Presentation Vendavo Event Theo Slaats
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Presentation of Theo Slaats, partner at Deloitte, on "Pricing technology as enabler for impacting business and bottom-line" at the Vendavo Pricing seminar on October 28, 2009 in Brussels.
![Problems with both price setting and price execution cause many companies to lose profit every year, typically of equal value to between 1 to 3% on sales 1 Price setting Price execution Loss of profit: between € 10M and € 30M* Unexplainable variances in profit margins, due to: ,[object Object]](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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Presentation Vendavo Event Theo Slaats
- 1. Pricing and Profitability ManagementPricing technology as enabler for impacting business and bottom-line Brussels, 28th October 2009
- 3. Downward pressures on prices
- 5. Price points evolve over time
- 6. Limited means to determine optimal price points* Per 1 Billion € of revenue and rule of thumb profit loss of 1-3% on sales. 97% of the Fortune 1000 companies suffer from this type of profit loss -AMR research-
- 7. A common pitfall is that pricing improvement initiatives started by companies do not fully deliver the targeted impact on business and bottom-line 2 Profit Impact (M €) Targeted profit impact Time Actual profit impact
- 8. 3 Less Variance Margin Customer Category Better Deals Margin Customer Category Successful pricing improvement initiatives involve the development and orchestration of your different capability elements Deloitte Pricing Maturity model ® Elements Examples of advanced maturity Price Impact Strategy Profitability analysis is used to develop new strategies Assignment Discounts and/or extra services are assigned based on impact on customer profitability, (Pay for performance) Organization Structure Clear responsibility for pricing decisions and proactive guidance of sales employees in pricing decisions Rewards Bonuses for sales employees vary with the level of profitability contributed by each individual transaction Policy & Procedures Managing prices at transactional level asks for guidelines for employees working and bearing responsibility at that level Reports & Tools Systems are available for sales employees and allow real-time customer profitability reporting Strategy Organization Process Tools
- 10. Evolution of price points over time
- 11. Complexity of discounts and trade terms
- 12. Downward pressures on prices
- 13. Required level of development and orchestration of different pricing capability elementsLOW HIGH
- 14. Sophisticated pricing technology solutions like Vendavo enable you to support all aspects of pricing 5 Less Variance Margin Customer Category Better Deals Margin Customer Category Price Setting Price Execution Price Impact Profit Analytics & Price Manager Management of the Price Waterfall Input Pricing Science Dependence Management of the Price Strategy Deal Manager Management of Customer & Deal
- 15. The Deloitte approach for a pricing technology implementation includes 3 streams: Value Capturing, People and Solution * Per 1 Billion € of revenue and rule of thumb profit loss of 1-3% on sales. 6
- 16. 7 Based on our experience, we can clearly identify some key principles regarding the implementation of sophisticated pricing technology solutions Change Management is a key success factor Value driven implementation approach Pricing maturity is a key success factor Keep It Simple where possible and focus on quick, tangible results
- 19. Validation workshops together with your business to discuss the findings + suggestions on required maturity end-state and transformation approach8
Notas del editor
- Price setting: Determining profit-maximizing prices for products and/or servicesPrice execution:Maximizing margin by managing leakage of on- and off-invoice trade termsMany companies recognize astrong (business) case for investing in the resolution of these problems.
- To actually realize targeted profit impact:Change management: embed pricing in your organisation on operational level as part of your commercial routine (instead of high level and ad-hoc actions)Increase your pricing maturity. Have the right combination of pricing capabilities in the right amount.
- Case examplesStrategy: sustainable profitability in certain commodity market segment not possible. Detect how to fix or which market segment to refocus on, e.g. specialties segment. Better dealsOrganization structure, Policies, Reports: supporting, channeling and monitoring the realization of different policies and procedures Less varianceRewards: bonuses linked to margin instead of volume/revenue Better deals
- -When ranking high on (some of) the key evaluation criteria, one should seriously consider a sophisticated technology solution, like Vendavo handling more complexity with less effort-Almost every multinational will require a strong and integrated pricing technology solution (even in the state of developing maturity)
- Integrating competitive environmentMarket, customer and pricing segmentationPrice optimizationPricing governance strategy (NLP, ELP, Target pricing)Value based pricingStrategy and tactics for aggregated bucketsDirective and “ex ante” guidelinesCustomer category levelMostly about “freeing” up cashChange is more about adoption and complianceStrategy and tactics on transactional levelFlexible and interactive approach within consistent frameworkCustomer specific levelMostly about “creating” extra cashChange is ultimately about “internalization” of new way of working of account management and sales at the customer interface
- Key assumptions:Harmonized waterfallClean and structured data
- Value driven implementation approach-Develop a solid and agreed Business Case framework (Topic of Deloitte’s afternoon workshop)-Focus on bringing added value for Sales in “on the field” price negotiationsKeep It Simple where possible and focus on tangible results-Complexity needs to be gradually built in line with the maturity-Start with manageable scope-Quick implementation of Pricing AnalyticsChange Management is a key success factor-Objective is to enhance user adoption but also to ensure the realization of the different pricing opportunities by changing the people’s mindsets and (risk) behaviours-Requires formal and active commitment from Top Management