monetizing innovation - finance...2017/10/06 · designing the product around the price monetizing...

www.simon-kucher.com

Designing the product around the price

Monetizing Innovation

“…the world's leading pricing consultancy…”

The Economist

Ljubljana, 3 October 2017

Alexandra WogritschConsumer Goods & Retail Practice

Office ViennaSchubertring 14, Top 5.OG1010 Vienna, Austria+43 1 512 [email protected]

Simon-Kucher & Partners at a glance

Growth and competitive strategies

Product portfolio (re-)design

Pricing excellence

Sales strategies and sales channel optimization

Customer-centric digital approaches

End-to-end transformation towards customer excellence

…

Global presence

Best consultancy in marketing and sales

> 3,000 projects in the last 3 years

World leader in giving advice to companies on howto price their products

Pricing strategy specialists

The world’s leading pricing consultancy

In pricing you offer something nobody else does

BusinessWeek The Economist

Professor Peter DruckerThe Wall Street Journal

World leader in pricing

Source: manager magazin survey of top managers in Germany, August 2007 and 2011/IMB

Source: brand eins Thema/Statista survey of approx. 1,800 partners and project leaders from consulting firms and approx. 1,400 C-level managers from German companies, May 2014, 2015, 2016 and 2017

Marketing and sales Marketing, branding and pricing

Sales, after-sales and CRM

brand eins Thema manager magazin

Simon-Kucher & Partners

Boston Consulting Group

McKinsey & Company

12

3



34 offices worldwide, > 1,000 employees, €240m revenue in 2016

McKinsey & Company



McKinsey & Company

Amsterdam Atlanta Barcelona BeijingBonn BostonBrusselsCologneCopenhagen Dubai FrankfurtGeneva Hamburg Hong KongIstanbul London Luxembourg

Madrid MilanMountain View Munich New York Paris San Francisco Santiago de Chile São PauloSingapore StockholmSydney TokyoTorontoViennaWarsawZurich

OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October 2017 2

Selected consumer goods clients – many other clients excluded due to confidentiality.

We have extensive experience in consumer goods and retail

Selected Simon-Kucher clients

Food/Beverage Non-Food Retail

ABF

Beam Suntory

Danone

Kellogg’s

Mondelez

Molson Coors

Nestlé

Moet Hennessy

Pernod Ricard

Peroni

Unilever

Pepsi

adidas

Asics

Beiersdorf

Coty Prestige

Henkel

Kimberly-Clark

Mary Kay

Nike

Philips

Reckitt Benckiser

Shiseido

Yves Rocher

7 Eleven

Auchan

Ahold Delhaize

Barnes & Noble

Castorama

Douglas

Rewe

Media/Saturn

Leroy Merlin

Metro C&C

Office Depot

Relay


Four numbers

1.6 72

4 9OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October 2017 4

1.6 72


OH_034DE17008_CGR_FMCG Ljubljana 2017_Simon-Kucher_Monetizing Innovation_3 October 2017

1 Source: Battelle, R&E Magazin; Fortune; Aug. 21, 2015

R&D investments higher than ever

13,5

13,4

10,4

10,0

8,0

VW

Samsung

Microsoft

Roche

Google

R&D investments 2013 in bn1 (share of turnover)

Companies with highest innovation expenditure

(5.2%)

(6.4%)

(13.4%)

(19.0%)

(13.2%)

Global R&D investments

$1.559bn

Selected numbers in the CPG world:

P&G 2.9%

Clorox 2.4%

Kellogg’s 1.4%

Mondelez 1.4%

General Mills 1.3%

6

1.6 72


Source: Simon-Kucher Global Pricing Study 2014

How did your last new product launch perform?

On average only 28% of new products meet their profit targets

Are your new products meeting their profit targets?

