Complex B2B Services Industry – the Case of Compliance Services for Large Projects
Brief
A global company in the complex B2B service industry, witnessed a market share erosion coming from a multitude of small players scattered worldwide. The compliance nature of the product made many customers treat the service as a compliance issue to be dealt with at minimum cost, rather than a useful service that pays for itself over time.
| Client's problem | Downward price trend, dispersing industry with volume-driven hostile pricing |
| H&P solution | Risk-assessment system, revealing true-cost of “cheaper” options |
| Impact on client’s business | Reduced demand for discounts, blueprint to calculate value |
Client's problem
The industry situation when Hinterhuber & Partners was called, was already troublesome: in the previous 5 years prices for the main service have fallen from 3-5% and the trend seemed steady with no indication of a halt. The company did have long-term contracts in place with the largest accounts and renewed others at a comparable or slightly lower price, showing a loyal customer base was present, nonetheless it started losing new contracts for price-related reasons. No one considered the offering as inferior to that of competitors, just some didn’t understand the value.
Hinterhuber & Partners Solution
As a first move, Hinterhuber & Partners suggested to immediately contact customers whose contracts were about to expire and offer a conditional discounting: if they agreed to renew business and also expand the share of their portfolio, they would get a discount. The rationale is simple: customers who have already tried out the service level of our client would have benefit from expanding their business a little bit while enjoying a more predictable (and lower) cash flow for the upcoming years without going out in the industry looking for other providers: a win-win situation that put everybody’s minds at ease.
Secondly, Hinterhuber & Partners implemented a risk assessment system used by insurance companies and similar entities to do one job: understand of much it would cost a customer to rely on an inferior or a superior provider. To undertake this task tens of hours of interviews with customers have taken place and project data extracted from different industry-risk databases compiled by independent authorities.
Impact on client’s business
Armed with the information gathered, the client was able to respond customers asking for a discount with a risk assessment challenging that an upfront saving would have actually translated in a saving for the company. The ease and completeness with which this data was compiled made a compelling case for customers to rely on our client right away. Already during the course of the project, our client witnessed a reversing trend in terms of prices charged and over time it was able to regain part of the lost market share.