Summary
In the high-performance battery sector, a middle-tier company was offering three battery brands, Red, Blue, and Yellow (R, B & Y), through four main channels: National, Regional, Independent, and Online. Despite gaining in volume each year, the client was facing decreasing margins. The client was using a cost-plus, commodity-focused approach to price its three battery brands. While this strategy maintained consistent margins across channels, one of its significant drawbacks is that it overlooks the opportunity to leverage varying consumer willingness to pay. Revenue Management Labs was engaged to review their existing pricing structure, discover where they were experiencing decreasing margins, and find opportunities to grow margins.
Challenge
The company faced a situation where they experienced volume growth year over year. This expansion is often considered a positive sign for a business, but in the case of the battery supplier, they were also experiencing a shift in channel volume toward lower-margin alternatives. The result was a negative profit mix and decreasing overall margins.
Solution
Revenue Management Labs developed a channel pricing strategy to address issues arising from the battery supplier’s cost-plus pricing approach. The data-driven strategy established consistent price gaps between channels and product lines, and the existing channel conflict was eliminated through channel-exclusive lines and products. We also provided a detailed implementation guidebook and reporting tools to evaluate pricing elasticity and channel pricing going forward. At Revenue Management Labs, our success is determined by the results of the pricing strategy, and we go above and beyond to help our clients implement our recommendations.
