Winning today means accelerating your pricing performance, and businesses like Perstorp are shifting into gear to make it happen. In Perstorp’s case, the Swedish-based company has a 135-year history of selling specialty chemicals to businesses worldwide—and with success. They are the leader in several sectors, and their products are used in everything from plastics to construction to agriculture.
But in the modern commerce race, it’s “lead or get out of the way.” It is with this spirit that Perstorp started rethinking the way business was conducted and laying the groundwork to transform. They wanted to accelerate their overall performance, build value and deliver growth in the face of several difficult challenges. For several years, Perstorp had experienced margin erosions driven by an increasingly competitive market environment and rising raw material costs.
Even small moves in raw material, freight and direct variable costs had significant impact on margin attainment. For Perstorp, the margin impact of volatile cost changes were compounded by time-consuming price update processes that could not quickly incorporate cost changes. In addition, buyer access to alternative global suppliers, increasing marketplace transparency, and lowered switching costs put further pressure on this chemicals supplier.
Moving from Good to Great
Perstorp initiated a business excellence program called “Good to Great” that addressed their need to reorganize and changed the way they approached the market. A major step in that journey involved the integration of algorithmic price guidance from PROS into their quoting and price management processes. With the integration of dynamic price guidance, Perstorp can measure pricing improvement at the sales rep-level through a metric they called Pricing Discipline Index (PDI).
Realizing Fast Results
Already, they have measured a 42% improvement on their Pricing Discipline Index in just 20 months which has helped them to recover approximately $1M in margin leakage per month. These new levels of discipline enabled by dynamic pricing resulted in Perstorp reporting their second strongest quarter in terms of EBITDA in recent history (according to their 2016 3rd Quarter report) alongside a EBITDA margin of 17.4%, which is 20 basis points higher than their best year of the 2009 to 2013 recovery.
Poised for More Wins
While Perstorp has certainly come a long way, they intend to improve upon these results and to incorporate the Pricing Discipline Index into their sales incentive structure as they continue to work toward their vision of consistent execution of pricing best practices.
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About the AuthorMore Content by Valerie Howard