Financial impact of value based pricing v4
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Financial impact of value based pricing v4

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  • Ed:LeveragePoint is the ONLY software solution for value-based pricing. We offer a SaaS-based collaboration platform that links all cross-functional team members involved in building and executing a value-based strategy.You can find out more about us by visiting our website: www.leveragepoint.com. That’s where you’ll find a recording and download of the slides for this and all our previous webinars. Plus much more.During the webinar, if you have any specific questions or comments, please feel free to enter them in the right-hand panel in the Questions section. Later, in the webinar we’ll respond to as many of them as we can.And now, I’d like to introduce today’s speaker.
  • Ed: Questions:How do you determine and identify customers who make the best value partners?What are your thoughts on splitting the sales force between value-based sellers and all others (commodity sellers)?How important is it to get senior management buy in?  What are the best ways to gain commitment from the top?What is the most critical success factor in converting a price and product teller to a consultative value seller?

Financial impact of value based pricing v4 Financial impact of value based pricing v4 Presentation Transcript

  • Copyright © 2014 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 Financial Impact of Value-based Pricing Monthly Webinar Series – February 26, 2014
  • Sponsored by LeveragePoint the Software Solution for Value-based Pricing www.leveragepoint.com
  • Today’s Presenter Dr. Stephan Liozu Dr. Stephan Liozu is a Pricing Evangelist and Thought-Leader as well as the Founder of Value Innoruption Advisors. He specializes in the design of innovative and differentiated business strategies for B2B firms, and the implementation of value-based pricing strategies. His acclaimed Customer Value Modeler (CVM®) certification program trains professionals in value modelling best practices. Stephan is co-editor of The ROI of Pricing, Innovation in Pricing and A User's Guide to Value Modeling as well as numerous academic papers. He holds a PhD in Management from The Weatherhead School of Management at Case Western Reserve University where he is an Adjunct Professor and a Visiting Scholar. Stephan sits on the board of Advisors of PPS. www.leveragepoint.com
  • The Financial Impact of Value-based Pricing
  • Learning Objectives  What is the ROI of Value-based Pricing?  What are the difficulties in executing a Value-based Pricing strategy?  How to measure the ROI of Value-based Pricing?  Examples for best-in-class B2B enterprises
  • Learning Objectives  What is the ROI of Value-based Pricing?  What are the difficulties in executing a Value- based Pricing strategy?  How to measure the ROI of Value-based Pricing?  Examples for best-in-class B2B enterprises
  • Value-based Pricing’s Impact on the Bottom Line 70% of respondents reported a 3% or greater increase in price, profit margin, and gross margin when using value-based pricing 0% 5% 10% 15% 20% 25% 30% 35% -6% -2% 1% 4% 7% 10% 14% Greater Than 16% R e s p o n d e n t % Sales Impact Profit Margin Impact Gross Margin Impact Value-based Pricing’s Impact on Sales, Profit Margin, and Gross Margin Source: 2013 State of Value-based Pricing Survey; n=144
  • Value Management Delivers Results 0.93 0.91 0.8 1.0 1.2 Value Masters (top 5%) Value Managers (top 25%) Well-Intentioned Directionally Challenged Runaway Trains The most profitable firms were those that combined value-based pricing with strong execution capabilities Operating Profit 1.0 = Industry Average 1.24 X 1.11 X 1.04 X Source: Monitor Pricing Capability Study; n=204
  • Learning Objectives  What is the ROI of Value-based Pricing?  What are the difficulties in executing a Value- based Pricing strategy?  How to measure the ROI of Value-based Pricing?  Examples for best-in-class B2B enterprises
