TV Screens

This case involves Vivid, a consumer electronics manufacturer that produces high-definition TV (HDTV) screens. Despite increasing sales volumes, the company’s revenue has remained flat. The core of the case involves analyzing a complex supply chain, identifying misaligned sales incentives that lead to excessive discounting, and recognizing that Vivid’s high product quality and high customer switching costs provide significant untapped pricing power.

- The Client: Vivid, a manufacturer of patented HDTV screens. - The Customers: Major TV manufacturers in Asia and the US who integrate Vivid's screens into finished TVs for global retail. - Current State: Vivid's technology is patent-protected, and customers face high switching costs because switching would require expensive plant reconfigurations. - The Conflict: While production costs have dropped significantly due to economies of scale (from $400 in 2015 to a forecasted $180 in 2018), revenue is not growing

Vivid has retained SKP to perform a pricing optimization project. The company needs to determine why revenue is flat despite volume growth and how to better capture the value (surplus) it creates within the HDTV supply chain

• Incentive Realignment: Shift sales compensation from volume-based quotas to profit-based metrics to reduce unnecessary discounting. • Discount Governance: Implement a stricter, multi-level approval process for discounts exceeding the standard floor. • Price Adjustment: Target an ASP of $240. This splits the $100 manufacturer/Vivid surplus more equitably ($40 for Vivid), giving both players a 20% return on sales.