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Model N European Survey: Pricing, Profit & Revenue life-cycle management - Life Sciences

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Pricing and revenue management is centric to an organisation’s profitability.
Processes flow across functional silos, across geographies via multiple technologies creating disconnects, revenue leakage and margin erosion and lack of visibility
Reporting lines are varied but profitability needs a board level owner to ensure consistent strategic focus and reporting.
Pricing and revenue management done well are data, accuracy and time dependent.
Technology is a successful enabler to achieve end to end process and data integration.
To move from operational pricing to strategic & proactive pricing and revenue management change management is required to achieve increased productivity.

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Model N European Survey: Pricing, Profit & Revenue life-cycle management - Life Sciences

  1. 1. European Survey Pricing, Profit & Revenue lifecycle management in Life Sciences 2
  2. 2. Pricing Organisation & maturity …..….…4 Pricing strategy & Performance Management ………………………..………….9 Pricing Execution & the role of value in Pricing………...……………………………..…..15 Conclusions, Lessons learnt & recommendations ………………….….…….24 TABLE OF CONTENTS: 3 European survey pricing, profit & Revenue lifecycle management- June 2013
  3. 3. Survey participants: Life sciences companies from all segments took part … CHAPTER 1: Pricing Organisation & Maturity but…48% indicated their pricing team was still very reactive and lacked clarity in roles & objectives. See Page 6 ….and agree on the need for a structured organisation that owns pricing and revenue management processes. 4
  4. 4. Leaders..18% have pricing & revenue management as part of their strategic planning process, reporting lines make coordination tricky.” Price & Revenue Management are intrinsically “matrix-ed” in nature, but who owns profitability? Direct Reporting lines are important but so is the accountability for pricing and margins across geographies: A key part of re-aligning the organisation around revenue lifecycle management is incentivising alignment down and across the organisation from Pricing to marketing, sales operations, finance and service. European survey pricing, profit & Revenue lifecycle management – Pricing Organisation & Maturity 5
  5. 5. Progressing..34% are in the process of re-engineering pricing & revenue management processes and have a clear goal in mind.” All successful transformations have c-level sponsorship; Experience suggests that sponsorship from the offices of the CFO together with Regional General Management are the kingpins to pivotal change. There is some way to go in terms of asserting Price, Profit & Revenue Management as an integral part of strategic planning. European survey pricing, profit & Revenue lifecycle management – Pricing Organisation & Maturity 6
  6. 6. Beginners.. 87% of respondents have only just started to become more proactive in pricing but lack of data is making progress difficult. Timely access to data, but also qualitative market intelligence is critical to forming fact- based and optimal commercial strategies. The implications for many are that they are driving a type of “commercial fog” and are with little time or capability to react when events emerge out of the mire! Organisations often overlook the information sources within their own 4 walls or that may be acquired directly from the channels waiting to be discovered. European survey pricing, profit & Revenue lifecycle management – Pricing Organisation & Maturity 7
  7. 7. Time to decide what to do next on Pricing Organisation & Maturity in your business? Madalina Preda, European Pricing Director “Building a pricing organisation to win the pricing battle” Download I’m FREE European survey pricing, profit & Revenue lifecycle management – Pricing Organisation & Maturity 8
  8. 8. The continuation of austerity measures in Europe is affecting the Life sciences industry in many ways: from the drugs made available to patients, to the way in which manufacturers engage with their customers, to the impact pricing strategies have across geographies. CHAPTER 2: Pricing Strategy & Performance Management The new normal: Growth is slow, flat or down! 9
  9. 9. European survey pricing, profit & Revenue lifecycle management – Pricing Strategy & Performance Management Vast.. 87% see International Reference Pricing as pivotal to competitive advantage; but only 12% have suitable technology & processes in place Recent years have seen a very significant increase in the pressures prices and revenues, IRP and other techniques like tendering and rebating have fast become a primary vehicle for buyers and payers to influence healthcare costs. Today’s enterprise class technology solutions for IRP help tackle inefficiencies and drive consistency in making optimized and proactive decisions, for new product as well as both patent protected and off-patent. 10
  10. 10. Tendering is fast becoming very pervasive, some organizations seeing as much as 80% of their European business driving by tendered opportunities. Without the right competencies and skills in place, large complex organizations will be inefficient in being consistently successful in managing their tender business and win-rates also average values of a tender business will suffer. Market-share in some markets are driven primarily by tender success and the revenue and profit value of the tender business. Hungry .. 65% want more training, more best practices & more competitive info to increase success rates and effectiveness in tenders. European survey pricing, profit & Revenue lifecycle management – Pricing Strategy & Performance Management 11
  11. 11. Stressed.. 71% of the respondents are either not measuring performance or do so sporadically based on business context” European survey pricing, profit & Revenue lifecycle management – Pricing Strategy & Performance Management Price, profit and revenue lifecycle optimization is often a poorly defined operating process; it is often broken and disjointed, causing performance reduction. The mandate and remit of pricing often lacks clarity and is not very well understood, consequently pricing performance definition with clear KPIs is often lacking “If you can’t measure it, you can’t improve it!”. Stakeholders in the performance process will be unclear on desired outcomes and they will be less effective in focus and collaboration efforts. 12
