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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.

How analytics aligns markets and pricing

McRickard concluded that Dayton Superior needed to apply analytics to the problem, giving it insight into its products, competitors and customers. With a data-driven strategy, it could deliver market-aligned prices to its sales reps.

"I've always been intrigued by analytics, particularly for old, traditional businesses," McRickard says.

Two years ago, Dayton Superior adopted MarginMax, a mathematical price optimization application for B2B companies from pricing optimization specialist Zilliant. MarginMax uses data science to produce rational, market-aligned pricing guidance by measuring price elasticity at the micro-market level and then predicting the impact of price changes.

A Zilliant team configured the application to generate optimized prices based on a set of factors defined by domain experts at Dayton Superior.

"I think we spent three to four months," McRickard says. "You had to get all the data sucked into the database. There's a gazillion transactions we run every day."

Once the database was built, he says, there was some significant training involved, particularly on the customer service end of things, though he notes it became second-hand once everybody was up and running.

To drive a data-driven approach through the organization, McRickard needed his sales leadership team to step up.

"From a sales management perspective, I've made massive changes to make sure I had leaders that understand how to drive the tools through the organization," he says. "When you have guys that are principally paid on commission, it helps to show them a path to new commissions."

"I've got high compliance from my sales guys, in the mid-90 percent," McRickard adds. "It actually started in the 90+ percent compliance range. We'd been preselling it, explaining it, telling them what it meant to them."

The change management plan was carefully orchestrated. There was frequent communication reinforcing the company's commitment to the new pricing initiative and the company held regular training sessions with the CFO, senior vice president of sales and Zilliant. Customer service, sales managers and sales reps all received a comprehensive understanding of the mechanics of the solution and how it created price guidance. Within one month, 98.3 percent of sales reps were leveraging the price guidance and quote turnaround time improved dramatically. That, in turn, allowed sales reps to be more responsive to customers.

Telling the customers

At first, McRickard says, customers' immediate reaction was that the new way of doing things was about higher pricing. But, in fact, he says, in many cases Dayton Superior had been quoting customers prices that were too high. The new guidance meant prices were more rational and more specific to each customer's buying circumstances. The company held an open forum for 400 customers at its headquarters to explain its new approach and allow them to ask questions.

 

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