AFC Pricing Workshop<br />Basics of pricing put into practice<br />24 November 2010<br />Check our website: http://www.the...
2<br />Agenda<br />18h00-18h15		Intro <br />18h15-19h15		Basics of pricing<br />19h15-20h00Continental Courier Case<br />
AFC and The House of Marketing: a win-win partnership<br />3<br />Marketing expertise and support to AFC customer projects...
The House of Marketing: a strong concept fueling continuous growth<br />Concept<br />Bridging<br />the Knowing-<br />Doing...
Privately owned, Belgium based company
50+ marketing consultants / experts
Pool of experienced freelancers</li></ul>History & Size <br /><ul><li>Serving clients based in Europe, Middle East and Africa
Team of consultants with different nationalities and cultural backgrounds enabling us to easily integrate the local cultur...
Located in Mechelen<br />5<br />
Marketing expertise delivered in both strategic and operational areas<br />I. Strategic Marketing<br /><ul><li>Market Inte...
Segmentation
Branding & Positioning
Business & Marketing Planning
Innovation
Sustainability </li></ul>II. Go-to-Market<br /><ul><li>Pricing
Product/ Brand/ Category/Services Management
Communication
Online marketing
Sales & Channel Management
Customer Relationship Management
Customer Experience</li></ul>III. Organization capabilities<br /><ul><li>Customer Process Management
Organizational design & Change Management
Marketing Audit
Marketing Coaching & Training
Employer Branding </li></ul>IV. Performance Management<br /><ul><li>Marketing Audit
Marketing Dashboards & KPI’s
Customer Lifetime Value & Return on Marketing Investments (ROMI)</li></ul>6<br />
Clients across many different sectors<br />ICT & Media<br />Utilities & Resources<br />Financial & Other Services<br />Con...
8<br />Agenda<br />18h00-18h15		Intro <br />18h15-19h15		Basics of pricing<br />19h15-20h00Continental Courier Case<br />
Who am I?<br />Name: Maarten Bosschem	<br />Working @ THoM since 2007<br />Education: <br />Commercial engineering<br />Ma...
Assisted Electrabel with their websites, pricing & channels
Analyzed and installed new pricing levels @ The House of Marketing
Designed and integrated new websites for Zoo Antwerp
Launched new product for Netlog</li></ul>Personal information:<br />Live in Ghent, play soccer competitively, cannot choos...
10<br />Pricing in The News<br />Increasing price<br />InBev & AlkenMaes increase beer prices*<br />23/08/2010, De Tijd<br...
Pricing is a huge lever to increase profit<br />11<br />Profit + 13%<br />Improve Price by  5%<br />Profit increase<br />P...
<ul><li>48% agree that it is hard for them to introduce price increases
33% of respondents confirms that there are typically conflicting agendas or priorities around pricing decisions</li></ul>T...
32% said prices will definitely have to be lowered in coming year
Only 14% of respondents said would raise prices, and in 10% of the cases, would raise prices less than the increase in cos...
And yet… 62% of respondents say their customers perceive their product as offering a unique solution and are willing to pa...
13<br />Organizational misalignment around pricing <br />1<br />Gaps in price execution and management (Unwarranted varian...
1<br />Organizational misalignment around pricingDiffering, and at times conflicting goals, relating to pricing within sam...
Outliers<br />Acceptable<br />line<br />Outliers<br />2<br />Price execution gaps: Unwarranted variance across pricingSoph...
