From the Ground Up How a Fortune 500 consumer durable goods manufacturer rebuilt its entire product strategy DOWNLOAD

Abstract

Before the housing bubble burst, this maker of consumer durable goods with close ties to the housing market enjoyed years of double-digit growth and numerous acquisitions without sweating the growing problems in its multi–billion dollar global product line. But when everything fell apart, its industry contracted by 45 percent and those gains came to a screeching halt – leaving the company to grapple with significant problems in areas including pricing, brand and sales force design. Deloitte helped the company in its efforts to get back on track as it pursued a major overhaul of its core product strategy. The goal was to position the company favorably for continued future growth through improved margins, fewer master brands and a streamlined sales force.

The Challenge

The company had originally identified a flawed pricing strategy as its primary challenge. It had a sprawling brand portfolio with considerable overlap among premium, midrange and economy brands. As a result, product pricing was as much a burden for its customers as for its own sales organization.

Deloitte was originally brought on to help with the company’s pricing efforts. But the more we learned, the more it became clear that other, much larger problems were lurking just below the surface. Customers were not only confused, they were increasingly dissatisfied with their experiences. A number of products were persistently unprofitable. Just as bad, the value proposition for the vast majority of individual products was unclear. And the sales team’s organizational structure led to scenarios where team members often competed against each other. If they only tackled pricing and ignored clear warning signs elsewhere, the company could miss out on a significant opportunity for improvement. These flaws may have been forgivable in strong economic times. But when most companies in this industry were operating at half their previous size, a new approach was needed.

How We Helped

When it came to the significant new challenges facing them, company management had a bad case of tunnel vision. In the early stages of our work together, we helped them see broader threats to their business that needed to be addressed. And we kept asking the tough questions that went well beyond the pricing work for which we had been engaged. This eventually resulted in an unprecedented three-day gathering of top company leadership, in which we helped them draw the outlines of what would eventually be a sweeping effort to revamp the company’s core product strategy – not just pricing, but the entire go-to-market strategy and sales force design.

Our first step was to understand the company’s needs better – an effort that would inform our work in every part of its business. We conducted extensive interviews with dealers and wholesalers to get their views on the product portfolio and the overall customer experience. We did the same with the company’s own sales force. We found that the sales team was aware of many of the same key problem areas identified by company leadership, but were unsure of how to change. We also helped the company perform a number of mystery shopping exercises to better understand the retail customer experience. All of this was balanced with customer analytics that clearly identified the value of customer segments by revenue, margin and cost-to-serve. From there, we were armed with vital information that would help guide our efforts to serve the company in three major areas:

• Pricing. We worked with the company to develop an understanding of its business objectives and strategy for each product, including margin targets, strike price margin range and overall differentiation by pricing. From there, we worked with the company to compare prices within its entire portfolio. (In some cases, products that were virtually indistinguishable carried different labels and were priced differently, presenting an opportunity to rationalize the portfolio.) We then compared pricing to the marketplace, further adjusting as necessary. Finally, we worked with the company to share the new pricing with its sales organization, support rollout plans and position it to monitor price performance on an ongoing basis once the new pricing structure was in place.
• Go-to-market strategy. There was considerable overlap within the company’s large product portfolio. Using valuable findings from hands-on customer research and extensive analytics, we were able to help it establish different customer segments and begin building product offerings that met clearly identified customer needs. This was a major improvement on the company-centric approach that had defined product strategy for years. Just as important, we helped them with the hard work of identifying the implications of changes to the go-to-market strategy – all the way through to the marketing costs of in-store display updates. As a result, the company is currently planning its move from three master brands to two.
• Sales force design. Large-scale changes to product strategy have an effect on the sales strategy, of course. We helped this company design a comprehensive plan for new sales force coverage, including incentive structure and geographic deployment. Everything was on the table, from productivity expectations, training, compensation and more. The company is currently in the beginning stages of executing on this detailed plan.

Solution

These changes add up to the largest single undertaking this company has ever taken on. Many of the changes are still being implemented. Already, the company is benefiting from a focused strategy and clear plan of action. Company leaders have a better understanding of who their customers are, how to price their products and position their brands, how to sell them and how to set themselves apart from competitors. Pricing changes that have been implemented to date are helping the client maximize profitability. But that’s just a small portion of the benefits the company expects to realize once the entire set of recommendations have been implemented.

Additionally, we are already helping this company establish a global operating model, building on the successful product portfolio related services we provided.

“We knew we had problems, but we didn’t know how far-reaching they were. Deloitte helped us see the big picture. Just as important, they knew what it would take to take a strategy-level vision and put it into action across the business for pricing, go-to-market, branding and sales force design. Their persistence and fresh thinking have been invaluable.” 
– CFO, Fortune 500 consumer durable goods company