Commercial Strategy

Commercial strategy consulting is the work of settling the decisions that turn a proposition into revenue: which customers you serve, what you sell them, at what price and in what packages, through which channels, with what sales model and what commercial terms. Vivaldi has worked on those decisions since 1999, including the commercialization program that took Del Monte Pet Foods, now Big Heart Pet Brands, from a declining cat treat position to a new brand in market.

• Since 1999commercial and growth strategy for global companies
• 200+published case studies
• 10 officeson four continents
• 5xWirtschaftsWoche Best of Consulting, Strategy and Innovation
• Brand Leadershipco-authored by our founder

When companies bring us in

Commercial strategy is usually bought by a CCO, a CRO or a CEO at a company whose revenue plan is detailed, well governed and not working. The trigger is almost always a specific decision rather than a planning cycle.

• Volume holds and price does not. Win rates look stable, average deal size drifts down, and the discount is quietly doing the work the proposition used to do.
• Before a pricing reset. The company is about to reprice against competitor benchmarks, which reproduces the market’s answer rather than its own.
• Before a channel restructure. A route is about to be added, cut or taken direct, and nobody has established what each route is actually worth per customer group.
• When the portfolio confuses the buyer. Several products reach the same buyer through different teams and nobody has settled what is being sold when a customer buys more than one.
• When something new has to be commercialized. A concept has cleared research and now needs a price, a package, a route and a first market, which is a different discipline from inventing it.

Why optimizing the route to market first does not work

The reasonable version of the standard approach is efficiency. The proposition is treated as settled, so the commercial job is to route it to market at the lowest cost of sale and the highest conversion. Channel mix, sales coverage, discount policy and incentive design all follow from that. Done well, it produces real margin.

The problem appears when the proposition is not settled and everyone assumes it is. The whole apparatus then scales distribution for a reason to be chosen that may no longer hold, and it does so efficiently, which is what makes it expensive rather than merely disappointing. Coverage expands. Discounting deepens to hold volume. The commercial team is measured on executing a plan whose premise was never tested.

The underlying error is usually a category assumption. Categories describe what companies sell. Demand spaces describe what customers are trying to get done, and the valuable ones cut across the categories incumbents organize around. A commercial plan built on the category scales distribution into a contest that has already moved. Owning a demand space is a more defensible position than growing a category, and it changes the pricing and channel decisions that follow.

What our commercial strategy consulting services include

We work the proposition and the demand architecture first, then the commercial model, then the channel economics. Reversing that order is the most common and the most costly mistake in this work.

1. The proposition and the demand architecture

• Which demand spaces the company intends to own, established from behavioral and occasion-level evidence rather than asserted in a workshop
• Where the right to win is genuine, which is a permission test rather than a capability test
• What is actually being sold when more than one product reaches the same buyer, which is usually the connection between them rather than the sum of them
• Where the offer is differentiated and where it competes on price, since the commercial motion should differ in each case

2. The commercial model

• Packaging: what is bundled, what is separable, what is entry level and what is reserved
• Price set against the preference the proposition earns, rather than against competitor benchmarks or cost plus a margin
• Commercial terms, contract shape and revenue model, including where recurring revenue is genuinely available and where subscription language is being applied to a transaction
• The sales motion each demand space requires, since a considered enterprise purchase and a routine repeat purchase do not share one

3. Channel economics

• Channel mix decided on economics per demand space rather than on historic share
• Cost to serve and cost of sale by channel, held against value over the relationship rather than first-order margin
• Where channel conflict is real and where it is a negotiating position
• Sustainable acquisition cost, calculated rather than inherited

4. Commercialization of what is new

• Which concepts are ready to carry revenue and which are still research, judged on purchase intent rather than enthusiasm
• Whether a new offer goes to market under an existing brand or needs one of its own, and what each choice costs
• The launch sequence: first market, first package, first price, and the evidence that would justify widening any of them
• What the company should stop selling to make room, since a commercial plan that only adds is a plan for complexity

5. The measurement that keeps it honest

• A line from each commercial decision to price, volume and capital intensity, then to the spread between return on invested capital and the cost of capital
• Economic profit as the scoreboard, because revenue growth funded by discounting and coverage can reduce it
• Unit economics by demand space and by channel, not blended across the business where the losses hide

Most commercial functions argue in activity language and are judged in financial language, which is why commercial and marketing investment should be argued as a claim on return on invested capital, not as a cost line to be defended.

