eBook: Decision Complexity in B2B


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eBook: Decision Complexity in B2B

  1. 1. ©2013 Zilliant Incorporated, All Rights Reserved Worldwide Make Your Numbers™
  2. 2. 2 With over 20 years of experience, Barrett has helped businesses with complex negotiated environments achieve rapid and effective margin improvements. Having delivered optimization solutions in industries as diverse as semiconductor manufacturing and building materials distribution, there are very few pricing challenges Barrett hasnt encountered and solved. Table of Contents A. Untangling the Sources of Complexity B. Causes of Massive Complexity C. Unmasking the Character of Complexity a. Overwhelming and Unfeasible Volume b. Critical But Hidden Nuances c. Coping via Myths D. Humans are Error Prone Barrett Thompson E. The Silent Suffering of Your P & L GM, Pricing Excellence Solutions F. Sound Like Anyone You Know? G. Take Action Today©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  3. 3. 3 Over the past decades, modern B2B enterprises have done a marvelous job managing complexity in their physical operations by taking advantage of new technologies. Yet for these same businesses, a massive new complexity remains unaddressed. This new complexity faced by B2B companies is called DECISION COMPLEXITY, and nowhere is it more evident than at the intersection of sales and pricing. Profit improvement through better pricing springs from one simple idea: That different selling circumstances can command different prices in the marketplace even for the same customer and product. Most companies offer variable pricing, but few are managing this complexity with the expertise and confidence required to get ahead.©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  4. 4. 4 Three major trends are responsible for the exponential growth in DECISION COMPLEXITY within VOLATILE B2B. ROAD AHEAD First, the size of product catalogs and customer lists has grown rapidly, creating more questions for sales teams. Second, go-to-market methods are increasingly more diverse. Channels, promotions and price types continue to expand, along with ambiguity about how to price them. Third, volatility of costs, demand, prices and competitive behavior within the market add a layer of dynamic uncertainty to the landscape. It’s simply impossible for your staff to keep up.©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  5. 5. 5 Market dynamics have resulted in a huge proliferation of complex decisions that is best described as a perfect storm of Size, Subtlety and Myth. Overwhelming and Infeasible Volume There are so many decisions to make, perhaps far more than is realized by those not on the front lines. A B2B business with 125,000 SKUs and 40,000 customers has a decision matrix of roughly 5 BILLION potential price decisions that could arise. In practice, it will make nearly 9 MILLION PRICE DECISIONS DURING THE YEAR. And the rate of growth in these complex decision points is accelerating each year as the business serves more customers, expands the product catalog, and responds to more volatile market conditions.©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  6. 6. 6 Critical But Hidden Nuances There are many valid influences which “With priceresponsive to the are more optimization, we should affect the price decision each and tens of thousands of every time, and some which shouldn’t. customer quote requests we receive each month, and Today’s B2B markets are highly dynamic and understanding the correct do a better job keeping our set of influences to apply is a constant prices in line with market moving target. But your business won’t wait for you to play catch-up – you need dynamics. ” the best answer fast. Kristin Johnson-Holz, VP of Marketing Schneider Electric NA©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  7. 7. 7 The price influences active in B2B sales Typically the most critical part of can span a wide range: setting prices is overlooked – the combined impact on the P&L from each • Product attributes individual price decision. That’s very risky. • Customer circumstances • Order characteristics • Market trends Identifying which influences actually make a difference in price, and quantifying how much they matter, is subtle and far beyond the capability of an unaided person.©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  8. 8. 8 Coping via Myths Faced with the overwhelming size and subtlety of managing MILLIONS of complex decisions, many people fall victim to myths. One common myth is that each customer shows the same price sensitivity for every product he purchases whenever he purchases it. Experience in dozens of pricing implementations confirms just the opposite – an individual customer will have varying sensitivity to price for each specific product he buys. Shouldn’t your prices reflect that?©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  9. 9. 9 When making MILLIONS of complex price decisions every year, your employees introduce price errors without knowing it. The price they actually charged doesn’t match the price they could have charged, to still win the business. This is not a shock – no human could possibly evaluate all the relevant influences, identify the truly important ones and balance them in just the right way to make the best possible decision each and every time. Compounding the complexity, many different people are making pricing decisions in your business, each with varying degrees of knowledge about the market and your P&L objectives.©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  10. 10. 10 The most common pricing error in B2B is underpricing due to the increased pressure to win business and meet quota. While the impact of underpricing just one transaction may seem small, the cumulative impact across MILLIONS of transactions is very large. In a well-known study cited in The Price Advantage, for the top 1,200 global companies in aggregate a … … IMPROVEMENT IN THE AVERAGE PRICE RECEIVED WOULD YIELD NEARLY IMPROVEMENT IN GROSS PROFITS.©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  11. 11. 11 Many companies acknowledge the Price is an incredibly powerful lever to potential power of price, yet are afraid improve profitability. The cumulative to raise their prices because they don’t impact of pricing errors is so significant have accurate predictions about what that if you don’t stop them, profits gained will happen to their P&L. elsewhere in the business can be completely wiped out Some issue general on the P&L. guidance to “get prices up” but then Ignoring pricing abdicate to the field, errors puts a huge who habitually price drain on financial the business into performance and well-worn puts your business at grooves such as risk. cost-plus 20%.©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  12. 12. 12 B2B companies will continue to see growing DECISION COMPLEXITY as a result of increasing product portfolios and customer counts. This underlying complexity is magnified many times over as you attempt to price your products into increasingly dynamic markets. This complexity is one of size and subtlety – MILLIONS of decisions to be made, and many contributing factors which should influence the decision outcome. What influences matter, and by how much? What is the best and fastest©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  13. 13. 13 Advances in predictive algorithms can equip B2B companies to handle the millions of accurate pricing decisions Contact Us Today to required in the field. Learn How to Better • Business users bring their expertise Manage Your Decision around current objectives and price strategies. Complexity • The price optimization engine calculates better selling prices across the entire business. The forecasted margin and revenue impacts of these prices are known before enacting price changes, and unlimited scenarios can be created and compared to arrive at the best overall prices. This combination of “EXPERTS + EQUATIONS” ensures you’re setting scientifically accurate price points that are aligned to your business goals.©2013 Zilliant Incorporated, All Rights Reserved Worldwide
  14. 14. 14 Zilliant provides B2B companies with data-driven guidance, enabling smarter pricing and sales decisions to help businesses make their numbers. The Zilliant optimization platform uses advanced science in its price optimization applications to enable companies to overcome the massive complexity in their businesses. Our flexible SaaS model allows customers to quickly and confidently improve their financial performance by integrating into existing systems and processes. Learn more about how Zilliant helps companies price more profitably and sell more effectively at www.zilliant.com.©2013 Zilliant Incorporated, All Rights Reserved Worldwide