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Pricing workshop

  1. 1. AFC Pricing Workshop<br />Basics of pricing put into practice<br />24 November 2010<br />Check our website: http://www.thehouseofmarketing.be<br />Follow us on Twitter. LinkedIn or Facebook<br />
  2. 2. 2<br />Agenda<br />18h00-18h15 Intro <br />18h15-19h15 Basics of pricing<br />19h15-20h00Continental Courier Case<br />
  3. 3. AFC and The House of Marketing: a win-win partnership<br />3<br />Marketing expertise and support to AFC customer projects<br />Workshops to AFC members<br />
  4. 4. The House of Marketing: a strong concept fueling continuous growth<br />Concept<br />Bridging<br />the Knowing-<br />Doing gap<br /><ul><li>Founded in 1994 and growing
  5. 5. Privately owned, Belgium based company
  6. 6. 50+ marketing consultants / experts
  7. 7. Pool of experienced freelancers</li></ul>History & Size <br /><ul><li>Serving clients based in Europe, Middle East and Africa
  8. 8. Team of consultants with different nationalities and cultural backgrounds enabling us to easily integrate the local culture while managing the multicultural differences</li></ul>Geography & Nationality<br />4<br />
  9. 9. Located in Mechelen<br />5<br />
  10. 10. Marketing expertise delivered in both strategic and operational areas<br />I. Strategic Marketing<br /><ul><li>Market Intelligence & assessment
  11. 11. Segmentation
  12. 12. Branding & Positioning
  13. 13. Business & Marketing Planning
  14. 14. Innovation
  15. 15. Sustainability </li></ul>II. Go-to-Market<br /><ul><li>Pricing
  16. 16. Product/ Brand/ Category/Services Management
  17. 17. Communication
  18. 18. Online marketing
  19. 19. Sales & Channel Management
  20. 20. Customer Relationship Management
  21. 21. Customer Experience</li></ul>III. Organization capabilities<br /><ul><li>Customer Process Management
  22. 22. Organizational design & Change Management
  23. 23. Marketing Audit
  24. 24. Marketing Coaching & Training
  25. 25. Employer Branding </li></ul>IV. Performance Management<br /><ul><li>Marketing Audit
  26. 26. Marketing Dashboards & KPI’s
  27. 27. Customer Lifetime Value & Return on Marketing Investments (ROMI)</li></ul>6<br />
  28. 28. Clients across many different sectors<br />ICT & Media<br />Utilities & Resources<br />Financial & Other Services<br />Consumer Goods & Retail<br />Healthcare & Public Sector<br />Transport & Logistics<br />7<br />
  29. 29. 8<br />Agenda<br />18h00-18h15 Intro <br />18h15-19h15 Basics of pricing<br />19h15-20h00Continental Courier Case<br />
  30. 30. Who am I?<br />Name: Maarten Bosschem <br />Working @ THoM since 2007<br />Education: <br />Commercial engineering<br />Master in Marketing Management<br />Professional milestones:<br />Marketing Consultant & Pricing expertise lead @ THoM<br /><ul><li>Travelled around Europe to help Microsoft with a reseller engagement model
  31. 31. Assisted Electrabel with their websites, pricing & channels
  32. 32. Analyzed and installed new pricing levels @ The House of Marketing
  33. 33. Designed and integrated new websites for Zoo Antwerp
  34. 34. Launched new product for Netlog</li></ul>Personal information:<br />Live in Ghent, play soccer competitively, cannot choose between snowboarding and skiing, love electro and house festivals & parties, South-America is my favorite holiday destination.…<br />9<br />
  35. 35. 10<br />Pricing in The News<br />Increasing price<br />InBev & AlkenMaes increase beer prices*<br />23/08/2010, De Tijd<br />NMBS increases tariffs*<br />16/08/2010, deredactie.be<br />$<br />Lowering price<br />or price image<br /> Delhaize decreased prices of 1000 products<br /> 01/04/2010, De Tijd<br />Danone launches discount range of yoghurt <br />12/09/2008, Le Figaro<br />$<br />Cutting Costs<br /> Solvay keeps on cutting costs in 2010<br />18/02/2010, De Standaard<br /> VW stops its production for a week<br />23/02/2009, De Tijd<br />* Note: Common reasons given are increased costs of raw materials and other resources., reduced sales and high inflation<br />
