Optimizing Medical Device Gross Profits with Dynamic B2B Margin Analytics Platform
Revology Analytics Case Study series in Outcome-Based Analytics™
Background
In the medical device industry, margin analytics and optimization capabilities are crucial for controlling price leakage and margin erosion, developing surgical pricing strategies, and setting the foundations for a value-based journey.
A leading med-tech company approached Revology Analytics to build a dynamic Margin Analytics platform for their Sales teams and Functional leaders (in Finance, Pricing, and Commercial Development) to improve pricing and discounting analytics capabilities and drive a stronger margin management discipline.
The company experienced the following pain points regarding Pricing and Margin insights:
Lack of visibility into macro insights, key net sales and margin growth drivers, and surgical opportunities to drive additional gross profits.
Decision makers didn't have quick access to granular drivers of price and margin leakage or be able to run scenarios to understand the opportunity of fixing each of them.
The sales team didn't have pragmatic, easy-to-use modules to understand the top customer and product-level opportunities to drive additional net revenue or gross profits.
There was a systematic inability to manage better discounting discipline with the sales team, with a wide dispersion of price discounts across sales reps (for similar customers).
The client wanted to build the in-house Margin Analytics solution for two of its largest business units across two primary regions: North America and Europe. The client's Heads of Analytics and Pricing and the Finance and Commercial Leaders of each BU-Region were crucial to the development effort.
Why Revology Analytics?
The client chose Revology Analytics for its expertise in Revenue Growth Management and Advanced Analytics and for its pragmatic, Outcome-Based Analytics process, which relies on building in-house Commercial Analytics capabilities using popular tech stack companies already have.
Additionally, we had a proven, highly collaborative, and sequential approach that leveraged an internal Core Team of experts and Sales Team power users. It ensured that the Margin Analytics and Optimization capability was co-created with the end-users, maximizing the chances for sustainable adoption.
Outcome-Based Analytics™ Engagement Framework
We followed a six-step engagement process from start to finish, in line with our typical Outcome-Based Analytics framework:
Understand critical pricing problems and the opportunity of solving them with Margin Analtyics capabilities.
Split the problem into manageable sub-components and collaborate with key internal stakeholders to align on the solution concept and design (meet with executive sponsors, internal experts, and finance, pricing, marketing, and sales power users).
Arrange iterative alignment sessions and roadshows with key stakeholders to update them on progress, address critical questions, and drive collective decisions.
Build a Minimum Viable Analytics Solution and collect stakeholder and power user feedback for refinements.
Launch the production version Margin Analytics solution based on the Core Team and Power User feedback.
Develop a playbook and provide training for Sales teams and functional leaders in Pricing and Finance to ensure the solution is built into the regular operating rhythm and sales review cycle. Re-engage with teams within six to eight weeks post-launch to understand the business impact and align on additional opportunities for continuous training and solution enhancement.
Project Timeline: Building a B2B Margin Analytics Platform in 90 days
Concept & Design
Our priority was to comprehend the problem and pinpoint the critical Pricing, Discounting, and Margin performance questions that required answers. These included understanding the biggest drivers of sales and gross profit growth, identifying top performers for learning purposes, and establishing consensus on team outcomes. We initiated exploratory meetings with key stakeholders, including Pricing, Finance, and Sales team members, to address these questions.
This initial session provided the basis for the Margin Analytics solution and what questions it would answer.
Initial Concept Exploration in Miro
After the initial exploration, we aligned on the Concept for a Margin Analytics platform.
It involved engaging with each stakeholder and power user to agree on the platform's components. For instance, the platform was designed to include an executive dashboard, in-depth analyses of Net Revenue and Profit growth drivers, assessments of discounting practices, and evaluations of Customer level pricing and margin opportunities.
After we aligned on the Concept, we conducted additional research to delve deeper into each area. This process included breaking down Net Revenue growth into Price, Volume, and Mix drivers at the customer and product levels.
