Automated Special Pricing Authorization Tool Accelerates Lsi’s Responsiveness to Channel Partners, and Improves Competitive Position
Company Info
Founded in 1981 and based in California’s Silicon Valley, LSI Corporation is the third largest fables semiconductor company in the world, and one of the leading manufacturers of technology for mass storage and consumer products. This includes controller ICs for storage systems and chips for DVD players and other set-top devices.
LSI is one of the few high-tech manufacturers to win two Emmy Awards for graphics chips innovations. The company recorded full year 2006 revenues of $1.98 billion.
LSI’s worldwide sales channels include a network of manufacturers’ representatives and distributors such as Arrow Electronics, ASI, Bell Microproducts, Ingram Micro, MA Labs, MicroLand Electronics and others. OEM products are sold direct to some of the world’s leading manufacturers.
The Challenge
In the competitive world of semiconductors, sales cycles can be long, and product design decisions are often locked in far ahead of a new product release. Designers and manufacturing engineers are constantly struggling to cost reduce their products by seeking alternate sources of components and lower prices from existing suppliers. This leads buyers and salespeople to engage in back and forth negotiations on component delivery times, quantities and prices.
A common practice in the semiconductor industry is for component distributors to make special pricing requests to manufacturers, to meet competition or out-maneuver another supplier by providing lower than standard pricing.
“Special pricing requests, authorizations and tracking those requests are critical elements of our sales and marketing processes,” explained Rick Flores, Distribution Sales Manager for LSI Corporation. “A strategic percentage of all major purchases in our distribution business involves special pricing requests.”
Special pricing consideration is traditionally granted to manufacturers’ most loyal and strategically important channel partners and customers who need to reduce their overall bills of materials. Special pricing strategies are also used to meet competition, move finished inventory from warehouses and expand a vendor’s market share.
“Approving special pricing requests has to be based on the opportunity at hand,” Flores said. “You can’t issue special prices across the board to everyone. You need to know something about the customer, the opportunity and the business that you’re going to win. When you have the right tool to collect this information for management to make the right decisions, it can really enhance your bottom line.”
Why CMR
Several years previously, LSI adopted CMR’s Web-based point-of-sale data (POS) and inventory reporting services to give its sales operations people more accurate, up-to-date information for tracking customer activity and sales trends. The implementation was so successful, that LSI asked CMR to help them improve the way they received and processed special pricing requests.
“We frequently receive inquiries via our sales people from distributors who ask us to deviate from our standard pricing so that they can specify one of our components instead of a part from a competitor, explained Vanessa Miller in LSI’s finance group. We have certain business rules that we need to follow that sometimes require upper management to get involved.”
As a result of past successes, CMR became LSI’s supplier of choice for channel management tools.
“Our financial applications and ERP systems didn’t have a good provision for handling and tracking special pricing requests. Because we have such a good relationship with CMR for other channel management solutions, it made sense for us to leverage CMR to develop a more efficient way for us manage special pricing requests.” Miller added.
Increasing Operational Efficiency
LSI’s field sales team has the authority to approve some transactions within certain parameters. Other times, senior executives have to get involved. The SPA application receives all requests from channel partners and automatically routes the right requests to the right people at LSI, to reduce the time required for approvals and order acceptance.
“Our goal in designing the CMR Special Pricing Authorization Web-based application was to fully automate a critical channel management process that has historically been slow, inefficient and unresponsive to customer needs,” explained Del Heles, president of CMR. “LSI and other companies use SPA to achieve easier and faster turnaround of special pricing requests to enable their distributor sales teams to better serve their customers and empower their channel partners to close more deals and produce higher revenues.”
Channel partners fill out a user-friendly online form that matches the look and feel of LSI’s other online resources. The requestor is prompted to enter all the required information and the form is submitted only after all required fields have been completed. When a new claim is ready to be reviewed, LSI’s processors receive an automatic alert, typically within five minutes of submission. Channel partners are instantly notified when requests are approved, modified or declined.
Improved Market FeedBack
The Special Pricing Authorization application from CMR now helps LSI win more competitive opportunities, increasing their market share and monitoring the effectiveness of pricing strategies by automating, managing, tracking and analyzing special pricing requests from resellers, distributors and field representatives.
LSI’s marketing managers can use a Web-based interface to better identify and solve product pricing and market education issues. They receive regular feedback from channel partners in the form of better-documented special pricing requests and justifications from sales people.
If an unusual number of requests are received, this may indicate that a product is overpriced for the market or that an upgraded product is being promoted by a competitor. It may also show that more detailed product information is needed in the market or that sales people require more thorough training.
“The CMR special pricing solution is a critical strategic tool used by our distribution sales organization, and the support that we get from the CMR development team is outstanding.”
“Automated special pricing processing helps us book more business, by quickly enabling our distributors to purchase more of our parts versus lower priced parts from our competitors.”
“CMR came in here and gave us a special pricing tool that met our requirements and stayed under budget. SAP couldn’t do that and Oracle couldn’t do that. That’s why we love CMR.”
Benefits To The Organization
- Accurate, up-to-date POS information enables the tracking of customer activity and sales trends
- Central place to gather information so that everyone can see a history of each account
- Channel POS reports help the sales team strategize about how to entice customers to purchase
- Channel Inventory itemizes inventory balances by account and improves movement of inventory
About Computer Market Research
For more than 23 years, CMR has delivered cost effective, technology-based applications and services to manufacturers to assist them in managing channel data, optimize their trade promotion investments and maximize the effectiveness of their distribution channels. CMR’s Web-based solutions accelerate and automate distributor and reseller data collection, processing, analysis and reporting. CMR’s newest clients include Buffalo Technology, D-Link, LSI Corporation, and Targus. More information is available from the CMR customer support line at
(858) 795-1021, or can be viewed at www.computermarketresearch.com.