  36. 36. Pricing is a huge lever to increase profit<br />11<br />Profit + 13%<br />Improve Price by 5%<br />Profit increase<br />Profit + 50%<br />Total Revenue = 100<br />Fixed Cost <br />= 65<br />Profit <br />= 10<br />Variable <br />Cost <br />= 25<br />Reduce Variable Costs by 5%<br />Improved price realization of 5% generates <br />50% profit improvement*<br />* Note: Assuming Average Fortune 500 Company<br />
  37. 37. <ul><li>48% agree that it is hard for them to introduce price increases
  38. 38. 33% of respondents confirms that there are typically conflicting agendas or priorities around pricing decisions</li></ul>THOM Pricing Survey: Pricing is top of mind & perceived as difficult to change in market<br /><ul><li>50% of marketers think their customers will become more price sensitive because of current economical situation
  39. 39. 32% said prices will definitely have to be lowered in coming year
  40. 40. Only 14% of respondents said would raise prices, and in 10% of the cases, would raise prices less than the increase in costs, putting additional strain on margin
  41. 41. And yet… 62% of respondents say their customers perceive their product as offering a unique solution and are willing to pay a premium for it</li></ul>Source: THOM Pricing Survey 2009 – preliminary results of 700 participants<br />12<br />
  42. 42. 13<br />Organizational misalignment around pricing <br />1<br />Gaps in price execution and management (Unwarranted variance in field, reactive pricing...)<br />2<br />Offer not aligned to different value requirements of segments or desired customer behaviors<br />3<br />Failure to drive and sustain value differential<br />4<br />Not effectively communicating value to change customer’s perceptions<br />5<br />From our experience, companies face many barriers to achieving higher price realization<br />Target price <br />Price realized<br />Value based pricing is about addressing these <br />gaps to increase profitability<br />
  43. 43. 1<br />Organizational misalignment around pricingDiffering, and at times conflicting goals, relating to pricing within same company can limit the effectiveness of pricing strategies<br />“Get me both higher market share and profit . . . now”<br />President<br />Marketing<br />Finance<br />R&D<br />Sales<br />BU General Manager<br />Operations<br />“This is the best product with the best technology on the market. It should be worth millions”<br />“This product took years to develop and our prices need to recapture this huge investment”<br />“If we bundle in more services we can justify higher prices and drive market share”<br />“Customers are saying our price is too high and competitors have and lowered price”<br />“We are well behind this quarter. Let’s do what it takes to start driving volume now”<br />“Special requests from customers are killing us. It’s driving our costs through the roof”<br />Pricing should be addressed strategically after finding common grounds and approaches on pricing and value management<br />14<br />
  44. 44. Outliers<br />Acceptable<br />line<br />Outliers<br />2<br />Price execution gaps: Unwarranted variance across pricingSophisticated customers use your discounting policies to gain unwarranted discounts<br />Results<br />50%<br />45%<br />40%<br />35%<br />30%<br />Actual discount<br />25%<br />20%<br />15%<br />10%<br />5%<br />€0<br />€100.000<br />€200.000<br />€300.000<br />€400.000<br />€500.000<br />€600.000<br />€700.000<br />€800.000<br />€1.000.000<br />€900.000<br />Sales revenues<br />15<br />
  45. 45. Proactive, policy-based price management ties pricing to value<br />Example:<br /><ul><li>“Loyalty” discounts for high store share
