August helped an EPC (Engineering, Procurement, Construction) company revamp its pricing practices and achieve higher profitability despite strong cost inflation.
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An EPC company had historically relied on highly manual pricing practices in their aftermarket business. The company’s new CEO saw underlying potential in pricing and engaged August’s team to shed light on historical performance, re-design the practices together with the key personnel, and help drive tangible profitability improvement.
August leveraged the EPC company’s rich data in a new manner by combining hit rate and price realization data to define profit maximizing price levels for different parts of the business. Together with the client, our team designed a new pricing approach that enabled a more systematic grip, while leaving sufficient room for manual adjustments. Further, we supported with the implementation and follow-up of the targeted changes by training the client’s sales personnel and by developing a pricing tool that has since been used on a daily basis.
The joint effort led to a step change in the EPC company’s pricing capabilities as well as a notable cultural shift from trying to win at any cost to maximizing profitability.
Financially, the new pricing approach resulted in +15 % average price increase in less than a year with no material impact on volumes. At that time, the company faced major pressure on their raw material costs (+30 % in market prices and +20 % in COGS due to smart timing of purchases). Thanks to the new pricing approach, the company’s absolute profit clearly improved despite the cost inflation. Further, the new pricing model allows the company to better steer its pricing in the light of future raw material price fluctuation.