How a commercial strategy engagement works

1. Diagnose. Customer and non-customer research, win and loss evidence, price realization, discount behavior and channel economics as they actually are. The output is a view of where revenue is being bought rather than earned.
2. Decide. The demand spaces to own, the proposition per space and what the company will stop selling. Tested with customers, stress-tested with finance, written down with the exclusions included.
3. Build. Packaging, pricing, commercial terms, the sales motion per space and the channel mix, each with the economics attached rather than asserted.
4. Embed. Incentives, governance, pricing authority and a measurement model in economic profit terms, so the plan survives the first quarter it costs someone volume.

Why companies choose Vivaldi for commercial strategy

We start one step earlier than most commercial practices, at the proposition rather than the route, and we are willing to tell a company to sell less. That is the uncomfortable half of the work and it is usually where the margin is.

Del Monte Pet Foods, now Big Heart Pet Brands, is the clearest example in our published work. The company had invented the cat treat category and its existing cat treat brands were declining, holding only 16% market share against competitors at 52% and 32%, with the business itself conservative and, in its own culture, more dog-minded. We worked outside-in, running one-on-one ethnographies alongside quantitative data to build a view of the cat-to-cat parent relationship, then defined a cat treat strategy and brand architecture and developed new product and service concepts against the seven highest priority platforms. One of them, Wild Catch, outperformed both Del Monte and the database average for top box purchase intent among all cat owners.

The commercialization decision is the part of that story this page is about. Rather than routing more product through the existing declining brands, the company launched Milo’s Kitchen in 2011, the first new brand in its 100 year history, which delivered $100 million in 18 months, was the number 7 new product launched in 2012 and was voted a Nielsen Breakthrough Innovation winner. The route to market was not the constraint. What was being sold, and under whose name, was. Read the full story: Digging up market expansion ideas for pet treats.

How to evaluate a commercial strategy consultant

Worth asking of any firm on your shortlist, including us.

• Ask whether they will question the proposition or only the route to market. Most commercial practices do the second. That is legitimate work and it is the wrong purchase when the proposition is the constraint.
• Ask how they set price. If the method is competitor benchmarking or cost plus a margin, you will get the price the market already offers. Pricing against preference requires knowing what the preference is worth, which is harder and is the point.
• Ask what evidence the demand spaces come from. Workshop output is opinion arranged neatly. Behavioral and occasion-level evidence is a different input and produces different answers.
• Ask what they would tell you to stop selling. A commercial strategy that only adds is a plan for complexity.
• Ask how the recommendation reaches economic profit. Ask to see the line to the spread between return on invested capital and the cost of capital, not just to the top line.

Commercial strategy consultancy, sales consultancy or management consultancy?

Related work

Commercial strategy rarely arrives alone. Four connected pieces, with the boundaries stated plainly.

• Pricing strategy if the immediate question is what the proposition is worth and how to package it. Price is a decision in its own right and it is the one most often taken by default.
• Demand landscape mapping if the demand spaces the commercial plan should serve have never been established from evidence. Map those before any channel decision.
• Go-to-market strategy if the proposition is settled and the question is the launch itself: first market, first channel, first motion.
• Brand and product portfolio strategy if the constraint is that the portfolio competes with itself in front of the same buyer.

This work sits inside our Competitive Strategy group, part of the Business Strategy and Transformation argument that supply-side work harvests value and demand-side work creates it, at Vivaldi, the strategy firm behind the Demand Landscape and the Interaction Field.

Commercial strategy consulting in the US and worldwide

We run commercial strategy engagements from 10 offices on four continents, most often for companies headquartered in the US and Europe that sell across both. The questions travel: what a customer will pay, which route serves a buying situation at a cost the relationship supports, and whether a price set in one market can hold in another. The answers rarely do, which is why packaging and channel economics are worked per market rather than translated from the home one.