  46. 46. “On-line”, fast pay, low service discounts</li></ul>Develop proactive policies that set proper <br />customer expectations<br />2<br />Price execution gaps: Unwarranted variance across pricing Companies can decrease these gaps by managing pricing proactively<br />Reactive, exception-based price management, drives prices down<br />Example:<br /><ul><li>End-of-quarter discounts
  47. 47. Meeting competition</li></ul>16<br />
  48. 48. 3<br />Offer is not aligned to different segments, value requirements or desired customer behaviors<br />….leaves money on the table for these customers and communicates that value does not have to be paid for…<br />2<br />High<br />1<br />Setting price here<br />Received Value<br />A<br />B<br />C<br />D<br />Low<br />Segment Size<br />….and misses growth opportunities by pricing these customers out of the market <br />3<br /><ul><li>Offer configuration is necessary to serve all segments more profitably
  49. 49. Differences in value can be captured with product variations or service</li></ul>augmentation that creates natural fences between segments<br />17<br />17<br />
  50. 50. Example Carbon Black Producer<br />4<br />Failure to sustain and drive differential value <br />Sustain differential advantage<br />Drive differential advantage<br />Traditional way<br />Value-based way<br /> Less Freight<br />€0.03<br />Product<br />Product<br /> Less Defective<br />€0.08<br />Cost<br />Cost<br />Positive<br />differentiation<br /> Less WIP Scrap<br />€0.07<br />Price<br />Price<br />Fewer <br />Material Rejection<br />€0.05<br />Value <br />Value <br />Customers <br />Customers <br />Reference <br />Value<br />€ 0.85 / kg<br />Next best<br />competitive<br />Alternative<br />internal <br />mixing costs<br />Change approach for new product <br />development to ensure delivered value<br />e.g. IKEA<br />Innovations sustain and expand differential value<br />18<br />
  51. 51. Example<br />Carbon black particles<br />Better product dispersability creates more complete mixing that...<br />Our cleaner product creates output reliability which...<br />… allows you to target supply – sensitive segments. generating improved revenue of<br />… reduces total raw materials used. decreasing input cost by <br />€ 0.06 / kg<br />€ 0.10 / kg<br />Example Carbon Black Producer<br />5<br />Not effectively communicating value to change customer’s perceptions<br />Concept<br />Product Focus<br />“What do we offer?”<br />Features<br />Features<br />Application Focus<br />“Why should the <br />customer care?”<br />Benefits<br />Benefits<br />Revenue <br />Drivers<br />Cost<br />Drivers<br />Customer Focus<br />“What is that worth?”<br />€ Value<br />Better articulating value helps to change price perceptions and justifying price points<br />19<br />
  52. 52. A classic example of value selling…<br />5<br />
  53. 53. Three elements need to be considered to pricing<br />21<br />Determine value needs, perceptions and price sensitivities of customers or segment<br />Understand cost to serve and how these change over time<br />Costs<br />Customers<br />Competition<br />Identify how your offer compares to competition and develop<br />competitive scenarios<br />
  54. 54. Determine contribution margin<br />1<br />Identify incremental costs<br />2<br />3<br />Identify volume/price trade-offs<br />Evaluate the market context to understand profit implications<br />4<br />Cost<br />Cust<br />Costing: deciding on the most profitable activities<br />Comp<br />22<br />
  55. 55. Contribution margin: variable & fixed costs<br />1<br />Cost<br />Cust<br />Comp<br />Company XYZ:<br />Price<br />Ex. € 10<br />Total Contribution<br />=3.000<br />(Per Unit = € 3)<br />.......................................<br />Unit <br />variable cost<br />Ex. € 7<br />Fixed <br />Costs<br />Ex. 1.500<br />Contribution<br />Margin<br />= 3.000/10.000<br />= 30%<br />Profits<br />= 1.500<br />Unit Sales<br />Ex. 1.000<br />Total Contribution = Sales revenue – Total Variable Cost <br />Contribution Margin (%) = Total Contribution / Sales Revenue<br />23<br />
