Situation

Multiple $100M+ subsidiaries of $3B public medical device business with slowing growth due to lagging innovation and thinning acquisition opportunities. Fragmented business units with varied levels of acumen and discipline around portfolio and pricing management. Pricing was an underdeveloped growth lever as a result of a variety of issues - pricing too aggressive, not aggressive enough, inconsistent from period to period, not tied to cost drivers, poor price for value, too late for effective implementation, etc. Pricing was not effectively optimized to help offset weakness in other revenue generating areas.

Action

Developed improved price and margin modeling mechanisms and processes within business unit marketing organizations. Instilled a disciplined process of historical record keeping, market intelligence gathering, product competitive and life cycle assessments, financial pro forma modeling and appropriate P&L review at senior management level. Annual process calendared well in advance of budget setting. Same methodologies also used early in the product development process to establish effective cost targets for development as well as on a periodic basis to react to changes in market conditions.

Result

Product categories nearing end of life or with limited technical replacement were optimized. Products under significant price pressure from competition or alternative technologies were assigned appropriate cost out targets for engineering and purchasing team resolution. New products offering customers significant clinical advantage (e.g speed of procedure, more predictable outcome, ergonomic advantage) were value priced accordingly. Pricing optimization was a critical component of maintaining above market sales growth, normally contributing approximately 25-30% of overall annual growth for the impacted business units.