Flow Control Equipment Distributor

Scaling Success: A Data-Driven Approach to Pricing and Profitability

Centralized pricing strategy and quoting solution across multiple location unlocking $41M EBITDA growth in 4 years

Case Study

Situation

Approach

Impact

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Related Insights

Profit Unlocked: $41M in Growth with Centralized Pricing Solutions

Transforming a decentralized, highly competitive business into a pricing powerhouse through data-driven strategies and scalable tools.

In an industry where regional operations and fragmented processes were the norm, this industrial flow control and automation distributor faced challenges in aligning pricing strategies across its 40+ brands. Despite rapid growth, inconsistent margins, limited pricing tools, and regional competitiveness hindered profitability. By implementing a centralized pricing strategy tailorable to each brand, leveraging advanced analytics, and deploying scalable quoting solutions, the company achieved $6M in EBITDA growth within a year and $41M in EBITDA growth through 4 years. This case study explores how a focused, multi-step approach to pricing optimization turned complexity into opportunity, laying the groundwork for sustained financial success.

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Situation

Disconnected Systems, Disconnected Strategy: The Case for Change

Without robust data tools, the business struggled to align growth opportunity with profitability.

Highly decentralized business with 40+ individual brands and processes, experiencing rapid growth through acquisitions
Operating in a highly competitive, regionally-focused industry with limited understanding of willingness to pay and not leveraging price as a strategic lever
Out of date list prices that were not market relevant

Despite margin growth, many brands were not maintaining margin %
Limited data sophistication, segmentation, and measurement tools & processes, which led to inability to set or realize goals based on potential opportunity
Limited organizational pricing culture

Findings: Buy Side Quality of Pricing

Conducted buy-side assessment ahead of Private Equity transaction that identified $30-$40M of incremental margin opportunity

Limited Differentiation

Products or services are lacking clear value distinction.
This can lead to pricing pressure, margin erosion, and lost opportunities for growth.

Price and Cost Change

Cost change is outpacing price change realization in parts of the business.
This gap is putting pressure on margin and is impacting overall profitability.

Margin Variation

Significant margin variation exists even within peer groups.
Inconsistent pricing and cost-to-serve drive profitability gaps.

Eroding Margins on New Business

New customer revenue brought in at a lower margin than previous product matches.

Approach

Unlocking Profitability: Strategic Steps to Optimize Pricing Across Brands

Integrating systems, deploying analytics to optimize pricing and profitability decisions.

Data Engineering: Consolidated 13 ERPs into 1 data set and developed product & customer hierarchies and attributes
Multi-Step Approach: Led pilot across 6 brands to fine-tune process, encourage buy-in, and develop a best in class pricing playbook that could be scaled across the organization
Price Model: Developed statistical pricing models for ongoing price optimization by brand
Price Guidance: Provided pricing guidance that includes enhanced segmentation, opportunity modeling, and implementation planning

Quoting Solution: Built and implemented a tailored quoting application to deliver price recommendations and decision support; Each branch tailored to their specific needs
Analytics: Deployed centralized, robust reporting dashboards and analytics that consolidated business results as well as tied to specific targets by brand
Cultural Adoption: Stood-up organizational engagement plan, including change management metrics, to reinforce desired behaviors & drive cultural change

Modeling Methodology

Built a multi-factor model that optimizes pricing through enhanced segmentation of key product, customer, and order factors delivered via a quoting solution

1. Identify Product Peer Groups for Differentiated Pricing

Segment products into peer groups with a certain number of unique customers and transactions using escalation logic.

2. Model New, Market-Relevant Price Levels

Analyze revenue margin % percentiles to identify market relevant prices
Example peer group for margin escalation: Brand | Vendor | Product Type
Separate margin % target and list & discount transactions

3. Assign Customer Margin Percentile Targets for each Peer Group

Identified the margin % model selection criteria (e.g., customer tier, product tier)

Green highlight indicates Model Recommendation Percentile

4. Assign List/Discount Price Targets

Identified the list & discount model selection criteria (e.g., customer tier, product tier)

Green highlight indicates Model Recommendation Percentile

5. Conduct Customer + Item Price Review

Set customer price capping to mitigate price change risk
Sales teams and GMs review finalized recommendations through INSIGHT provided application for high visibility and user-based functionality

6. Deliver Price Recommendations

Integrated recommendation model into quoting application
Utilized results as an input for measurement and reporting, as well as continuous improvement
Reinforce desired pricing behaviors through usage and adoption metrics
Ability to continuously improve model based on results

Technology Solution

Developed user-friendly quoting application, API integration with ERPs, and Analytics that are enhanced over time to increase brand usage and adoption

Quoting Application

Features:

Each brand is built in the application
Develop invoice pdfs that are brand- and logo- specific
Track open quotes through approval process
Incorporate exchange rate and freight adders for Canadian brands
API connection back to ERP (certain brands only)

INSIGHT Analytics Reporting & Analytics

Features:

Each brand is built in INSIGHT Analytics Dashboards
Customizable homepage dashboard, e.g., GM homepage shows actions needed for pricing and quote application usage
Sales rep summary dashboard displays individual performance across revenue, price, and cost change
Margin scatter allows for comparison of revenue and margin % across customers, vendors, and product types

Continuous Improvement

Stood up continuous improvement structure to ensure ongoing benefit across brands delivered at a set cadence

Advisory Services

Measurement:

Monthly measurement report on predetermined KPIs (Impact, Usage, Adoption, etc.)
Key business insights and actions with follow-up from previous month
Additional KPIs and reporting available upon request

Model Review, Tuning & Adjustments:

Develop and execute model adjustment plan (annual full model review + quarterly parameter tuning) with quarterly progress review
Ad-hoc analyses included and tied into model tuning cadence or monthly reporting, based on requirements

Change Management:

Feedback collected annually from the quoting application users on workflow and model recommendations
Sales reps with low usage/adoption highlighted and the cause for non-compliance determined with appropriate actions implemented

DRIVE Platform

App Enhancement:

Compile and prioritize quoting application enhancement requests and estimate of effort
Conduct two 1-week springs annually to implement prioritized features

Data Engineering:

Refresh data up to a daily cadence
Data cleansing and manipulation processes automated for loads to other processes

Integration:

Integration to the client ERP through the INSIGHT API monitored as it is relevant for each brand
Failures in the integration supported by INSIGHT safeguards added to ensure integration stability

IMPACT