Global Chemicals Firm Optimizes Pricing Processes to Boost Margins by Millions

 

 

For a global chemicals company with multiple subsidiaries serving customers in more than 200 countries, pricing to maximize profitability was a particular challenge. Inconsistent internal pricing processes often created conflicts among internal groups. Although the company had methods for defining common costs, many cost-to-serve elements were unclear.

Challenge

Ad hoc pricing processes, along with misaligned corporate and field sales policies, characterized the company’s pricing strategies and execution. Without a common set of deal evaluation criteria for all customers and contracts,  noncompliant invoices were routinely approved.

The chemical company’s sales organization was unable to truly understand the contribution margin of a given deal or customer and, as a result, often left millions of dollars in profit on the table. Executives realized that in order to improve profitability, the company required an integrated pricing strategy supported by easy-to-use tools and robust technology.

Solution 

PROS was selected as the strategic solution to ensure uniformity and access to pricing. Because margin improvement was a strategic imperative, executives supported funding pricing system initiatives despite severe cuts or complete freezes on other IT projects. This chemicals company selected PROS pricing solutions to deliver several key capabilities and benefits.

PROS provided a robust, real-time web services product pricing interface that integrated with the company’s SAP ERP system. This led to several pricing improvements, including standardized data sources, interfaces, monitoring and administration. Additionally, PROS solutions empowered corporate governance teams to control not only how products were priced but also to control the prices at which the products would be sold.

Results

• Provided visibility into pricing data by customer, product and other attributes that executives, product management, sales, logistics and finance groups needed to make better pricing decisions
 • Replaced an outdated pricing system, enabling marketing teams to standardize methods for constructing product prices
 • Ensured the latest pricing would be readily available in the field so that sales representatives could quickly and easily execute more profitable price changes
 • Delivered complete integration with SAP, coordinating different technical services to seamlessly roll out the PROS solution to all business units

Conclusion

PROS pricing solutions helped the chemical manufacturer establish a consistent pricing strategy to ensure that all products are priced uniformly. In a matter of weeks, the company met its goal of strict adherence to maintaining contribution margin parameters. PROS helped define new KPIs and develop an effective change management plan that facilitated successful user adoption among executives, product management, sales, logistics and finance professionals.

Underperforming customers were identified immediately, and millions of dollars are expected in margin improvement. Within 17 days after PROS solutions went live, management easily identified underperforming products and customers and took immediate corrective action. The company pushed out prices and deals quickly, effectively and, most importantly, uniformly. Furthermore, operational KPIs helped the company recognize that everyone had a stake in optimized pricing procedures and that PROS could be relied on to achieve internal goals while still meeting external market needs.

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