Machine working on a steel plate.

Understand Pricing Realities Across Market Segments

The Challenge: Our client manufactures and sells products that are incorporated into various types of equipment by customers who operate in numerous distinct industries. While this client has a strong technology base and an extensive service support network, it faces active, on-going competition from other firms around the world. Frequently, this company must react to lower prices offered by its competitors.

Assessment: Working with this client, the Blue Canyon team examined the complex customer chains through which this firm went to market. We developed business models to examine the various customer organizations included within these customer chains, and conducted extensive discussions with the customers leadership teams to understand the distinct business environments into which our client sells its products. We learned that the firm’s pricing strategy, which followed a straightforward “catalog” structure, was misaligned with many of its customer segments. Some customers were disappointed with the standard product and wanted our customer to “raise the bar”. At the other end of the spectrum, there were other segments in which the firm was losing business because its standard offering – and its standard pricing – included features and services that customers did not want.

Strategic Solution: Blue Canyon defined three distinct clusters of customers, each of which had unique needs and presented a distinct economic opportunity. The client’s overall strategy, including pricing, was realigned to match these three market clusters. In one segment, the firm’s strategy involved significant efforts to raise the product quality, add new features, and improve delivery of services provided so that it could gain a higher price point. In a second segment, the firm increased its emphasis on one product attribute while pairing back on other unnecessary elements, yielding a more customer-aligned offering and a higher margin. In the third cluster, the firm introduced a basic, initial price-point product and began to recapture lost market share at margins that were quite acceptable.

Results: This client is now growing market share and profits in all three segments while customer satisfaction levels have been rising, reflecting a better harmony between this firm’s strategy and its customers needs.

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