Pricing Leadership Navigating through Tumultuous Times October, 2009

This Recession was Different… Deeper Bottom Multiple Bubbles Global Scope Copyright © 2009 John Hogan

Deeper Bottom

Multiple Bubbles

Global Scope

Despite the Emerging Recovery: Pricing will be Tough in the Coming Year A recent survey of CMO’s found that price is the top concern for customers in the second half of 2009 Source: AMA CMO Survey August 2009 Copyright © 2009 John Hogan

The Challenge of the Times… As we focus on recovery, our markets are undergoing massive structural change Copyright © 2009 John Hogan Globalization Shifting Demand Patterns Sustainability Transformative technologies

What is Pricing’s Role in the New World?

In the New Economy: Successful Pricers Will Move… Copyright © 2009 John Hogan Setting prices… $9.99 From: Monetizing the Value Net… To:

Salesforce.com Fueling Growth through their Value Network Founded in 1999, SF has grown to over $1bn in sales through delivery of CRM services to the SMB market Based on Software as Service platform Growth fueled by custom apps from independent developers Copyright © 2009 John Hogan

Based on Software as Service platform

Growth fueled by custom apps from independent developers

The Revenue Model is Becoming More Complex… Multiple Transaction Types Different & Complex Value Propositions Maintained profits through recession … and More Profitable! Copyright © 2009 John Hogan

Multiple Transaction Types

Different & Complex Value Propositions

Maintained profits through recession

In the New Economy: Successful Pricers Will Move… Copyright © 2009 John Hogan Marking up costs… From: Proactively managing costs with price… To:

Ingram Micro: Regaining Share from Low Price Competitors Ingram Micro, a leading technology distributor reversed market share declines by encouraging customers to engage in lower cost behaviors Losing share to lower price / lower service competitors Higher costs from high-touch service model Segmented market with high variability in willingness-to-pay Copyright © 2009 John Hogan

Losing share to lower price / lower service competitors

Higher costs from high-touch service model

Segmented market with high variability in willingness-to-pay

The Game Changed with a Low-Price / Low Cost Offer New offering reduced value delivered and cost to serve Regained share profitably Minimized volume and margin loss in high value segments New Service Menu Copyright © 2009 Monitor Company Group, L.P.

New offering reduced value delivered and cost to serve

Regained share profitably

Minimized volume and margin loss in high value segments

In the New Economy: Successful Pricers Will Move… Copyright © 2009 John Hogan Measuring the demand curve… From: Mining the demand curve… To:

Dow Corning: Creating a New Offering for an Overserved Segment Facing growing share loss in its Silicones business, Dow Corning recognized that it was delivering more value (at higher cost) than customers wanted Increasing price pressure from customers Price declines fueled by “low value” competitors Experiencing significant share loss Copyright © 2009 John Hogan

Increasing price pressure from customers

Price declines fueled by “low value” competitors

Experiencing significant share loss

Dow Launched a New Brand: Xiameter Since its inception in 2002, Xiameter has grown to account for over 30% of Dow Corning Sales. Created value by subtraction $70 million investment broke even in 6 months Becoming core to Dow Corning business model Copyright © 2009 John Hogan

Created value by subtraction

$70 million investment broke even in 6 months

Becoming core to Dow Corning business model

Pricing Leadership Preparing to Win in the New Economy Get your data warehouse in order Track purchase trends Look at market and company data Build analytic capabilities Partner with sales and marketing to manage price, value, and cost Bring something to the table (e.g., insight or opportunities) Build a case for change using data Improve efficiency and quality of pricing processes Copyright © 2009 John Hogan

Get your data warehouse in order

Track purchase trends

Look at market and company data

Build analytic capabilities

Partner with sales and marketing to manage price, value, and cost

Bring something to the table (e.g., insight or opportunities)

Build a case for change using data

Improve efficiency and quality of pricing processes

Copyright © 2009 John Hogan Thank You! [email_address]