Customer Stratification” has the power to enable us to transform our company from being product-driven to customer-driven. It has helped us understand our customers in greater detail, enabling us to optimize our selling resources, which will result in an improved ROI.
Margin Management: A Profit Platform
Unleash the Combined Power of Customer and Product Data:
In our co-authored, best-selling book, Pricing Optimization, published through the NAW, we address the challenges distributors face with margin leakage and lost profits due to pricing mistakes. The most common mistakes are twofold. First, distributors often confuse their Value Create (Customer Stratification) and Value Capture (Pricing Optimization) decisions. It is critical to clearly understand, define and optimize these two value decisions before bringing them together in a pricing model. Second, even when using a defined pricing model, distributors often compound what is already a complex process by still leaving the ultimate pricing decision in the hands of salespeople without data-driven support. These decentralized pricing decisions are a prime reason for gross margin inconsistencies across markets, customers, and products. The answer to optimizing profits through pricing lies in “managing complexity” by creating a price structure with fewer variables while offering “consistency”as far as the process — i.e. doing things the same way every time. Our research and our book bring critical pricing factors together in a simple, effective model, while helping distributors implement pricing processes that they can manage consistently and profitably.
Since its inception, we have implemented the model across hundreds of distributors and manufacturers in the B2B industry, across verticals ranging from building materials, HVAC, industrial, plastics, foodservice, oil and gas, electrical, electronics, grocery chains, and chemical, to name a few.
ACTVantage Approach & ROI
Our approach is rooted in developing sustainable analytics capability rather than a one-time short-term model. Are they two different things? We believe so, based on researching more than 250 implementations of analytics engagements. Since publishing pricing optimization in 2013, we have helped hundreds of distributors implement the model. Over the years, we studied those implementations and asked the critical question: What determines if firms would sustain benefits (margin improvement, customer retention, value design, market share growth, etc.) of implementing analytics?
It’s not just the quality of the tool or technology or software, though it’s part of the mix. Firms that sustained the benefits of analytics have integrated three critical capitals – Process, Technology and Performance metrics to PEOPLE by creatively developing analytics as a capability. Our platform is the result of this key learning. ActVantage clients routinely see an ROI of 200% or MORE—many times the investment with ActVantage—in as little as THREE months. The gains are realized through margin growth, account penetration, cost-to-serve reduction and revenue growth.
Customer Stratification Applications
Pricing Optimization Benefits
- Acts as a sales and pricing management platform
- A bridge to devise sales person-specific goals
- A common language to drive profitable growth
- A tool to develop customer-focused culture
- A profit playbook for territory / market growth
- Acts as an advisor for analytics-based strategies
- PREDICT profit leakage of at-risk Customers and Items
- PROVIDE customer-specific pricing actions
- PERSUADE a value-based sales approach
- Acts as a compass for Profitable Growth
- Establish a common language for focused actions
- Helps monitor sales force productivity and performance
- Focus on leading indicators than lagging indicators