  • • What do you include? • How do you account for uncertainty? • How do you define the scope? Difficulty in Making the Business Case • Who gets credit for results? • Who measures what? • When & what do you measure? • How do you communicate results? Difficulty in Measuring the Impact Value-Based Pricing and ROI
  • www.leveragepoint.com 3.83 3.83 4.16 4.21 4.25 4.27 4.28 4.29 3.00 3.20 3.40 3.60 3.80 4.00 4.20 4.40 4.60 4.80 5.00 DEFINING THE SCOPE OF PRICING INITIATIVES DEFINING ALL RELEVANT COSTS FOR SPECIFIC PRICING INITIATIVES EVALUATING SPECIFIC INCREMENTAL PRICING GAINS CALCULATING THE ACTUAL RETURN ON INVESTMENT (ROI) ESTIMATING THE SPECIFIC PRICING EFFECT OF INITIATIVES AGREEING ON A DEFINITION OF PRICING ROI FOR INITIATIVES SETTING UP THE PROPER REPORTING PROCESS FOR ROI DEFINING OVERALL INCREMENTAL PRICING EFFECT FOR INITIATIVES Difficulties in Measuring The ROI of Specific Pricing Activities (1 to 7 scale) (n=204)
  • www.leveragepoint.com 2.37 3.11 3.16 3.25 3.34 3.48 3.60 3.67 4.02 4.23 2.00 2.50 3.00 3.50 4.00 4.50 5.00 QUANTIFYING DIFFERENTIAL VALUE FOR INTANGIBLE DRIVERS QUANTIFYING DIFFERENTIAL VALUE FOR DRIVERS ESTIMATING TOTAL ECONOMIC VALUE DESIGNING THE FORMULA FOR EACH VALUE DRIVER COMMUNICATING VALUE MESSAGES TO CUSTOMERS SHARING OF THE VALUE POOL WITH CUSTOMERS IDENTIFYING COMPETITIVE REFERENCE VALUE FINDING COMPETITIVE PRICING LEVELS SEGMENTING THE MARKET & CUSTOMERS IDENTIFYING VALUE DRIVERS Declared Difficulties in Value-based Pricing Activities (1 to 7 Scale - n=144)
  • Learning Objectives  What is the ROI of Value-based Pricing?  What are the difficulties in executing a Value- based Pricing strategy?  How to measure the ROI of Value-based Pricing?  Examples for best-in-class B2B enterprises
  • www.leveragepoint.com 18% 11% 15% 18% 24% 27% 29% 29% 29% 32% 39% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% NONE OF THESE HIRING OF NEW PRICING PROFESSIONALS IMPACT OF OVERALL PRICING TEAM PRICING AND VALUE TRAINING PROGRAMS DEPLOYMENT OF VALUE-BASED PRICING STRATEGIES PRICING-RELATED CONSULTING PROJECTS DIVISIONAL PRICING PROGRAMS INVESTMENTS IN PRICING SOFTWARE CUSTOMER-SPECIFIC PRICING PROGRAMS COMPREHENSIVE CORPORATE PRICING PROGRAM PILOT PROJECTS FOR PRICING PROGRAMS What Do You Measure ROI For? (n=204)
  • Starting Tomorrow: Design Experiments Designing a Controlled “Before/After” Experiment for an Innovative Product. Key Learning: Measure carefully the before and after. Track scientifically the contribution in Pricing & Innovation Councils. Communicate the quick win up/down & sideways (top management!). Celebrate the win & repeat to gain confidence (from sales & product devpt). Cost-based Pricing • $61K in incremental GP$ over 12 months Value-based Pricing • $250K in incremental GP$ over 12 months
  • Learning Objectives  What is the ROI of Value-based Pricing?  What are the difficulties in executing a Value- based Pricing strategy?  How to measure the ROI of Value-based Pricing?  Examples for best-in-class B2B enterprises
  • What Do They Have in Common?
  • Value-focused Companies Source: Publically available Annual Reports
  • Available On Amazon: The ROI of Pricing Get Your Copy Today Value-based Pricing Chapters  Value-based Pricing ROI (by Roger Best)  Making the Business Case for Value- based Pricing (by Dr. Stephan Liozu)  Making the Case for Value-based Pricing Software (by Ed Arnold)
  • ROI of a Cloud Solution for Value-based Pricing Source: Arnold, E (2014) Making the case for organizational collaboration, The ROI of Pricing, New York, NY: Routledge Confidential
  • March Webinar Winning with the New Buyer: Smart Strategies to Sell and Defend Your Value March 19, 2014 Presented by: Chris Provines CEO, Value Vantage Partners Author, Healthcare Value Selling To Register visit: www.leveragepoint.com/resources/webinars
  • Thanks for Watching! sales@leveragepoint.com www.leveragepoint.com (617) 945-7075 Dr. Stephan M. Liozu, Ph.D. Value Innoruption Advisors sliozu@case.edu www.stephanliozu.com @StephanLiozu Let us know your thoughts and enter to win a copy of The ROI of Pricing: Please complete our two question survey which will appear when you leave the webinar.
  • Attendee Feedback Contact Sales Take the Survey Use the QR code or visit: https://www.surveymonkey.com/s/2376PLS Use the QR code or email: sales@leveragepoint.com