Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

Global construction company uses analytics to make pricing local

Thor Olavsrud | April 12, 2016
Dayton Superior, a supplier of concrete and other materials for projects ranging from the Panama Canal to the Trump Ocean Club, is using a data-driven approach to price optimization to help it align prices with all the various markets in which it operates.

Dayton Superior is a global B2B company that has turned to analytics and optimization to align its prices with local markets.

You may not be familiar with Dayton Superior, but you know its work. Headquartered in Miamisburg, Ohio, the 115-year-old global nonresidential concrete construction company has supplied the concrete and other materials for bridges, canals, buildings and stadiums around the world, including the Panama Canal, new World Trade Center Towers and Trump Ocean Club.

"We're very much involved in all the big, cool buildings going up," says Dayton Superior CEO James McRickard, noting that the company has been heavily involved in the Hudson Yards project on Manhattan's West Side — a 26-to-28 acre mixed-use real estate development over the West Side Rail Yard that will consist of 16 skyscrapers, a school and more than 14 acres of public open space. "We make the stuff that holds it all together."

Build globally, price locally

The company has a global footprint, but the construction industry, even the heavy construction industry Dayton Superior plays in, is a local and regional business. Prices for all manner of goods and services fluctuate based on the region, and the company was increasingly finding it difficult to compete with local vendors who better understood the economics of a particular region.

"The company had principally gone to market with a very traditional national list price," McRickard explains. "We would publish our new pricing and our competitors, in about three minutes, would come up with their counterstrategy. What was missing in our business was what the price should be in New York vs. L.A. or Miami. We just didn't know."

McRickard took the helm as CEO of Dayton Superior in January 2013, and it soon became clear that price transparency was a major problem. The company published one central price list that was updated on an annual basis. The final price of any project was the list price, minus a negotiated discount.

It wasn't a small list either. The company has roughly 17,000 SKUs across four main product lines: concrete accessories, chemicals, forming and paving. It also has about 3,000 distribution customers.

There were discounting guidelines in place, but the way the rules worked, nearly 80 percent of Dayton Superior customers were treated as large customers, regardless of their actual spend. To make matters worse, McRickard says, the discount decisions were generally a judgment call, meaning the prices were often irrational and inconsistent. The lack of pricing consistency meant that large distributors were incentivized to place large orders for warehouse stocking rather than small orders, and that significantly increased the company's cost-to-serve.

In addition, prices were almost always misaligned with market conditions and customer expectations. The company did include a geographic aspect to the matrix prices, but it was rule-based rather than market-based. Frontline reps frequently found themselves either losing business due to overpricing or giving away unwarranted discounts.


1  2  3  Next Page 

Sign up for Computerworld eNewsletters.