  12. 12. Mature.. 6% use integrated revenue management solution with global data source; Challenged.. 58% use excel or multiple point solutions .” Until very recently, integrated revenue management operations have been a must-have only in some industries – such as airlines, hotels, consumer products; this is no longer the case: in life sciences, integrated revenue management is fast becoming a matter of effectively addressing increased commercial complexity. Because price, profit and revenues are created and delivered by many functionally, geographically and divisionally dispersed stakeholders. Non- collaborative tools and point solutions will fail to deliver consistent process and data collaboration for all stakeholders. European survey pricing, profit & Revenue lifecycle management – Pricing Strategy & Performance Management 13
  13. 13. Mark Hill, Senior Director, Market Access EAME Time to decide what to do next on Pricing Strategy & Performance Management in your business? “Dynamic IRP on Launch Sequencing & price management” Download I’m FREE European survey pricing, profit & Revenue lifecycle management – Pricing Strategy & Performance Management 14
  14. 14. CHAPTER 3: Pricing Execution & the role of Value 61% indicated a stronger focus on pricing as a means to deal with economic downturn and protect profitability! 15
  15. 15. Discrepancies are caused by the considerable multi-layered complexity which often exists in the gross-to-net price and margin process; Discounts on-invoice, off invoice as well as rebate and incentive allocation to products and customers are often managed in a non- consistent manner. Customer, product and market price and profit transparency is lost in the mix which in turn cause difficulties in tracking and measuring the effectiveness of commercial strategies in execution. European survey pricing, profit & Revenue lifecycle management – Pricing Execution & the role of Value Leaking..59% face discrepancies between order & invoices; 65% do not have regular exception reporting 16
  16. 16. Unified..71% agree that sales teams are not well educated on pricing to protect margins” European survey pricing, profit & Revenue lifecycle management – Pricing Execution & the role of Value Traditionally sales organizations are expected to deliver revenues and have often not been measured on price and margin performance. Value based selling, strategic selling and other value and margin focused tactics have often not been prioritized. Skillset and capability shortages are frequent and many companies are looking to upgrade their sales organizations to reflect the new commercial reality in the industry. 17
  17. 17. Dominant.. 82% have not linked sales incentives to margin performance.” European survey pricing, profit & Revenue lifecycle management – Pricing Execution & the role of Value The past 3-4 years have seen a new commercial reality emerging in the European life sciences industry. Few organizations have traditionally had their sales organizations focused on value selling and compensation schemes have been aligned with this. The sales function is an integral component in the price, profit and revenue achievement lifecycle: Innovative life sciences organizations are realizing this and starting to create a better balance of incentives. 18
  18. 18. Price and profit pressures, driven by customers and competitors chiefly, is promoting value based selling to the forefront. Sales is starting to be seen as a core component in the value creation and selling process, some times even seen as a leader: Fundamental to the evolution of the sales teams is the balance of incentives between price, margin and revenue performance. European survey pricing, profit & Revenue lifecycle management – Pricing Execution & the role of Value Divided.. 54% find their sales teams do not highlight value systematically in sales process 19
  19. 19. Value and unique selling points compared to the competition is critical for commercial success. Innovation in value is not just in product features, but can also be in application of how products are used to exploit their full benefits, for example dosage, diagnostics and other aspects offer ways of enhancing value. European survey pricing, profit & Revenue lifecycle management – Pricing Execution & the role of Value Positive.. 65% believe customers see value as an asset over of pricing levels 20
  20. 20. Lack of pricing control and invoice transparency creates imbalance between optimizing deal, local market and regional prices. Commercial dynamics in multiple market environments create a reality where any time lag for data to support pricing decisions for involved stakeholders means they quickly become reactive as a consequence. Unwanted price transactions can often cost millions in reduced margins by the ripple effects that reference pricing has across markets. European survey pricing, profit & Revenue lifecycle management – Pricing Execution & the role of Value Invisible.. 71% lack near real time visibility of sales teams deviation for target margin levels 21
  21. 21. Effective collaboration, process coordination and discounting discipline requires ability to control and manage to defined outcomes. Improved visibility of discounts improves margins and improves commercial strategy consistency and execution. Discounting reduce profitability and impacts well beyond individual deals or markets, with reduced net margins as a consequence. European survey pricing, profit & Revenue lifecycle management – Pricing Execution & the role of Value Proactive.. 82% are working to gain visibility of discounts across geographies and measure impact on profitability. 22
  22. 22. European survey pricing, profit & Revenue lifecycle management – Pricing Execution & the role of Value Ray Almeida, Vice President, Global Sales & pricing analytics Time to decide what to do next on Pricing Execution & the role of value in your business? “Global Pricing: maximising effectiveness with real time insights” Download I’m FREE 23
  23. 23. CHAPTER 4: So What? • Pricing and revenue management is centric to an organisation’s profitability. • Processes flow across functional silos, across geographies via multiple technologies creating disconnects, revenue leakage and margin erosions and lack of visibility • Reporting lines are varied but profitability needs a board level owner to ensure consistent strategic focus and reporting. • Pricing and revenue management done well are data, accuracy and time dependent. • Technology is a successful enabler to achieve end to end process and data integration. • To move from operational pricing to strategic & proactive pricing and revenue management change management is required to achieve increased productivity. 24
  24. 24. Join our Linked-in group: European Life Sciences, Price, Profit & Revenue lifecycle Management Forum Show me more! Request the full survey Request the Gartner case study Arumble@modeln.com WATCH THE VIDEO ! http://youtu.be/doid1Rt3Ekk Life Sciences organisations talk about pricing trends in Europe and strategies that add value: IRP 25 Follow us on Twitter: ModelN_Europe

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