Profitability Improvement through Pricing

GE Advanced Materials – Improving Boron Nitride Margins

Situation

In early 2004, GE’s boron nitride products were beginning to see significant cost pressures arise due to material inflation, threatening to squeeze margins across the product line but especially in hot-pressed boron nitride, whose ongoing viability as a product offering was at risk.  The product team had long held a perception that the products were sold into a price competitive market with limited leeway to increase prices.

Approach

With the backing of management, Greg began a series of price increases over the ensuing 18 months, resulting in 15-25% higher price levels. Price increases were differentiated by product depending on the competitive situation and customer switching costs.  Greg worked closely with the sales team to implement the increase, including direct negotiations with key customers often resulting in simultaneous price increases and long term contract agreements.

Results

Greg was able to successfully overcome inflation pressures and increase product line margins across the board.  The hot-pressed boron nitride products went from questionable to solid performance, re-establishing the product line as a core element of the product platform.  Negotiations with key customers went so well that the CEO of one major account asked if Greg could train his salespeople on how to implement price increases.

GE Lighting – Upselling Metal Halide

Situation

The metal halide products at GE Lighting were one of the more profitable and fastest growing product lines, with a strong product range providing numerous options for customers across a range of industries and applications.  However, Greg felt that the product line was still performing below its potential due to a lack of concerted effort in driving higher margin “upsell” products, partly due to the complexity of the product line.

Approach

After taking significant steps to simplify the positioning and value propositions for the product line, including modifying product designations to make their advantages clearer, Greg implemented a range of new selling tools and approaches to increase sales.  These tools included return on investment (ROI) calculators, updated literature, easy selection matrices, and automatic inclusion with simple pricing rules on all quotes (with appropriate emphasis on customer benefits).  Additionally, Greg provided significant training to our sales managers and distributors and became directly involved in introducing new solutions to strategic accounts.

Results

Greg were able to increase sales of “upsell” products from 18% to 22% of total revenues in just one year, adding over a point to the gross margins of the product line, while simultaneously gaining market share. This also burnished GE’s reputation for leadership in emerging products within the product line, improving relationships with key lighting equipment OEMs and specifiers.