Pricing and margin improvement

Pricing strategy and margin improvement in Nigeria

When costs rise faster than prices, margin leaks in many small places at once: a price increase that was passed through late or only in part, a pack size that no longer earns its shelf space, a channel that sells volume at a loss, a trade promotion that pays for sales that would have happened anyway. Carthena Advisory finds where margin is leaking, quantifies it product by product and channel by channel, and puts in place the pricing and commercial discipline to recover it.

Our method rests on four pillars: pricing, cost pass-through, channel economics and trade execution.

Pricing and price architecture

We build the price architecture across brands, pack sizes and channels: the price points the market will accept, the gaps between them, the price ladder against competitors, and the role each product plays in the portfolio. Price increases are designed to protect volume where it matters and to recover margin where the market allows.

Cost pass-through

In an inflationary economy, the question is not whether to pass costs through but how much, how fast and on which products. We measure how much of each cost increase has actually reached the price, product by product, and set pass-through targets and a timetable that balance margin recovery against volume risk.

Channel economics

Every channel has a different cost to serve. We calculate the true profitability of each channel and key customer after discounts, rebates, logistics and credit, show where volume is being bought at a loss, and redesign terms so that each channel earns its place. The physical cost of serving each channel is examined with our supply chain practice.

Trade spend and promotions

Trade spend is often among the largest and least measured costs in a consumer business. We evaluate which promotions, rebates and listing fees generate incremental profit and which only subsidise sales that would have happened anyway, and redirect spend to what works.

Revenue growth management

Pricing, pack, channel and promotion decisions are usually made by different teams on different data. Revenue growth management brings them together, so every commercial decision is judged on the margin it creates rather than the volume it adds. We set up the measures, the review rhythm and the decision rights that make this work inside a commercial team.

MarginCOS

MarginCOS is the margin recovery platform Carthena built to make this work continuous rather than a one-off project. It applies the four pillars to a company's own sales, price and cost data, classifies each product and channel by margin risk, and tracks recovery over time. Advisory engagements can run on MarginCOS, so the client keeps the analysis and the discipline after the engagement ends.

Signs margin is leaking

• Gross margin is falling although prices have risen.
• Price increases reach the market months after cost increases.
• Volume is growing fastest in the least profitable channels.
• Trade spend is rising without a clear link to profit.
• Nobody can say which products and customers make money.

How an engagement runs

1. Diagnose. Price, cost, channel and trade data analysed to quantify the margin leak.
2. Prioritise. The actions ranked by margin recovered and risk to volume.
3. Implement. Price changes, pass-through plans, channel terms and trade spend rules.
4. Sustain. Ongoing measurement and review, on MarginCOS where the client chooses.

Why Carthena

Carthena Advisory has completed more than 70 projects in 12 sectors, and is led by a Fellow Chartered Accountant. We combine commercial analysis with economic intelligence on inflation, the exchange rate and input costs, and built MarginCOS so that the margin a client recovers is measured, visible and kept.