Case Study
Price increase management
Insight
We were approached by a global consumer health business who needed support with a price increase. They hadn’t raised prices in five years and with costs moving upwards and exchange rates bottoming they saw an opportunity for a double-digit price increase.
The problem, of course, was the pushback from their customers. The finance team could count back each of the five years, with a spreadsheet to support the detail, but this was of no relevance to a fresh-faced buyer with no knowledge of recent account history.
The situation was worsened by the fact the retailers had nudged up prices in the intervening five years and were selling above recommended price. They had implemented a price increase anyway and banked it in the form of enhanced margin. For the retailer this was a year one scenario – today’s price was what they expected and anything upwards was undesirable.
Solution
Through a series of workshops, we worked with cross-functional teams across the business to help them build the case for a price increase. This expanded on their own cost-based analysis to include competitor information and international comparisons. Promotion and marketing spends were built in to give a full customer profitability assessment.
The company’s legal team were engaged to ensure any regulatory issues were avoided.
We then helped the commercial team work through different scenarios to assess risks and benefits to create a finished plan.
Outcome
With our help, the client created the price increase communication and sent their initial letters to UK retailers. The next few weeks were similar to a stressful game of ping-pong, as requests and counter-proposals flowed back and forth.
Finally, and with time counting down towards D-day, we were able to help the supplier gain an increase some 4% ahead of inflation. Achieving a re-set on this scale was way beyond their customers’ opening salvo and a result they were happy with, allowing them to reset their profitability in the UK market.
