Pricing Strategy Challenge

The Problem:

The sales staff of a major cable service provider was pressing for across the board price reductions. The depth and the scope of the proposed price reductions would certainly affect profitability, which was an unacceptable outcome to the management. ChicagoAnalytics^TM was retained to analyze the situation and propose a workable resolution.

The Solution:

ChicagoAnalytics^TM conducted a comprehensive benchmarking study, strategic market scan, regulatory review, competitive trend analysis, and internal cost studies. Based on the findings, a “what-if” model was prepared to simulate the effects of different options on the “bottom line.” The deliverables included a specific list of low-margin services that should be packaged with other products to create high-margin “bundles,” and recommendations for new product development initiatives. In addition, a flexible pricing approach without wholesale price reduction was designed and ultimately implemented.

The Benefit:

The organization was able to refocus its priorities on what really counts - “the bottom line.” The Product Management function was strengthened and tasked with balancing the short-term sales-driven pressures with a longer-term, margin-focused approach. Finally, the organization embraced a more systematic, analytical approach that has moved it a long away from a “fire-fighting”, reactive mode of operations towards a more rational, fact-based, proactive mode of operations.