Summary
A market leader in the waste disposal services sector approached Revenue Management Labs to address the discrepancy between their overall growth and the declining net sales per customer. The waste disposal company had sustained overall growth through strategic acquisitions of smaller competitors. The unintended consequence of these acquisitions was the emergence of varying price models and discount structures across the customer base. Revenue Management Labs diagnosed the issue and implemented a systematic approach to discounting designed to increase overall net sales per customer.
Challenge
One of the primary challenges faced by the waste disposal company revolved around the significant disparities in the discount structures for newly acquired companies. This inconsistency resulted in similar, longstanding customers receiving markedly different discount rates. The lack of uniformity in discount allocation posed a critical issue in maintaining fairness and transparency across the customer base. Compounding the challenge of disparate discount structures were substantial price increases implemented to counter the declining net sales. These increases triggered a surge in customer complaints as clients voiced their dissatisfaction with the elevated pricing. The escalation of customer concerns necessitated frequent interactions with support staff, creating operational strain and triggering ad hoc negotiations for one-off discounts.
Solution
Revenue Management Labs collaborated closely with the waste disposal company’s sales force and customer service team to formulate actionable strategies for the implementation of structured trade terms. This involved a comprehensive examination of existing discount types and their success rates, leading to the development of a tool designed to identify optimal discount types and apply them accurately to individual customers. To further enhance efficiency and accuracy, a model for incoming customers was instituted. This model automatically flagged the permissible pricing levels based on the forecasted Customer Lifetime Value (CLV) of incoming customers. This not only streamlined the onboarding process but also ensured that pricing aligns with the potential value of each customer, fostering a balanced and fair discounting approach. Central to the solution was the commitment to maintaining the integrity of the discounting system. Rigorous measures were put in place to safeguard against inconsistencies, ensuring that the new structured trade terms were implemented uniformly and adhered to across the customer base.
