Medical Products

A category-leading medical products manufacturer under intense pricing pressure asked SPG for assistance in developing a strategy to combat competition. After reducing prices as much as possible, our client lost 15% market share and saw margins erode by 25% to 30% and were unable to effectively compete with their larger competitor. While our client had no unique product advantages, we quickly uncovered that they did enjoy an unknown competitive advantage in their distribution channel. Our client had built a powerful national network of product distributors who serviced remote locations across the country. After a thorough analysis, we determined that competition only offered price discounts in large urban settings where they could service at low cost but had no capabilities for reaching more broadly into the marketplace. Not realizing their channel advantages, our client had recently begun a process of bypassing distributors in an effort to reduce costs. SPG quickly recommended reversing our client's distributor bypass strategy. We also developed a new menu of products and services that recognized the unique needs of urban versus rural customers. By stripping out extraneous services for urban customers and charging for non-standard deliveries to rural customers, our client was able to better align its value and pricing to the unique needs of their customers' segments. This strategy fully stopped price and market share erosion, and our client has gone from an 11% loss to a 5% net profit.