  56. 56. Cost<br />Cust<br />2<br />Identifying The Incremental Costs<br />Comp<br />Incremental costs: Cost of production for one additional unit<br />Variable cost: Cost of last produced unit NOTaverage variable cost<br />Fixed costs: Most seen as incrementalBUT be careful of step changes…<br />Opportunity costs: The contribution foregone when an asset is used for one purpose instead of another<br />24<br />
  57. 57. Full cost<br />€ 9,3<br />€ 6.9<br />€ 0.93<br />€ 0.47<br />€ 8.3<br />€ 1.0<br />Cost<br />Cust<br />2<br />Identify relevant costs for pricing decision:<br />Comp<br />At Company XYZ, there’s an opportunity to sell 500 more units at a price of € 8/Unit.<br />For this, additional capacity is required at a cost of € 400 and admin costs would <br />increase with € 200. Variable production costs would only be € 6.7 per unit….<br />Total Euros<br />Euros per unit<br />Units<br />1,000<br />= 1,500<br />+ 500<br />1,000<br />+500 (Incremental)<br />Revenues<br />€ 10,000<br />€ 4,000<br />€ 10<br />€ 14,000<br />Revenues<br />€ 10,000<br />€ 8<br />Costs<br />Costs<br /><ul><li>Direct Var. Costs</li></ul>€ 7,000<br />€ 10,350<br />€ 3,350<br />€ 7<br />€ 6.7<br /><ul><li>Direct Fixed Costs</li></ul>€ 1,000<br />€ 1,400<br />€ 400<br />€ 1<br />€ 0.8<br />- General & admin costs<br />€ 500<br />€ 700<br />€ 200<br />€ 0.5<br />€ 0.4<br />Total <br />Costs<br />€ 8,500<br />€ 12,450<br />€ 8.5<br />€ 7.9<br />Profits<br />€ 1,500<br />€ 1,550<br />€ 1.5<br />€ 0.1<br />25<br />
  58. 58. Identify volume/price trade-offs: Breakeven analysis<br />- (-10)<br />%BE = <br /> (30+(-10))<br />= 50%<br />-Δ Price<br />%BE = <br />(CM +Δ Price)<br />Cost<br />Cust<br />3<br />Comp<br />Unit Breakeven Sales<br />% Breakeven sales change<br />Price<br />Ex. 10<br />Total Contribution<br />Per Unit = 3<br />.........................<br />Example<br />Current price: € 10<br />Variable cost/unit: € 7<br />Current Weekly Sales: 1.000 Units<br />How much would sales have to increase to make a 10% price reduction profitable?<br />Unit variable cost<br />Ex. 7<br />Fixed <br />Costs<br />Ex. 1.500<br />Break-Even<br />Unit Sales<br />= 1000<br />Break-Even Sales = Fixed Costs / Total Contribution per unit<br />26<br />
  59. 59. 4<br />Cost<br />Cust<br />Strategic guidelines when facing different cost types<br />Comp<br />Cost Type<br />Cost Type<br />Strategic Objective<br />High Variable costs<br />High Fixed Costs<br />Opportunity Costs<br />Drive Price<br />Drive Volume<br />Capacity Optimization<br />Low Contribution Margin <br />High Contribution Margin Contribution Margin foregone<br />Example:<br />Wholesale distribution<br />Office supplies, Technology distribution<br />Example<br />Chemical plant, Pulp and paper. …<br />
  60. 60. Price competition can be a very dangerous game Think before you step into prices wars… <br />Cost<br />Cust<br />Comp<br />Sports Competition<br />Price Competition<br /><ul><li>The more intense, the better
  61. 61. The more intense, the worse
  62. 62. Play as hard as you can
  63. 63. Weigh the cost of each confrontation
  64. 64. Goal is to win, regardless of the cost
  65. 65. Goal is to profit, considering all costs</li></li></ul><li>Cost<br />Cust<br />The value received and thus the willingness to pay is not the same across all customers<br />Comp<br />high<br />Missed <br />Opportunities<br />medium<br />Price relative to Value<br /> Price Paid<br />Unharvested<br />Value<br />One size fits all<br />low<br />low<br />medium<br />high<br /> Value Received<br />
  66. 66. Cost<br />Cust<br />Offer is not aligned to different segments, value requirements or desired customer behaviors<br />Comp<br />….leaves money on the table for these customers and communicates that value does not have to be paid for…<br />2<br />High<br />1<br />Setting price here<br />Received Value<br />A<br />B<br />C<br />D<br />Low<br />Segment Size<br />….and misses growth opportunities by pricing these customers out of the market <br />3<br /><ul><li>Offer configuration is necessary to serve all segments more profitably