Share of products

No

72%

Yes

28%


A tale of two car launches:

vs

Dodge Dart Porsche Cayenne


Dodge Dart: Designed without customer WTP at the centre

Disastrous sales performance

Second biggest new product flop in 2012 after the Apple iPhone map

Discontinued in 2016

Sergio Marchionne, CEO

I can tell you right now that both the Chrysler 200

and the Dodge Dart, as great products as they

were, were the least financially rewarding

enterprises that we've carried out inside FCA in

the last eight years. I don't know one

investment that was as bad as these two were..


Porsche Cayenne:Roaring success driven by focus on the customer

Challenge

Needed a new innovation outside traditional sports car niche

Zero experience in the SUV category

Inconsistent with the Porsche brand at the time (speed, power, daring and engineering)

Outcome

Most profitable car in the automotive industry

Most important car in Porsche portfolio

~50% of total company profit


1.6 72


There are four types of innovation flops

#3: Minivation

(underpriced or "undervolumed")

#1: Feature Shock

(over-engineered or wrong features)

#4: Undead

(born to fail)

#2: Hidden Gem

(potential not recognised)


#1: Feature Shockamazon fire phone: An offering consumers didn’t want

A feature-packed phone with

… four cameras

… facial recognition technology

… 3D effects

… the shopping feature Firefly


The result:

A $170 million write-down due to unsold inventory

One of amazon’s biggest flops in years

14

#2: Hidden GemDigital imaging: Kodak did not realise its potential

Suffers internal resistance for fear of cannibalising film sales

1995Kodak introduced its first digital camera, only getting serious about that business in 2001

2012Kodak declared bankruptcy

1974Steven Sasson tasked with figuring out whether charge-coupled devices (CCD) had any practical applications

invents first digital camera

TodayDigital imaging & sensors critical across myriad sectors

Manufacturing

Military & aerospace

Upstream oil & gas

Scientific research

Medical & life sciences

Security

…


#3: MinivationPark Assist: A product heavily underpriced

OEMs understand actual customer value

VW's customer price: €670Cost-plus pricing towards VW and other OEMs: approx.€100


#4: UndeadSegway: Born to fail or clearly the wrong positioning

Ambition

Breakthrough personal transporter to transform the B2C market

Business plan sales target:

50,000 in first year

£6,3002

Reality

Niche B2B product for tour operators and shopping centre security

Actual sales:

30,000 in 6 years


1.6 72


9 key steps for successfully monetizing innovations

The core: Product configuration

and bundling

3Segment!

One size fits all doesn't work!

2Have the

WTP talk early

1

Outside-in business case:

from hoping to knowing

6Pick the winning price strategy:Skimming vs. penetration

5

Maintain your

price integrity

9

4 Monetization model:

How you charge trumps what you charge

Use behavioural pricing

to fine-tune

8Value communication:

The product as such is not sufficient

7



Willingness to pay... often not considered!1

20


Source: Simon-Kucher project database

Without the WTP talk you cannot prioritize and focus!

Brand

…

Fastening

CutColor

Sole material

Size

Outer material

Additional detail

Inner material

Value drivers Preference drivers

…

What are consumers actually willing to pay for?

What are mere choices of preference?

1

21


Source: Home Depot website on Apr 24 2017

Convenience helps drive a 50% premium for one added product feature

Weber charcoal grill "Original kettle"

Price:$149.00

Weber charcoal grill "Original kettle premium"

(269)

Price:$99.00

(94)

Only difference is this ash tray!

