manufacturing & automation business development

Update transfer-price based on local decision-making

Problem

AutomationCo. sells its products via Local Sales Units (LSUs) in each country. To sell these products, AutomationCo. utilises a transfer pricing strategy. But in recent times it was losing its monitoring control on individual LSUs which was beginning to impact potential sales opportunities in a few product segments.

Outcomes

5 Key factors affecting pricing decisions identified
45 LSUs pricing to be studied through the developed tool

Quick summary

AutomationCo. has been a leading manufacturer in industrial and automation products. The after-market service department of AutomationCo. struggled to understand the local pricing decisions at the sales units. Working with SGC’s on-demand workforce, the global service office sought to better manage and control the pricing decision-making process at local countries’ LSU level.

The key questions in the project were:

  • What are the current practices of product pricing at LSUs?
  • What are the factors that affect LSUs pricing decision for end-customers?
  • How to improve and control recommended end-customer prices?

The situation

AutomationCo.’s global center sold products to the LSUs at a predetermined price point and recommended them to use a region-based end-user price. However, the local units did not follow the recommended price levels. Thus the global center aimed to enhance their global pricing approach by comprehensively understanding the local pricing practices and model.

AutomationCo. utilized SCG’s on-demand workforce to conduct an in-depth research in five countries to thoroughly understand the factors that were involved in the pricing process. The SCG's agile workforce collected and analysed the data from 5 countries to provide the global sales team with a grasp on general pricing situation at a local level.

External and internal factors in pricing decisions

Our approach

Phase 1: Understand current global pricing recommendation process

The SCG's agile workforce interviewed global center officers at AutomationCo., to understand the current pricing process and the assumptions made in the pricing model. Next, key stakeholders were identified to develop the research structure and tools for the LSUs.

Phase 2: LSUs pricing decisions analysis

In-depth Interviews with selected stakeholders at the LSUs revealed varying pricing practices and models. The SCG's agile workforce identified that there was a clear mismatch between global and local pricing approaches. Additionally, the research highlighted local reasons for pricing decisions.

Phase 3: Deep dive into pricing factors at LSUs

The SCG's agile workforce created profiles for each LSU and unveiled internal factors that were affecting local decisions. Both the SCG's agile workforce and AutomationCo.s’ global team realised the factors that were overlooked by the global office. In addition, it was also identified critical external factors that needed to be periodically monitored to improve market share and revenue generated by the LSUs.

Pricing waterfall structure at LSUs

Results

SGC’s on-demand workforce helped AutomationCo.’s global office to identify the key factors that drove pricing decisions at the LSUs.

In addition, the SCG's agile workforce identified improvement areas in the current process to increase the visibility of pricing decision making from local to global level. This time-boxed sprint accelerated AutomationCo.’s shift towards local-based pricing that further impacted their revenue potential by 4X.

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