Situation

  • Long tail of medical technology products with cost plus mark up prices in the system
  • Margin pressure from procurement,
  • Competitors offering discounts in the MedSurg marketplace leading to unstructured sales discounting and margin erosion
  • Reluctance from the sales force to implement prices rises due to perceived fear that sales volume would be lost.
  • Issues with the pricing master data leading to incorrect invoicing and margin leakage

Outcome Required

  • Market acceptance of price rise leading to incremental EBIT gains.
  • Strategy to combat procurement
  • Pricing structure to support strategic discounting and margin expansion program
  • Develop a pricing team to centrally manage pricing

Action Taken

  • 675 basis points of margin improvement driven by the Project Blackbird SKU price optimisation project in the first 12 months. EBIT gains in year 1 were $2.7M on revenues of $40M and in year 2, gains of $3.5M were realised with a 2nd iteration of the Project Blackbird algorithmic pricing program.
  • New approach to selling on value using Customer Value Discovery program rolled out.
  • More detailed competitor pricing intelligence database developed
  • Development of new pricing strategy + structures.
  • Implementation of pricing management function to manage pricing structure, discount programs and reimbursement economics.
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