In theory, size should be a significant advantage. A larger scale provides a wider product range, broader reach, and access to resources that smaller competitors cannot match. These factors should create golden opportunities for growth. However, it doesn’t always pan out that way, especially when size leads to complexity. For instance, one large chemicals distributor found their substantial size and enviable market share was something of a headache. Their market scale, encompassing tens of thousands of products and thousands of customers, added layers of complexity. A history of acquisitions further complicated matters, leading to inconsistencies in control and decision-making.

Their vision was to leverage their market position to drive growth and increase margins. To achieve this, they set ambitious goals that required a multi-year commercial transformation program.

Pricing dynamics analysis leads to quick wins in sales

The first step in this program was to analyze the pricing dynamics of their industry in terms of dimensions such as churn, elasticity, and overall performance teardown. This established a solid fact base that provided insights for reviewing their existing business and setting new pricing guidelines.

This analysis identified commercial opportunities to raise or lower product prices in cases where they were out of balance based on price sensitivities and margins. Further sifting identified a range of quick wins that the sales force could then use in a price optimization program.

Sales force involvement is a key factor to commercial success

The active engagement of the sales force was critical to the program's success. Their involvement ensured that the iPad-based commercial toolkit developed for the program matched their ways of working. It enabled them to make “better, faster, smarter” decisions in the field.

The commercial organization then used analysis of customer lifetime values to refocus their sales efforts on their most valuable customers. Sales coverage was rebalanced in terms of “hunting” versus “farming” activity and sales resources were realigned to target the biggest opportunities.

One sales rep believes the toolkit was vital in equipping them to make the required changes, stating: “It is incredibly powerful to walk into a customer meeting armed with this kind of insight and information. It makes us much more credible.”

The outcome of the re-pricing quick wins and sales rebalancing was everything the chemicals distributor had hoped for. The program led to a 4 percentage point cash margin improvement within six months of launch. Just as importantly, the tools continue to be a hit in the field with more than an 80% adoption.

Within the first year, the program became self-funding. By year-three, it was yielding a run rate of tens of millions of dollars, matching the commercial organization’s initial ambition.