Organizational Transformation to Value Based Pricing: A Case Study with Ardex Americas

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Stephan Liozu, CEO of Ardex Americas, presents how his mid-sized manufacturing company transitioned from a cost-based to a value-based pricing strategy.

Stephan will tell his story of a transformational journey beginning in 2008, the benefits today, lessons learned, and the company's future path. Hear real-world, practical advice from a successful industry leader.

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Organizational Transformation to Value Based Pricing: A Case Study with Ardex Americas

  1. 1. Organizational Transformation to Value-Based Pricing:The Case Study of a Mid-Size Industrial Companywith Stephan Liozu, Ardex Americas Monthly Webinar Series - March 2012 Copyright © 2012 by LeveragePoint Innovations Inc. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means — electronic, mechanical, photocopying, recording, or otherwise — without the permission of LeveragePoint Innovations Inc. This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion. COMPANY CONFIDENTIAL
  2. 2. Sponsored by LeveragePoint the Software Solution for Value-based Pricing2
  3. 3. Today’s Presenter Stephan Li St h Liozu is President and CEO of Ardex Americas, a subsidiary of the German-based Ardex Group, where he serves on the Global Management Committee and is in charge of worldwide information technology, technology strategic innovation and international specifications selling programs. Ardex Americas produces high performance specialty building materials and has been serving customers in North, Central and South America for more than 30 years. Currently, Stephan chairs the German-American Business Circle of Pittsburgh and serves on the Board of Directors of the World Affairs Council of Pittsburgh. He has also been a visiting professor at universities in Pittsburgh Toulouse, France, and previously held leadership roles at Freudenberg & Company, the Saint-Gobain Group, and Owens Corning.3
  4. 4. Pricing Orientation & MostCommonly Used Pricing Strategies  Perceived –value pricing Pricing Pi i Cus- Cus  Performance-based pricing Strategies tomer  Willingness-to-pay-based pricing (WTP) Profit Pricing Com- Pricing Cost petition Strategies Strategies  Cost-plus method  Penetration pricing  Target ROI/ROS  Price skimming  Breakeven-based analysis  Price follower behaviors  Target CM pricing  Price according to average market price <4>
  5. 5. Click to add sub title 01 Pricing Orientations are Not Mutually Exclusive! y Value-based V l b d Competitive Add text in Product Advantage Pricing here Intensity • Economic Value Analysis • EVE® Cost- • “Dollarization” Process Competition- based based Pricing Pricing • Dynamic cost-plus • Competitive Analysis • CVP Analysis • Benchmarking Degree of g • Competiti e Intelligence Competitive • Activity-based Costing Adoption <5>
  6. 6. The 5 Organization C’s of PricingTransformation CHAMPIONS CENTER-LED CHANGE ORGANIZATIONAL TRANSFORMATION CONFIDENCE CAPABILITIES <6>
  7. 7. Organizational Mobilization for Pricing Champions at the top leading the internalization of pricing practices Organizational Change capacity requiring organizational mobilization Formal and informal organizational Capabilities Organizational Confidence acting as the fuel for superior pricing Center-led management through specialized experts supporting divisional decision making process <7>
  8. 8. Progressive & Pragmatic Internalizationof Value based Pricing Value-based Increased Adoptio Pilot Programs Full Adoption Mo So odification Stimuli S olutions t DNA s on Search Behavior Success Stories Transformation Experiential Leaning Transformative Learning ► Knowledge foundation in pricing ► Change mindset/frame of ref. ► Experiments & Pilot Studies ► Learn a new language (value) ►Trial & Error approach ► Importance of mentoring/coaching ► Celebration of success & stories ► Enduring and irreversibility of ► Analysis of failures/breakdowns change to change the firm culture <8>
  9. 9. The Story of a Transformational Journey Pricing Capability Grid™ Price Setting 2014 Value-based Pricing 2011 Competition- C titi based Pricing 2010 2008 Cost-based Pricing Weak Medium Strong Price Realization <9>
  10. 10. How Pricing Was Set in 2008 • Cost-Plus Approach with strong influence of target margins. pp g g g • Prices were set by the CEO and the CFO in small committee. • Strong influence from international and legacy pricing. • Pricing structure was very simple: list price + distributor discount. Rare deviations were allowed from that structure. • No pricing authority was given to sales and marketing staff. No latitude for price negotiation. • Pricing was not reviewed formally. Heavy focus on margins formally margins. <10>
