Energize Channel Pricing


A mid-tier player in the high-performance battery industry sells three brands of batteries, Red, Blue & Yellow (R, B & Y), across four primary channels (National, Regional, Independent and Online). The company was experiencing growth in volume and a negative profit mix as channel volume shifted to lower margin alternatives (Figure 1).

The RML Approach

Segment Channels & Customers

Who are the unique channels and customers in the market?

Understand Channel Needs

What are the value drivers for each channel?

Create Optimization & Exclusivity

What are the right price gaps and products for each channel?

Execute, Monitor, Report & Adjust

What training is needed to create a sustainable change?

The Challenge

The client needed to develop a channel pricing strategy that moved past its cost-plus, commodity-driven system. The cost-plus technique ensured margin consistency within channels but failed to capitalize on the differences in consumer willingness to pay. A cost-plus strategy was resulting in inconsistent pricing between brands, thereby creating channel conflict (Figure 2).

1. Segment Channels & Customers

Revenue Management Labs first identified six customer segments across the four primary channels:

  • Auto
  • Off-Road
  • On-Road
  • Marine
  • Power Sport
  • Industrial

The cross-purchase habits of customers were evaluated by channel. The online channel habits showed that customers had a high propensity to buy multiple batteries of B1, B2, B3, and B4 (Figure 3). This process and insight was leveraged to determine which deals would be the most customer relevant by channel. In the case of the online channel, Blue line battery 2-for-1 or multi-purchase promotions drove significant volume.

2. Understand Channel Needs

To evaluate each customer group, MaxDiff analysis was performed. This helped identify the most important purchase attributes for each group (Figure 4). With a keen understanding of the relevant attributes, we competitively ranked our offer versus the competition by channel.

3. Create Optimization & Exclusivity

To optimize the pricing of the batteries within the three brands, it was necessary to examine customer and product elasticities. First, advanced analytics were employed to ascertain price elasticities (Figure 5). These insights were utilised to establish regular and promotional pricing guidelines.

4. Execute, Monitor, Report, Adjust

1. Each channel was provided with exclusive lines/products
(existing & new) to eliminate conflict within the market.

2. Consistent price gaps were developed between channels and product lines to reinforce brand positioning and achieve margin
targets (Figure 6).

The Result

+ 1.8% Margin Per Battery

The client received an implementation guidebook as well as the necessary tools to evaluate elasticity and channel pricing moving forward. After implementation, the customer experienced a 1.8% increase in margin per battery (Figure 7).

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