Electrical Equipment Manufacturer
Discounting Strategy Safeguarded Pricing from Erosion
Strong discount strategy ensured pricing wasn't offset by unearned discounts, delivering $25M revenue growth over 2 years
Optimizing Discounting Strategies: A Data-Driven Approach to Margin Protection
A large electrical equipment manufacturer centralized discounting policies, implemented data-backed controls, and achieved $25M in revenue growth.
Decentralized pricing authority and inconsistent discounting practices created significant margin erosion for this large electrical equipment manufacturer. Sales teams relied on their own habits for setting discount levels, leading to price variations across customers, products, and regions. To address this challenge, the company implemented a structured, data-driven discounting model, integrating it into CRM for better control and measurement. This transformation resulted in $25M in revenue growth over two years, proving the power of disciplined pricing backed by analytics.
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Situation
Decentralized Discounting Erodes Margins and Reduces Pricing Control
Inconsistent discounting practices and multiple ERP systems created pricing inefficiencies, reducing the impact of price increases.
- Complex pricing methodology and system made it difficult and lengthy to make changes to list price
- Antiquated and multiple ERP systems; limited resources
- Decentralized sales organization where sales reps had autonomy to and frequently quoted outside price discount recommendation
- Experienced sales team that felt they knew the market best and a tool was seen as a burden in the quoting proces
Approach
Implementing Data-Backed Discounting Controls for Pricing Consistency
A dynamic discounting model and CRM integration provided structured pricing guidance to improve revenue outcomes.
- Consolidated cost & revenue data from multiple systems and ran analytical playbook
- Designed and implemented dynamic model to recommend discount levels
- Built and integrated tailored Discount Guidance Application into ERP & business process
- Developed measurement and compliance structure and reporting, leveraging Power BI
- Ran continuous improvement playbook to deliver ongoing model and process enhancement
Protect Margins with Smarter Discount Management
Centralized discount policies, improved oversight and reduced margin erosion with a system designed to safeguard your bottom line
Contributing Factors to Variability
- No transparency to the sales team of discounts given for similar customer / orders (i.e., “We have over 12K SKUs and I have no idea what a good discount is for most of them.”)
- Individual salesperson’s habitual discount level (i.e., “I always give an 18 – 20% discount off list.”)
- Underlying belief that commission structure would drive sales team to minimize discounts as much as the market would bear
- Decentralized pricing authority was the primary driver of high margin variability and a result of individual salesperson’s habitual discount levels
Tailored Technology Solution
Implemented discounting guidance through integrated recommendation for thousands of sales representatives as an immediate action to drive dollar impact
Measurement
Compliance and impact rigorously measured to drive corrective action and feedback into the Discount Application parameters
| Area of Measurement | Description | Measurement |
|---|---|---|
| Application Usage | Is the quote being entered into the Discount Application? | % of instances vs quotes |
| Recommendation Adoption | How close is the quoted multiplier to the target multiplier? | Variation between quoted multiplier and target multiplier |
| Quote Pipeline Impact | What is the $ / % impact in the quote pipeline? | Within peer groups: historical average multiplier (baseline) vs. quoted multiplier |
| Order Pipeline Impact | On quotes that turned into orders, what is the $/% impact in the order pipeline? | Within peer groups: historical average multiplier (baseline) vs. quoted multiplier |
| Sales Impact | What is the actual impact on net price ($/%) once invoiced? | Multiplier and margin difference versus targeted budget and historical trends |
| Metric | Current Level Assignment | Proposed Level Assignment | Difference | Comments |
|---|---|---|---|---|
| Adoption | 78.4% | 73.8% | -4.5% | Adjusted price levels slightly decrease overall adoption, but adoption is still above 70% |
| Adoption +/- 5% | 38.5% | 45.0% | 6.5% | Discount multipliers have been adjusted so that more quotes fall within +/-5% |
| > 5% Above Target | 41.1% | 31.4% | -9.7% | Discount multipliers have been adjusted so that more quotes fall within +/-5% |
| Revenue at Target ($M) | $57.7 | $59.6 | $1.9 | After adjusting price levels to reflect sales-rep behavior, price modeling impact increased by nearly 3.3% |
Change Management
Developed a plan to address usage and adoption challenges heard from the field
Analytics for Smarter Sales Decisions
Tracked key metrics to analyze how recommendations and adoption correlated with win rate, enabling more data-driven decision-making.
Impact
Accelerating Growth Through Data-Driven Pricing
Advanced analytics and pricing science unlocked sustainable revenue and strategic decision-making
$25M
Revenue Growth from Price
Over 2 Years
Developed optimized pricing model backed by data science
Stood up rigorous analytics to provide data-driven decisions
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Electrical Equipment Manufacturer
Discounting Strategy Safeguarded Pricing from Erosion
Strong discount strategy ensured pricing wasn't offset by unearned discounts, delivering $25M revenue growth over 2 years
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