SIMCRO: pricing customer value in animal health

A pricing strategy for a private-equity portfolio company

SIMCRO designs animal-health delivery systems, including injectors, applicators and specialist packaging used to administer veterinary medicines. Its products combine engineering, customisation and product testing with the practical requirements of pharmaceutical companies, veterinarians and farmers.

During its ownership of the business, The Riverside Company supported SIMCRO’s development as an international supplier of animal-health delivery systems. Riverside brought Pricing Insight into the business to examine how pricing could support its commercial objectives.

The challenge was to negotiate effectively with sophisticated procurement teams from large multinational pharmaceutical companies, including Bayer Animal Health. SIMCRO needed a clear explanation of the value it provided, a disciplined approach to setting prices and customer agreements that created a more balanced value exchange.

The challenge: make value visible beyond the unit price

A procurement discussion can focus on the purchase price of an applicator or packaging component. Yet the commercial relationship also involves product performance, manufacturing requirements, delivery reliability, technical support and the consequences of a product or supply failure.

Pricing Insight worked with SIMCRO to connect these considerations to the customer’s business. The question was not only what a product cost to manufacture, but how it helped the customer operate, serve its own customers and manage risk.

The strategy also needed to recognise differences between direct pharmaceutical accounts, retail channels, product categories and territories. A common method was required, without assuming that every customer valued the same offer in the same way.

The approach: diagnose, discover and develop the strategy

The documented program included a three-day workshop series in Hamilton on 13–15 December 2016, involving SIMCRO’s leadership, finance, marketing, analytics and regional sales teams. Pricing Insight used its Pricing Diagnostic and Customer Value canvases to structure the discussions and translate them into commercial priorities.

The work brought together three areas:

• Strategic pricing diagnostic: Review pricing practices, customer agreements, decision-making, sales capability, analytics and the tools used to support quotations.
• Customer Value Discovery: Map the benefits customers received and the operating risks SIMCRO helped them manage, going beyond a list of product features.
• Price optimisation: Examine quoted versus realised prices, product-level price variation and opportunities to make pricing decisions more consistent with customer value.

Preparation included sales and pricing analysis, customer-value discussion planning and conversations with industry participants. The workshops then tested the team’s understanding of value against specific customer situations and identified where further external validation was needed.

Customer value as the basis for negotiation

Pricing Insight’s structured value framework helped the team examine both the benefits of the offer and the consequences when something went wrong. The customer-specific assessments considered:

• Product performance: Fit for purpose, accuracy, quality and the value of customised delivery systems.
• Supply and service: Lead times, delivery coordination, flexible capacity and the practical requirements of each account.
• Operational risk: The consequences of unavailable packaging, interrupted supply or products that did not perform to specification.
• Technical support: Product development, problem solving, documentation and the support available when customers needed assistance.

These assessments helped distinguish what SIMCRO believed was valuable from what still needed to be tested with the customer. The resulting plan called for selected customer pilots and on-site validation before extending the approach more widely.

For sales teams, the objective was to prepare a stronger commercial discussion with procurement, supported by a clearer understanding of the concerns of marketing, operations and technical stakeholders. Price could then be discussed alongside the performance, service and commitments associated with the offer.

Refining agreements to create a better value exchange

The review addressed how customer agreements could support pricing discipline. A key issue was the relationship between quantity-based prices and the volume a customer ultimately purchased.

Pricing Insight explored how benefits offered to a customer could be linked more closely to commitments delivered in return. The work covered minimum quantities, price breaks, the potential use of earned rebates rather than upfront concessions, and earlier preparation for agreement renewals.

The principle was practical: a lower price should have a clear commercial basis. Where a concession depended on volume or another commitment, the agreement should make that exchange explicit rather than leave SIMCRO carrying the cost of an expectation that might not be met.

From workshops to a practical action plan

The workshop outputs set out immediate priorities and actions over the following three, six and twelve months. These included selected customer-value pilots, clearer documentation of the company’s value proposition, improvements to the quoting tool and better access to customer and product sales information.

Pricing Insight also recommended bringing value drivers into the quoting process, documenting the tool’s purpose and use, and testing changes with the sales team. Follow-up correspondence in early 2017 records work on the project plan, nominated accounts, responsibilities, timings and user acceptance testing.

The deliverable was a structured pricing strategy and implementation roadmap designed to improve margin and profitability while supporting important customer relationships. It connected customer value, price optimisation, agreement design and sales execution rather than treating a price increase as a stand-alone decision.

Pricing Insight’s role

The SIMCRO engagement demonstrates Pricing Insight’s work with a private-equity owner and its portfolio-company management team. Its proprietary Customer Value Discovery techniques helped translate specialist product capabilities into a clearer basis for pricing, negotiation and a more balanced exchange of value with major customers.

Develop your portfolio company’s pricing strategy

A clear pricing strategy connects customer value, commercial terms and the decisions sales teams make every day. Explore our private-equity pricing expertise, strategic pricing diagnostic and value-based negotiation workshops.

To discuss a portfolio company or a complex customer negotiation, contact Pricing Insight.

By Ron Wood, Pricing Insight. Product image: SIMCRO VS injector.