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$6 Million in Savings With a Revived Product Line
The Problem
Stiff price competition was the problem facing the boards division of a leading provider of computer hardware, software and services in their historically best-selling board product line targeted at the medical, high-end graphics, and industrial automation markets.
Solution
KnowledgePoint Marketing analyzed cost-saving options as a way to retain the product line and restore its best-seller status by creating a multi-year product roadmap and developing several new sales tools.
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KnowledgePoint helped the division quantify the true value of its premium by looking at how different features were priced in the market, and how the competition charged for better performance. |
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KnowledgePoint built a price model that took into account feature-set, performance advantage, and brand premium. It confirmed that the price at which the products would move would be below production cost. |
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KnowledgePoint discovered that the prices the company was paying for the commodity parts that went into its boards were well above those competitors were paying. Renegotiating supplier agreements was key to reducing costs immediately, enabling the company to drastically reduce its prices to remain competitive, while achieving its margin goals in the short term. |
Results
With the information and analysis provided by KnowledgePoint, the company was able to renegotiate supplier agreements on the spot, and within a month saved $6 million dollars. Encouraged by this breakthrough, engineering took a second look at the board and made minor modifications to reduce the cost even further.
Operations also set in motion plans to look at other manufacturing outsourcers that would provide more competitive bids, setting the stage for future savings. The product line resumed its best-seller status for the next three years.
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