Combatting rising raw material costs with commercial levers

Challenge

A basic materials company was not able to react to the steep rise of raw material prices in a timely manner. The company realized that their profitability was deteriorating as customer prices became outdated and did not cover the raw material costs anymore. In addition, the company reasoned that the challenge was amplified because 1) customer prices did not reflect customer perceived value and 2) they lacked structured, company-wide sales execution and management processes.

Brave the future

August performed commercial diagnostics to assess the client’s current state as well as crystallize its target state. Especially:

• Price differentiation concept was established, in which target prices would be based more on products’ characteristics and customers’ willingness-to-pay
• Principles of analytical account management were also defined, which supports fact-based target setting and planning for strategic and key accounts
• Practices and KPIs for more systematic and structured sales steering (e.g., sales steering clock) were also described
• Top-down profitability improvement potential related to improved pricing and account management were identified and quantified

Together with client, August built a practical roadmap to develop commercial competencies: New practices, methodologies and competencies would be tested, and profit improvement realization accelerated through proof-of-concepts. After POCs, new processes and practices would be rolled-out to the whole sales organization in the form of on-the-job learning training program.

Impact

The joint-effort led to:

• Crystallized target state and current state descriptions for commercial competencies, revealing key areas for improvement
• Pragmatic roadmap to develop the commercial competencies
• Identified and quantified profit improvement potential