b2b pricing: the how of sustainable improvement

B2B pricing: the how of sustainable improvement

Ian Tidswell

February 2017

© een Consulting GmbH 2

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: [email protected]

https://www.linkedin.com/in/iantidswellpricing

mailto:[email protected]

© een Consulting GmbH 3

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)

http://www.slideshare.net/IanTidswell/why-improving-pricing-is-hard-but-worth-doing-and-how-to-get-started

http://www.slideshare.net/IanTidswell/b2b-pricing-framework-elements

http://www.slideshare.net/IanTidswell/b2b-price-guidance-with-impact-putting-the-pieces-together

4© een Consulting GmbH

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


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


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


?

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


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


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


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


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


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


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?


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


• 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


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


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”


Summary

Pricing is…

● challenging

● takes time to show full potential

18

● 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/[email protected]

https://www.linkedin.com/in/iantidswellpricing

mailto:[email protected]