Multimedia

A Fortune 500 multimedia company under competitive attack and struggling with the impact of new technology came to SPG to develop a pricing strategy to help reverse its failing financial performance. Facing considerable downward price pressure (between 20%-30%) and massive cost reductions, our client enlisted SPG to develop a pricing strategy to maximize its revenue and profit potential. After aggressively investigating industry dynamics and the company's value proposition, SPG determined that our client committed the common mistake of thinking that its business had become commoditized. We determined that there were many aspects of its service and fulfillment capabilities that actually created a competitive advantage, yet it failed to charge for these services. SPG advised our client to increase its profit potential by aligning its most valued products and services with the needs of its highest contributing customers. SPG helped achieve this objective by segmenting its customer base and restructuring its products and services to better align with value for which different customer segments were willing to pay. We then developed both high-end and low-end product offerings that mapped to the specific needs of this segmented marketplace and trained the salesforce to communicate this new value-based selling approach. This resulted in our client achieving a $6 million (10%) increase in net revenue during the first six months of the project, with another 10% increase realized during customers' annual contract renewals. By reducing the service demands for low-end products and services, our client also found that average costs have been reduced by 10%.