  67. 67. Differences in value can be captured with product variations or service</li></ul>augmentation that creates natural fences between segments<br />30<br />30<br />
  68. 68. Cost<br />Cust<br />Tiered offerings are creating fencesdemonstrating value and increasing profits <br />Comp<br />Dell – Consumer Choices<br />Duracell<br />Marriott – Consumer choices<br />BMW - series<br />
  69. 69. Cost<br />Cust<br />Reinforce & communicate the value you provide in the market<br />Comp<br />Goal: Frame the reference<br />
  70. 70. Evaluating the 3 C’s as a first step towards strategic pricing<br />33<br />Costs<br />Customers<br />Competition<br />Step 1: <br />Determine contribution margin<br />Step 2: <br />Identify incremental costs<br />Incremental costs = Cost of production for one additional unit<br />Variable cost of last produced unit<br />NOT average variable cost<br />Most fixed costs are incremental<br />BUT be careful of step changes<br />Do not overlook opportunity costs<br />= The contribution foregone when an asset is used for one purpose instead of another<br />Step 3: <br />Identify volume/price trade-offs<br />Step 4: <br />Evaluate the market context to understand profit implications<br />Sports Competition:<br /><ul><li> The more intense, the better
  71. 71. Play as hard as you can
  72. 72. Goal is to win, regardless of the cost</li></ul>Price Competition:<br /><ul><li>The more intense, the worse
  73. 73. Weigh the cost of each confrontation
  74. 74. Goal is to profit, considering all costs</li></ul>high<br />Missed <br />Opportunities<br />Price = Value<br /> Price Paid<br />medium<br />Unharvested<br />Value<br />Align value and price by:<br /><ul><li>Adapt price according to value for customer
  75. 75. Create offering aligned with segment needs
  76. 76. Improve perception through communication and marketing actions</li></ul>low<br />low<br />medium<br />high<br /> Value Received<br />
  77. 77. 34<br />Agenda<br />18h00-18h15 Intro <br />18h15-19h15 Basics of pricing<br />19h15-20h00Continental Courier Case<br />
  78. 78. Common opportunity areas we see that can result in enhanced price realization<br />Price Opportunity # 1:<br />COLLECT MORE ON ALL OFFERINGS BY REDUCING PRICING VARIABILITY<br />Price Opportunity # 2:<br />MAKE MORE MONEY ON DIFFERENTIATED SERVICES<br />Price Opportunity # 3:<br />IMPROVE BUSINESS MIX TO IMPROVE PROFITS<br />35<br />
  79. 79. Continental Courier Case: explanation<br />Company profile<br />Continental Couriers, the international division of a postal <br />incumbent, was established in 1937 and is a small player <br />within the European business mail market.<br /><ul><li>Revenues in 2010: € 97 million
  80. 80. Estimated marketing budget for 2010: $1.5 million
  81. 81. Goals for 2011: increase sales by 20% and increase margins realized</li></ul>Questions<br />Are there types of customers which are more/less profitable than others?<br />Are there account managers with lower or higher margins?<br />What does price band analysis tell us? <br />
  82. 82. Solutions case<br />Some customer types seem to be more profitable than others. All account managers set on average higher prices than expected (negative avg discount)<br />Are there types of customers which are more/less profitable than others?<br />2. Are there account managers with lower or higher margins?<br />
  83. 83. Step by step how to price band<br />1<br />Plotting<br />discounts<br />over volume<br /><ul><li>Select discount and volume columns
  84. 84. Click: insert – scatter plot
  85. 85. Look at the created graph</li></ul>2<br /><ul><li>Is a correlation present between volume and discount given? If so, that’s a good thing.
  86. 86. Are there a lot of outliers or is everything scattered across a single band?
