the right path to pricing maturity with george cressman

Monthly Webinar Series - January 2012

The Right Path to Pricing Maturity

with George Cressman

World Class Pricing, Inc.…dedicated to creating world class pricing managers…

Copyright © 2012 by LeveragePoint Innovations Inc.No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means —electronic, mechanical, photocopying, recording, or otherwise — without the permission of LeveragePoint Innovations Inc.

This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.

COMPANY CONFIDENTIAL

the Software Solution for Value-Based Pricing

Build the Value-Based Strategy

Execute Value-Based Strategy

2

Today’s Presenter

G CGeorge Cressman is founder and president of World Class Pricing, a consultancy specializing in helping clients build world class pricing managers. George has nearly 30 years of experience in the chemicals industry having held business sales and marketingchemicals industry, having held business, sales, and marketing management positions at DuPont, Monsanto, and Union Carbide.

Currently, George is a member of the advisory board for the Institute for the Study of Business Markets, has served as a Trustee for the Marketing Sciences Institute, and is a Visiting Scholar at the University of Virginia. He is an adjunct faculty professor at the University of Delaware and Drexel University He has written extensively onDelaware and Drexel University. He has written extensively on business and marketing strategy and has been quoted in The Economist and a number of trade journals.

3

Pricing MaturityPricing Maturity

Pricing Maturity isPricing Maturity is….

The ability to actively manage price realization toAchieve above average industry profitability.

4Copyright 2012 World Class Pricing, Inc.

Pricing Maturity In OrganizationsPricing Maturity In Organizations

Organizations – and their managers – grow pricing

capabilities in predictable patterns.

Copyright 2012 World Class Pricing, Inc. 5

Developing Maturity in Pricing Practices

Manage

Manage

ManagePricing

Linkages

IncreasingProfitability

Manage

ManageValue

Delivery

ManagePricingProcess

ManagePrice

Discrepancies

Increasing Managerial Control6Copyright 2012 World Class Pricing, Inc.

Pricing Practices Maturity: Driven By Culture ChangeDriven By Culture Change

For most companies, developing pricing practices involves significant cultural changes that involve:• How customer targets are chosen.• How offerings are designed.• How offerings are communicated• How offerings are communicated.• How channel decisions are made.• How pricing decisions are made.• How negotiations with customers are conducted.

These changes impact decision rights andThese changes impact decision rights, and so are not always readily implemented.


This change takes time and effort!

Skipping StagesSkipping Stages

k d h f bSkipping stages dooms the process of becoming pricing mature:• Underlying skills are not developed.• Organizational will falters.g

There are no shortcuts!


Stage One: Manage Price DiscrepanciesStage One: Manage Price Discrepancies

Objectives:Objectives:• Raise awareness of pricing challenges and opportunities.

B i “ lf f di ” f th t ti• Begin “self funding” of the maturation process.


Maturity Stage One: Manage Price DiscrepanciesA Identify customer accounts with unacceptable priceA. Identify customer accounts with unacceptable price

deviations.B. Develop an understanding of causes of unacceptable price

deviations.C. Implement plan to reduce/eliminate unacceptable price

deviations.

Important Control Plots:p• Realized Price – Volume• Customer Profit – Volume• Customer Profit – PriceCustomer Profit Price• Realized Price – Sales Person


Stage Two: Manage Pricing ProcessStage Two: Manage Pricing Process

Objectives:Objectives:• Begin pricing process management.• Standardize decision making effort.

Eli i t d d i i ki ti iti• Eliminate random decision making activities.


Maturity Stage Two: Manage Pricing Process

Address:

Bring system to the pricing process -

Address:1. How are pricing decisions made?2. Using what criteria?3. By whom?3. By whom?

Develop controls for how pricing decisions are made and begin centralization of the pricing

process.


Stage Three: Manage Pricing ProcessStage Three: Manage Pricing Process

Objectives:Objectives:• Institute a value based pricing process.• Centralize control of the pricing effort.

B ild i i biliti b dl th fi• Build pricing capabilities broadly across the firm.


Maturity Stage Three: Manage Value Exchange

B B h i V l N ti ti

Price SettingEstablish Prices That Capture A Fair

Portion of The Delivered Value

Value Communication

Buyer Behavior – Value NegotiationDesign Negotiation Practices That Force

Customers To Acknowledge and Pay for Value

Offering Structure

Value CommunicationCommunicate The Menu’s Value

Delivery To Customers In An Understandable Manner

Value Assessment

Offering StructureCreate An Offering Menu That Gives

Customers Valuable Options

Foundation: Customer TargetingS l C h h i C li iff i l l

Understand Drivers Of Value For Customers And Determine The Offering’s Value Delivery


Select Customer Targets Where The Business Can Deliver Differential Value At Competitive Advantage

Stage Four: Manage Pricing LinkagesStage Four: Manage Pricing Linkages

Objectives:Objectives:• Align the entire business around value delivery.• Integrate value delivery processes across the firm.

B ild t d tit i t lli t• Build customer and competitor intelligence systems.


Elements of Strategic Pricing StrategyElements of Strategic Pricing Strategy

Profitable Pricing Strategy is founded on three interacting components:CustomersCustomers

Manage the value exchange so customers areforced to acknowledge and pay for value delivery

Profitable Pricing Strategy

CompetitorsManage industry interactions

for consistent profitability

ResourcesAssign resources to the

most profitable activities


for consistent profitability most profitable activities

Maturity Stage Four: Managing Pricing LinkagesCustomer Target Selection

Managing PricingLinkages

Customer Target Selection

CompetitiveStrategy

ResourceAllocation

Offering Portfolio

What value should

Channel Decision

How do we deliver

Customer Communication

How do we communicate the we create?

Product-Service Menu

the value?

Channels Direct

value?

and/orValue based mass communicationMenu

Value based product development

Channels Direct

Intensity/Types/ActivitiesValue based sales communication


Maturity Stage Four: Managing Pricing LinkagesI l i FImplementation Frame

OrganizationStructure Pricing Process Pricing Intelligence Pricing Policy

Design for value creation and delivery

C F ti l

Customer/Competitor/Cost

Price table

Discount/Rebate

Decision rules defined

D i i kiCross-Functional design and linkages

Integrated data bases

Rigorous validation techniques

rules consistently enforced

Decision making centralized

techniques


SummarySummary

• Achieving pricing maturity yields dividends in market l d fi bilicontrol and profitability.

• Manage the four stages – don’t skip stages.• Allow the organization to grow to maturity.• Invest in building the appropriate skills and implementation infrastructure – don’t skimp!


Thanks for watching!

www.WorldClassPricing.netwww.WorldClassPricing.netGeorge.Cressman@WorldClassPricing.netGeorge Cressman(912) 882 1232(912) 882 – 1232

[email protected] Manson(781) 727 – 5977

20