The Discount Management Blueprint
A market leader in Waste Disposal Services was suffering from declining net sales per customer (Figure 1). Although the company had been experiencing overall growth, it was being achieved through acquisitions of smaller competitors. The multitude of acquisitions resulted in inconsistent customer pricing and discount structure.
The RML Approach
Define Discount Components
What are the components of discount investment?
What discount components truly drive profitability?
Structured Discount Terms
What is the right discount playbook for specific customers?
Execute, Monitor, Report & Adjust
What training is needed to create a sustainable change?
The discount structure for newly acquired companies varied greatly, resulting in inconsistent discounts being provided to similar, incumbent customers (Figure 2). Additionally, the client was taking substantial price increases, which led to customer complaints. Customers were regularly calling support staff and negotiating one-off discounts. Revenue Management Labs (RML) was brought in to investigate and implement a system with the twin objective of gaining control of discounts whilst increasing overall net sales.
1. Define Discount Components
2. Understand Drivers
As shown in Figure 3, the success of discount types varied greatly. These insights were formalized in a discount playbook.
3. Structured Trade Terms
4. Execute, Monitor, Report & Adjust
Revenue Management Labs worked with the company’s sales force and customer service team to deliver actionable strategies for implementing the structured trade terms. This meant creating a tool for identifying the successful discount types and applying the correct discount to each individual customer.
It was essential that the integrity of the discounting system be maintained moving forward. A model for incoming customers was implemented that automatically flagged the level of pricing allowed based on the incoming customers’ forecasted CLV.