Embarq Logistics is a $750 million distributor of telecommunications products and services.
We consider pricing a strategic weapon in the marketplace and consequently spent a good deal of time improving processes, automating functions and measuring the effects of pricing changes. Our division was in the process of soliciting buyers for divestiture and we needed to improve our EBITDA as much as possible to drive up the sales price. As sophisticated as we were, we employed SPA because our results had plateaued and we thought we might be leaving money on the table.
And we were. Millions of dollars. Millions of dollars that drop right to the bottom line. SPA likes to talk about delivering 2-4 margin points but from our experience that estimate is very low. If you are not evaluating your product and customer sets for price sensitivity and setting pricing accordingly, you are likely leaving 6-10 points on the table. We provide some degree of price flexibility to our inside sales reps and even with those modifications, we still see meaningful margin improvements. We expect these increases to continue, and we will continue to cash checks with each improvement!
SPA can help you increase your bottom line in a matter of months and we are very pleased how quickly the process happened —from the analysis to bottom line impact. We started in early spring 2008 and we had new pricing for 140,000 SKUs analyzed, designed and implemented by September 2008.
We've seen minimal pushback from customers; most haven’t even noticed the price change. Because we were nervous about potential customer backlash, we established a control group that didn't receive the SPA-determined price increases as a way to be sure that the SPA program would not negatively impact sales. I tracked this every week, for every group, and I can say definitively that not only did the SPA program not hurt sales, the margins for the SPA group improved over the control group.
Our sales force had some initial concerns. But because their compensation is weighted more heavily towards margin and because we saw an immediately benefit, which was reflected in their commission checks, they were onboard very quickly. It also helped that this had no negative impact on our supplier relationships.
The SPA team members are consummate professionals and quickly became an extension of our pricing team. They are extremely nimble, very responsive and deliver exactly what they commit to, typically ahead of schedule. They are also extremely flexible and able to meet you where you are. Regardless of the maturity and sophistication of your pricing discipline, they will look at your unique situation, improve it and quickly drop money to your bottom line.
SPA is a well-kept secret and has earned my unqualified recommendation. There should be a 1-800 number and you should call now.
Brad Clark, Senior VP of Sales and Marketing