Industry Example

1

22


Source: Simon-Kucher

Segmentation: One size fits none!2

23

Commuting

Workplace

School time

On the go meals

A

B

C

D


What does that look like in reality?3

Example: Impulse consumption opportunity

Hyper

Super

Cash&Carry

Convenience

Mom&Pops

Pharmacies

Travel Retail

Vending

Street Vendors

Horeca

Bakeries

25cl

33cl

50cl

75cl

1l

1.5l

Occasion Brand Package Price Channel

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

3.50

3.75

4.00

24



Technology has created different consumer shopping behaviors

Subscription Trial-to-purchase / leasing

Mobile ordering, payments & loyalty programs

Flash sales and direct to consumer

Portable consumer experiences

and many more…

4

25


Source: www.loreal.com; https://www.ft.com/content/e980243e-13ee-11e4-8485-00144feabdc0

And the tools to cultivate a direct relationship through offer personalization

Free virtual makeup try on app positioned as a personalized, digital beauty advisor

Almost 20 million downloads worldwide, top lifestyle app, 65 million product trials in 2015

Buy easily on the app through L’oreal.com

Barcode scan for use in stores

Digital recreates a content and a relationship with the consumer that we have never had in the self-service world. People go into a store, they are faced with a wall of products and by definition, they don’t get any advice when it’s self-service. We can create the digital beauty adviser that will help them choose"

Jean-Paul Agon, CEO

4

26

http://www.loreal.com/

https://www.ft.com/content/e980243e-13ee-11e4-8485-00144feabdc0


Pricing strategy... Not always on top of the agenda!5

27

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

Profits Marketshare

Volume Product mix Volumegrowth

Revenues Costreduction

CEO

CMO

Sales director

CFO

Supply chain

Account manager

Product manager

Pricing

Marketing


Source : Simon-Kucher project database

The huge challenge of aligning pricing goals

Relative importance

5

28

Feminine Care case study: Successfully broke line-pricing Active/Sportline launch


Source: Simon-Kucher experience

Without WTP your business case is useless!6Typical process

Concept testing Apply volumesBack solve PPA & volume to hit profit hurdles

Assemble basic ingredients, core

Include price and count elasticity, perceptions

Understand secondary impacts

Add risk assumptions

Source of volumeConsider competitive reactions (war gaming)

Keep checking in

29


Source: www.lush.com, www.everlane.com

What does your product stand for? An innovation won’t speak for itself 7

30

http://www.lush.com/

http://www.everlane.com/


Source: Simon-Kucher project example

Your consumers will behave irrationally

High price article:

$ 495.00

$ 745.00

$ 495.00

$ 745.00

Volume increase: 21%

After:Before:

$ 2.50

$ 3.50

Low price article:

Volume increase: 14%

After:Before:

$ 2.50

$ 3.50

8

31



Simple principle for price reactions

- Board member

In our organization you have to come up

with at least three measures what can be

done apart from price decreases before

we even think about decreasing prices.

This simple rule had the highest impact.

Everybody understood.

9

32

9 key steps for successfully monetizing innovations

The core: Product configuration

and bundling

3Segment!

One size fits all doesn't work!

2Have the

WTP talk early

1

Outside-in business case:

from hoping to knowing

6Pick the winning price strategy:Skimming vs. penetration

5

Maintain your

price integrity

9

4 Monetization model:

How you charge trumps what you charge

Use behavioural pricing

to fine-tune

8Value communication:

The product as such is not sufficient

7


monetizinginnovation.com

Case studies

Methods & tools

Blog articles

…learn more!


www.simon-kucher.com

AmericasAtlanta, Boston, Mountain View, New York, San Francisco, Santiago de Chile, São Paulo,Toronto

Europe/Middle East Amsterdam, Barcelona, Bonn, Brussels, Cologne, Copenhagen, Dubai, Frankfurt, Geneva, Hamburg, Istanbul, London, Luxembourg, Madrid, Milan, Munich, Paris, Vienna, Warsaw, Zurich

Asia/PacificBeijing, Singapore, Sydney, Tokyo

Vienna officeSchubertring 14/Top 5. OG1010 Vienna, AustriaTel. +43 1 5122979 0

Thank you!


Alexandra Wogritsch

Director

Office Vienna

Schubertring 14

1010 Vienna

Austria

Tel: +43 1 5122979 16

Mobil: +43 664 9630150

[email protected]

monetizing innovation - finance...2017/10/06 · designing the product around the price monetizing...

Documents