  11. 11. Step 1: Increased Focus on Pricing((2008-2009)) • Focused one person in the finance team to track pricing for the CEO • Started building a foundational pricing knowledge base: • Introduced a pricing review during the monthly management meeting to review pricing actions, variations and discuss competitive situation. • Introduced concepts of value proposition, customer value perceptions, perceptions and perceived benefits versus product attributes in the selling process. • Identified the value and pricing champions in the group i.e. marketing and account managers who were engaged in the pricing process and understood the concept of value-selling. <11>
  12. 12. Step 2: Formalized Pricing Process((2009-2010)) • Created the position of Pricing & Revenue Optimization Manager reporting to CFO: • Develop monthly pricing cockpit:KPI‘s, value maps, & price waterfall analysis. • Work with marketing function to define optimum pricing levels for new products based on margin targets and delivered customer value. • Introduce a formalized Special Pricing Program with authority levels and dollarization of every deal versus competition. • Reinforced participation in Pricing Society and enrollment in CPP: • 8 people passed CPP + 8 more enrolled. • Created the Pricing Council • Monthly meetings with key managers to review pricing actions, variations and discuss competitive situation. • Formalization of the dollarization process as part of Council discussions. • Introduce value-based pricing process for one product: case study number 1. <12>
  13. 13. Formalization of the Dollarization Process • Increased the focus on the use of dollarization process and tools to p capture and communicate the Ardex value proposition (product and service performance). • Run new products through the manual dollarization process in 2010 as pilots. • Create and post dollarization models for key products on the intranet p yp for field use. • Align marketing communication, technical training and product development to consistently promote our dollarized advantages advantages. • Educate distributors and contractors in all technical training classes. • Design web-based tools & marketing brochures web based brochures. <13>
  14. 14. Step 3: Implement Fundamentals ofValue-based Pricing (2011) • Creation of a Pricing Team reporting into Marketing • Addition of a sales and marketing analyst for pricing reporting. • Pricing Manager becomes part of the New Product Innovation Team. • Creation of all tools and templates for systematic customer value evaluation. • Introduce Pricing early in the Stage Gate process and test value-drivers in the market at the concept evaluatiom stage with help from sales organization. • Expand the Pricing training program: • 28 people in the CPP program with PPS. 20 CPP as of February 2012. • All Account Managers, Regional Sales Managers, Divisional Sales Manager in CPP! • Created Pricing Module for Sales Reps as part of a 24-month 6-module training program. • Implement strategic projects: • Training program for distributors and contractors on the dollarization process. • Conduct internal brainstorming session to quantify the value of our services and other intangibles part of our offering. <14>
  15. 15. The 5 C Model Applied to ARDEX Americas CEO Specialized Experts Diffusion of Expertise CHAMPIONS Support Price Setting Incremental Small Steps Team-Wide CENTER-LED CHANGE ARDEX PRICING TRANSFORMATION Training Experience Tools Communication CONFIDENCE CAPABILITIES Coaching Championing Training <15>
  16. 16. Step 4: What is Next? (2012-2014) • Additional focus on training of trade partners. • Intense cultural training for sales force. g • Implementation of LeveragePoint Value-based Pricing to: • Support all new product and segment launches. • Handle mutilple stakeholders & complex job sites. • Document all critical existing products with standard value models. • Run value-based pricing analytics for Pricing Council Council. • Track ROI more formally. • Train, train...and communicate value. <16>
  17. 17. The Complexity of Value-based Pricing Architects, Engineers & p Specifiers General Contractor Distributor Building Owner Contractor & Installer Savings/Productivity Gains/Warranty Life-time Value/Warranty Transactional Relationship Marketing Relationship <17>
  18. 18. Key Success Factors - Ardex Value Selling Capabilities to monetize differential value of our benefits & to manage complexity Strong organizational alignment (Sales, marketing, R&D, technical support, etc) Strong technological and scientific backbone (ERP, LPI, special apps, webinars) Customized and targeted communication campaign to support sales force Advanced internal and external training across the board <18>
  19. 19. Our Next Webinar – April 18th Jim Geisman Ji G i Software Pricing Partners Founder & Principal What You Need to Know to Negotiate Better Software Deals NOTE the time! 1:00pm Eastern19
  20. 20. Thanks for watching! www ardex com www.ardex.com Stephan Liozu, CPP / / p linkedin.com/in/stephanliozu @StephanLiozu www.leveragepoint.com Jay Manson y jmanson@leveragepoint.com (781) 727 – 597720

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