We also analyzed Gross Profit growth, deconstructing it into Price, Cost, Volume, and Mix drivers at the customer and product levels. Furthermore, our team performed an extensive analysis of Net Price realization and the overall discounting behavior of the sales team.
Overall Solution Concept example in Miro
Upon completing this research, we created Concept documents for each primary dashboard. These documents outlined the objectives, metrics, and analyses to be incorporated into each dashboard.
Dashboard Concept example (1 of 16)
Subsequently, we designed each dashboard in Miro and reviewed them with our client, implementing any necessary modifications based on their feedback.
Dashboard design example (1 of 16)
Minimum Viable Analytics Solution (MVAS) and Solution Launch
After aligning the Concept and Design and setting up the data, the team created a Minimum Viable Analytics solution, which took four weeks.
The MVAS included the following modules:
Executive Summary: provided senior executives with global trends, key drivers, and top opportunities to drive additional gross profits.
Revenue and Gross Profit Drivers: enabled Pricing, Finance, and Sales operations teams to dive within two or three clicks into more granular drivers of price leakage and margin erosion and run scenarios to understand the opportunity of fixing each of them.
Top Customer Opportunities: provided sales teams with pragmatic, easy-to-use modules to understand the top customer opportunities (Discounting and Product Margin) to drive additional Net Revenue or Gross Profits.
Discounting Analysis: offered sales managers insights to manage better discounting discipline with their teams via Discount Curve Analysis and Sales Team Stack Ranking.
Executive Summary
Revenue and Gross Profit Drivers
Top Customer Opportunities for Discounting Rationalization
Discount Curve Analysis
During this pilot period, the Core Team members and Sales Power users tested the product to ensure it worked properly with minimal latency (fast responsiveness to filter and parameter changes), addressed the right questions, was easy to use, and was intuitive.
The team incorporated their feedback and made additional modifications before launching the product in the production environment, which took about three to four weeks.
Training and Driving Adoption
After launching the product, we worked with the client's Learning & Development team to build sequential learning modules to drive tool adoption throughout the global commercial organization.
The first few weeks involved building how-to training (i.e., how to use the tool, apply filters, etc.) and cascading this train-to-trainer approach with short-form videos.
The second portion was a "so-what" training, which was more of a case study-style session on how to look for opportunities for margin and pricing improvements and interpret results.
There were tactical sessions, such as two 60-minute pieces of training for Pricing and Finance leaders, and 60-minute sessions for Sales directors and VPs with the intent that they would train their sales staff and reinforce some of these learnings later on.
Short-term training
The team created five-minute micro-learning videos with the client's Learning and Development team, addressing how to use each analytical module to drive decisions. We also created a searchable knowledge base with concepts, screenshots, and frequently asked questions.
During the training period, we wanted to ensure that the revenue and margin performance discussions now incorporated specific elements of Price and Cost impacts, Customer and Product mix, Volume impacts, and Discounting behavior.
Long-term training / driving adoption
Organizational Impact
The client saw positive results by implementing the Margin Analytics solution for our medical device. Most importantly, it stood up fast (under 90 days) using a technology the client was already familiar with (Tableau).
The company improved its Net Price realization in the first year after implementing the Margin Analytics solution by pinpointing and addressing previously unidentified price leakage and margin erosion drivers.
The platform helped the company understand the factors impacting its Gross Profits. By identifying these adverse impacts and implementing changes to address them, the company was able to improve both net Revenue and Gross Profits.
The Margin Analytics solution allowed the company to develop more targeted and strategic pricing strategies at the Customer level.
The solution set the foundations for a value-based pricing journey for the client. This new capability allowed the company to continue refining its pricing strategies and better align its pricing with the value its products provided to customers.
If you'd like access to our sample B2B Margin Analytics workbooks used in this Case Study, please visit our "Revenue Analytics Tools" section.Subscribe to
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