An American food services, facilities and uniform services provider operating in 22 countries including the US and Canada, sought to evaluate and standardize their pricing structure. They wanted to understand the shortcomings in the current pricing strategies that were stymying their profit margins. They needed a price execution tool that could not only capture flaws in the current pricing process and leverage the effect of competition’s pricing in the surrounding regions. They also sought to improve contract renewal rates, 15% of which were overdue, negatively impacting profit margins and sales.
Wipro developed a price optimization solution to take into account various factors affecting product pricing at particular locations. The solution conducts an impact analysis at the item-location level to determine the factors that affect price sensitivity for each product, obtains competitor pricing, and factors in effects of inflation on product pricing, allowing the client to set the optimal price for each product. The solution also compares revenue and margin improvement plans with actuals to check the need for any course corrections and help in boosting contract renewals, ensuring contracts are addressed in a timely manner before they expire.
The solution provided an immediate boost to profit margins, improving by $40 million in the first six months. The ability to compare prices (which were 12% below competition’s mean prices) with that of competitors and a new understanding of customer segmentation in new product categories helped the client to identify and correct underpriced products, helping them increase profitability. With 4x more account insights, there was also a huge uplift in contract renewals, and year-on-year profit margin increased by more than $140 million.