B2B Pricing: the how of sustainable improvement
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B2B pricing: the how of sustainable improvement
Ian Tidswell
February 2017
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Ian Tidswell Biography
Founder of een Consulting, focused on helping B2B companies develop best-in-class end-to-end sustainable pricing processes
Professional Experience
• Since 2016, Independent Professional, Switzerland
• 4 years, Global Head of Pricing, Syngenta, Switzerland
• 2 years, Pricing Transformation Lead, Medtronic, Switzerland
• 6 years Partner, Head of Business Consulting, Vendavo Consulting, UK and USA
• 4 years, Director, i2 Technologies, USA
• 4 years, to Engagement Manager, McKinsey & Company, USA
Selected Experiences
• Developed a pricing framework & process for pricing innovations for out-licensing for leading diversified industrial company
• Built the HQ global pricing team for Syngenta. Indirect management of in-country pricing managers
• Lead multiple in-country projects for Syngenta to diagnose pricing opportunities and actions to address price setting, commercial terms management & price execution challenges
• Lead development of a global commercial terms/policy framework and playbook to align CT/P with strategic goals in each country within Syngenta, improved CT/P performance and enabled automation
• Headed the strategic initiative to substantially improve, harmonize and automate Medtronic International’s pricing processes across all major markets. Drove improved pricing & risk exposure
• At Vendavo successfully led discovery, design and deployment of Vendavo price system at multiple customers including chemicals, distributor, semiconductor, tire and mobile phone manufacturers
• Frequent speaker at global pricing conferences
Education
• Ph.D. Physics, Harvard University, Cambridge, Massachusetts, USA• B.Sc. in Physics, Imperial College, London University, UK
At a glance
• Former McKinsey senior consultant with line management experience in MedTech and agri-chemicals business
• Proven B2B Pricing transformation leader
• Practical, hands-on approach with track record in value delivery
• Based in Basel Switzerland
• LinkedIn Profile
• Email: ian@eenconsulting.com
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Introduction
• A previous slide deck introduced the topic of ‘why improving B2B pricing is worth doing but difficult, and how to get started’ (http://www.slideshare.net/IanTidswell/why-improving-pricing-is-hard-but-worth-doing-and-how-to-get-started)
• Another slide deck reviewed examples of different types of pricing frameworks that are helpful in organizing and prioritizing pricing activities (the what of pricing) (http://www.slideshare.net/IanTidswell/b2b-pricing-framework-elements)
• In this presentation we focus on practical steps to improve pricing, from the what and how, to gaining permission, making the changes sustainable, and showing progress
• Look for these other related presentations on:
• Some practical tools that help improve pricing
• How to improve your price guidance to support negotiated sales (http://www.slideshare.net/IanTidswell/b2b-price-guidance-with-impact-putting-the-pieces-together)
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HOW to build a bridge to better pricing
Insights, knowledge, best practices Learn WHAT to do
Pricing and supporting skills HOW to get it done
Pricing team brand/reputation PERMISSION to do it
Improve processes, technology, data Make it SUSTAINABLE
Measure progress SHOW progress to maintain support
The focusof this
presentation
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Five dimensions of WHAT to build for a pricing process that works
Clear priorities that should influence pricing decisions
Company Goals
Harmonized processes & data etc. to leverage scale
Standards
Who makes decisions based on insights, skills
Organization
Data and direction to support decision-makers
Information & Guidance
Process and technology to support and sustain
Consistent execution
A Pricing Process that is:
• Effective
• Efficient
• Sustainable
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WHAT to harmonization is a key decision
• Harmonize a core set of the most common and important elements
• Pricing framework, terminology
• Product, Customer hierarchies
• Waterfall structure
• Approval framework
• Standard price reports
• Deal structures
• Provide a frame for local businesses to operate in
• Expect and support local deviations where necessary
• Keep the core as simple as possible and plan for exception!
Imp
ort
ance
(va
lue,
str
ateg
y)Frequency & Commonality
Standard: FullyHarmonized
Selectively or Partially
Harmonized
Exception: Eliminate or Local only
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?
Simple factors should guide the decision on what and how
much to harmonize
Less Harmonization More Harmonization
Diverse product lines Similar product lines
Local customers Global customers
Flexibility to meet customer pricing & deal requirements
Price consistency across customers & geographies
Local flexibility, agility Alignment to globalstrategic goals
Ability to adapt tothe customer
Improved visibility, automation, quality,OPEX cost reduction
Local prices segmentation List prices, price guidance
Discount & rebates values, schemes
Framework, commercial term libraries
Keep it simple!
BusinessStructure
Go-to-Market
Decisionarchitecture
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Gaining permission to improve pricing will depend on your pricing team having the right skill mix
● What mix of skills does the team need?
● How will you obtain and build the skills?