  87. 87. Outliers mean that policies are not always adhered to. Every outlier would need to be checked and evaluated individually.</li></ul>Analyzing found<br />results<br />Price banding can help identify customers with a too high or too low discount<br />
  88. 88. Very small positive correlation shows too many unwarranted price variances<br />3. What does price band analysis tell us? <br /><ul><li>Very small positive correlation between sold volume and offered discounts, which means discounts are given out without volume reasons
  89. 89. Outliers should be investigated and pricing policies monitored</li></li></ul><li>Looking for price misalignments relative to cost or value delivered<br />What to do?<br />1) Reduce Price<br />2) Provide More Value<br />3) Evaluate why these customers are willing to pay more <br />H<br />Missed Profit <br />Opportunities<br />PRICE<br />Price = Value<br />What to do?<br />Communicate Value Better<br />Increase Price<br />Remove Some value<br />Unharvested<br />Value<br />L<br />VALUE<br />L<br />H<br /><ul><li>Unharvested Value Accounts: 160
  90. 90. Missed Profit Opportunity Accounts: 299</li></ul>= A Customer Account<br />40<br />
  91. 91. (2) About Waterfall Analysis<br />What it is:<br />A price waterfall is an analytical tool that diagnoses the following:<br />How much money is being deducted from the list price in the form of discounts and potential giveaways to arrive at a “Pocket Price” for a product. customer or segment<br />Helps process improvement initiatives by linking quantified price “leaks” to specific points in the price management process<br />Pocket Price<br /><ul><li>The List Price net of all known adjustments (discounts etc)
  92. 92. The actual revenues realized</li></ul>Price (Euros)<br />41<br />
  93. 93. Waterfall analysis is usually based on data and input from interviews<br />Interviews<br />Check correlation volume - discount<br /><ul><li>Salespeople
  94. 94. Customers
  95. 95.
  96. 96. Order size discount?
  97. 97. Competitive discount?
  98. 98. Payment term bonuses
  99. 99. Yearly bonuses
  100. 100. Promo’s
  101. 101. …</li></ul>Check correlation discount - country<br />Identify possible leakages<br />Correlation discount - salesperson<br />Interviews for yearly rebates. promo’s. <br />payment term discounts. etc.<br />Data analysis<br />Difference between list price and pocket price can sometimes <br />even be so big that costs are no longer covered<br />
  102. 102. Closing Arguments: 3 C’s Best Practices<br />COSTING BEST PRACTICE<br /><ul><li>Understand the incremental costs of product/service elements. enabling company to profitably offer multiple product/service offerings at different price levels
  103. 103. Understand which sales drive incremental capacity costs and which do not. enabling company to price to profitably recover capacity cost from the former. while pricing to drive incremental contribution from the latter
  104. 104. Adjust non-negotiable price levels based on the ability to improve contribution from all customers who would qualify for that price level. not based on the value of an individual deal</li></ul>COMPETITION BEST PRACTICE<br /><ul><li>Identify current/potential competitive advantages and capabilities that leverage those advantages
  105. 105. Target customers (or jobs) that most value capabilities for profitable growth and focus your resource investments of service to those segments
  106. 106. Anticipate and plan for changes in competitor and customer behavior that could threaten your competitive position in your target segments
  107. 107. Collect and communicate competitive information to minimize the impact of negative-sum competitive confrontations
  108. 108. Evaluate your competitive success by your ability to grow profits. not market share.</li></ul>CUSTOMER BEST PRACTICE<br /><ul><li>Understand how the products and services that you sell generate value for customers (revenues or cost savings). noting particularly differences between the value delivered by you and by the competition
  109. 109. Sell “value delivered”. not features. and grow markets by educating more customers on the value that your company can deliver
  110. 110. Segment your market for pricing by offering different product/service bundles at different price levels to reflect differences in the value that you deliver.</li></li></ul><li>Your personal point of contact<br />Pricing:Maarten Bosschem<br />Mobile: +32 (0)15 444 015<br />E-Mail: maarten.bosschem@thom.eu<br />Other:Pieter Lievyns<br />Mobile: +32 (0)15 444 045<br />E-Mail: pieter.lievyns@thom.eu<br />The House of Marketing<br />KardinaalMercierplein. 2<br />B-2800 Mechelen<br />Belgium<br />Office +32 (0)15 444 000<br />Fax +32 (0)15 444 044<br />www.thehouseofmarketing.be<br />Join us on LinkedIn<br />Follow us on Twitter<br />44<br />
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