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Why Improving B2B Pricing is Hard but Worth Doing. And How to get Started
Pricing is the highest lever for improving profitability. But it is also very complex due to multiple different factors. Improving pricing involves thinking about the WHAT and HOW of pricing, gaining PERMISSION from the organization, designing for SUSTAINABILITY, and SHOWING progress to maintain support. This and other slide decks will show you my approach based on 15 years in multiple different types of roles leading B2B pricing transformation with global 1000 companies
Why Improving B2B Pricing is Hard but Worth Doing. And How to get Started
- 1. Why improving pricingis hard but worth doing and how to get started February 2017 Ian Tidswell
- 2. © een ConsultingGmbH 2 Ian Tidswell Biography Founder of een Consulting, focused on helping B2B companies develop best-in-class end-to-end sustainable pricing processes Professional Experience • Since 2016, Independent Professional, Switzerland • 4 years, Global Head of Pricing, Syngenta, Switzerland • 2 years, Pricing Transformation Lead, Medtronic, Switzerland • 6 years Partner, Head of Business Consulting, Vendavo Consulting, UK and USA • 4 years, Director, i2 Technologies, USA • 4 years, to Engagement Manager, McKinsey & Company, USA Selected Project Experience • Developed a pricing framework & process for pricing innovations for out-licensing for leading industrial • Built up the global pricing team for Syngenta. Indirect management of global network of pricing managers within. • Lead multiple in-country projects for Syngenta to diagnose pricing opportunities and actions to address price setting, commercial terms management & price execution challenges • Lead development of a global commercial terms/policy framework and playbook to align CT/P with strategic goals in each country within Syngenta, improved CT/P performance and enabled automation • Headed the strategic initiative to substantially improve, harmonize and automate Medtronic International’s pricing processes across all major markets. Drove improved pricing & risk exposure • At Vendavo successfully led discovery, design and deployment of Vendavo price system at multiple customers including chemicals, distributor, semiconductor, tire and mobile phone manufacturers Education • Ph.D. Physics, Harvard University, Cambridge, Massachusetts • B.Sc. in Physics, Imperial College, London University At a glance • Former McKinsey senior consultant with line management experience in MedTech and agri- chemicals business • Proven B2B Pricing transformation leader • Practical, hands-on approach with track record in value delivery • Based in Basel Switzerland • LinkedIn Profile • Email: ian@eenconsulting.com
- 3. 3© een ConsultingGmbH Pricing provides the highest leverage profit opportunity 0% 2% 4% 6% 8% 10% 8% 3% 2% 11% Volume Fixed cost Price Variable cost “What’s the impact of a 1% improvement in each profit lever*? ● Raising the net price has a larger impact on profits than any other lever ● Potential profit improvement in many B2B companies: 2-5 points of revenue ● First benefits generally start in weeks. Full realization usually takes years * For a typical Fortune 500 company
- 4. 4© een ConsultingGmbH So if pricing is such a great source of value, how come so many companies struggle to get there? ● Complex topic: economics, psychology, channel partners, strategic relationships, dynamic ● Cross-functional collaboration: “Squeeze the balloon” fix one problem and something else goes wrong ● Leadership “don’t know what good looks like” and pressure to “make the numbers” each quarter ● Marketing sensitive to criticism of pricing skills ● Sales sensitive to losing control: “we know the market” ● Metrics polluted with other market changes ● Disparate systems, poor quality data ● Data not set-up to support pricing
- 5. 5© een ConsultingGmbH Building a bridge to better pricing ● The goal is clear – pricing that is: - Effective – Adequate to accomplish a purpose; producing the intended or expected result. - Efficient – Performing in the best possible manner with the least waste of time and effort. - Sustainable – Reliably supporting decisions for the vast majority of cases consistently ● The challenges building bridges are also clear: - Sometimes there is lots of talk and little action - Building takes a long time - It’s expensive: need ongoing maintenance - Benefits come only after construction is done
- 6. 6© een ConsultingGmbH HOW to build a bridge to better pricing Insights, knowledge, best practices Learn WHAT to do Pricing and supporting skills HOW to get it done Pricing team brand/reputation PERMISSION to do it Improve processes, technology, data Make it SUSTAINABLE Measure progress SHOW progress to maintain support
- 7. 7© een ConsultingGmbH Five dimensions of WHAT to build for a pricing process that works Clear priorities that should influence pricing decisions Company Goals Harmonized processes & data etc. to leverage scale Standards Who makes decisions based on insights, skills Organization Data and direction to support decision-makers Information & Guidance Process and technology to support and sustain Consistent execution A Pricing Process that is: • Effective • Efficient • Sustainable
- 8. 8© een ConsultingGmbH Building pricing insights, knowledge, best practices ● Break the problem into pieces – build a framework - Adds value by simplifying the problem while framing the conversation - Keep tweaking, enriching, deepening as you learn more - Keep communicating the core concepts so they become part of the company DNA ● Ruthlessly prioritize. Be transparent about it ● Start with a few projects targeted to help build up the knowledge base
- 9. © een ConsultingGmbH 9 Example Pricing Framework Strategy + Goals Pricing Structure Execute Monitor + React ● 2-5 simple, easy-to- understand elements ● Clear boundaries between the different elements
- 10. © een ConsultingGmbH 10 Example Pricing Framework: 2nd level activities • Offer Design • Product & Customer Segmentation • Price Setting (List Price) • Price Guidance (Pocket Price Corridor) • Delegation of Authority, Incentives • Capability development • Communication (internal, external) • Product & Service Design (Value Architecture) • Waterfall Design • Comm. Terms & Policies Menu • Process & Automation model • Price Governance model • Transaction Price Process • Exception Management • Metrics • Pricing Process • Price Outcome (absolute, relative) • Adjust tactics, goals Strategy + Goals Pricing Structure Execute Monitor + React
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