Competitive-based pricing strategy

While cost-plus pricing is popular because of its ease of implementation for large product catalogues, its exclusive use in a pricing strategy neglects many other pricing methods that are valuable for different types of products, including market-based curve pricing, yield-based pricing, and sandwich pricing, among others.

A construction OEM, who uses a predominantly cost-plus pricing methodology for all their parts, approached Carlisle to update their entire pricing process, including both daily pricing activities and annual repricing. The OEM required Carlisle intervention to help understand a better approach to pricing that incorporates data-driven insights.

Ultimately, the client wanted to achieve a 3% repricing impact for 2021, balancing price increases for part categories where data indicated a lost revenue opportunity and price decreases for slow-moving categories.

• Competitive Pricing Study: The client lacked a cohesive understanding of their market position and any supporting competitive data. Carlisle identified the key competitors and conducted data-scraping and mystery shopping to gather competitive prices. Key leader and follower relationships were identified to inform the development of new segments and pricing rules.

• Strategy Redesign: Carlisle designed a multivariate segmentation algorithm catered to the client’s specific requirements and data. Carlisle then defined pricing methods, such as sandwich pricing and yield-based pricing and market positioning strategies for each segment. With this revamped pricing strategy, Carlisle delivered an annual reprice with an incremental 3% net revenue gain above the normal annual reprice changes.
• Software Implementation: Concurrent to the other workstreams, Carlisle led the introduction, development, and integration of the Syncron software solution to the client’s digital and IT management teams. Carlisle sequentially configured each element of the strategy in Syncron based on inputs from each strategy workshop. Finally, Carlisle conducted the annual reprice in the tool for immediate ROI and value delivery. Once complete, Carlisle trained and conducted user acceptance testing with the pricing team, ensuring full understanding of how to use Syncron for daily pricing activities.

Through the competitive pricing study, the client now has a database of competitive prices and associated data, as well as an understanding of how to continue collecting and updating this competitive data as part of their yearly repricing process. The newly-implemented pricing strategy, fully configured in the Syncron system, generated a price list for the client to communicate to their customer base for 2021. This price list achieved 3% incremental margin impact for 2021, meeting the client’s intended goals, with an average price change of 1%.