● Note: required skills mix will change over time
Pricing
Company Business
Analytics / Problem Solving
Influencing
Process Management
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Generally a center-led pricing team structure is best
Level of Centralization Best for…
Centralized• Single Group responsible for pricing decisions• Limited adjustments for regional differences• Can be very sophisticated, but far from markets
Industries with global customers:• Semiconductor• Aerospace• Many chemicals
Center Led• Hybrid: central strategic pricing organization
coordinating local centers of pricing excellence• Centralized team provides guidance and
templates for execution in region or BU, best practice identification and dissemination
Most other global companies• Balance of local and global• Level of centralization can
vary significantly
Decentralized• Territories make autonomous pricing decisions• Fully recognize local variations, but likely to
lead to misalignment across territories• Difficult to achieve and sustain highest
performance levels of pricing process
Special cases• Disparate, fragmented BU’s• Non-core BU’s• Highly regulated
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Owns the pricing
framework
• ‘Owns’ pricing process, systems, tools,
• Drives continuous improvement
• Sets the standards for List prices, price corridors, discount & rebate
library, escalation design, etc. (values set locally)
• Identifies and disseminates best-practices into the organization
Manages the process
• Coordinates global price processes, e.g. annual price adjustments,
cross-boarder price corridor, etc.
• Ensures pricing quality & consistency across the business
Promotes visibility
• Tracks pricing at corporate level
• Provides baseline standard reports
Resource for the business
• Supports business with the most complex & important pricing decisions
e.g. large deals, new products, strategic initiatives
• May be part of the escalation process
Reporting • Varies, but marketing is the most common
A Centralized Pricing Group with clearly defined goals
and role is a best practice
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Head of Pricing
Regional Pricing Leads
Local Pricing Leads
Global Operations
Analyst(s)
Pricing Transformation
Business process
Technology
In global organizations there are different pricing roles
• Owns globally
aligned processesincl. reporting
• Works closelywith HQ functions
• Internalconsulting focus
• Prioritize businessrequirements forautomation
• Owns pricing systems
• Owns regional and local pricing processes
• Primary contact forpricing transformation
• Own system use locally
• Responsible for pricing processes, best practice development and dissemination
• Incentives aligned to pricing outcomes (but does NOT own specific prices)
• Reporting lines vary but head of commercial ops or marketing is best
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Skills of the extended team are also important
● Which teams and which skills should be prioritized? Follow the money!
● Be crisp on “What’s in it for them”
● Training format: pricing specific at first, then embed in regular trainings
Team Key skills needed
Productmarketing
• Price setting• Price/volume analysis• Price tracking• Price exception analysis
Customer marketing
• Commercial Terms design• Customer Segmentation• Price monitoring
Sales • Pricing basics• Negotiation skills
Finance • Pricing basics
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Ensuring the pricing team has impact
Recommendation Rationale
Have a plan, but be a little opportunistic
• Coherent, but not rigid, plans
Help solve high-profile problems
• Builds credibility
Follow-through on commitments
• Set expectations so you have a chance to exceed
Track and communicate progress
• Have a plan and execute!
Go where you have support • Increases odds of success• Proves value to organization
Get others to tell the story • Build allies with wins• Make them look good
Keep at it • Don’t let the setbacks stop the momentum
● What is the reputation today?
● What do you want it to be?
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Technology, data and process ensure sustainability
● It’s a challenging step
● When done right it will add huge value
● Technology deployment faster now, but deploy the right solution!
● “Once in a career” opportunity to transform your company!
Key point Rationale
Build support for a price system • Communicate value drivers
Understand data situation • Fix while starting to use
Use “quick-and-dirty” tools to get started
• Prove out the value• Learn by doing
Develop the vision • Leverage frameworks & tools• Continually test concepts
Identify what decision points need process automation
• ‘000s of decisions• ‘00s of users• Repeatable decision criteria
Use data-influenced rules to reduce the # decision points
• Fast analysis needed• Segmentation is key
Standard vs Exception mindset • Keep the system simple!!• Plan for exceptions
Estimate the value impact • Higher pocket prices• Reduced dispersion• Reduced errors, etc.
Integrated is better • Drives quality data • Drives user acceptance
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• Puts focus on key decisions points
• Scalable, optimized & pinpoint price recommendations (cost-to-serve, feedstock cost/index, plant utilization, buying behavior)
• Up-to-date embedded price analytics and guidance
• Facilitates collaboration across sales, marketing, finance
• Faster decisions (e.g. track feedstock volatility)
Pricing systems are much more than the analytics:
• Rules based pricing
• Clear roles and responsibilities
• Improves process discipline
• Reduced errors from automation and integration
• Consistent pricing decisions
Effective Efficient
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Measure and communicate to show progress
Key points Rationale
• Accept that measuring price performance is hard
• Reality gets in the way
• Accept you have to do it!
• No other way to track value
• Triangulate on the impact
• Build up evidence from different directions
• Different data speaks to different audiences
• Track metrics consistently over time
• Relative performance over time tells you a lot
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A triangulation approach to measurement is needed: their is no one ‘magic’ metric
Financials:
Pricing Performance
Competitive
Performance
Pricing Initiatives
& Must Wins
Pricing Process
Maturity
Pricing
Impact
Assessment
• Price variance versus previous year & budget
• Specific initiative impact (e.g. relative to untouched areas)
• Price and volume performance versus industry peers
• Measured against a customized capability grid
• Project and initiative progress
“PRICES
”“P
RICIN
G”
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Summary
Pricing is…
● challenging
● takes time to show full potential
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● Build allies by helping
● Track progress
Pricing also…
● adds tremendous value
● is hugely satisfying
Key messages
● Holistic plan, keep adapting
● Prioritize and target actions
https://www.linkedin.com/in/iantidswellpricinginfo@eenconsulting.com
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