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Pricing Strategy In Tumultuous Times

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This is a speech on how macro-economic forces from globalization to new technologies to sustainability are forcing companies to rethink their approach to capturing value.

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Pricing Strategy In Tumultuous Times

  1. 1. Pricing Leadership Navigating through Tumultuous Times October, 2009
  2. 2. This Recession was Different… <ul><ul><li>Deeper Bottom </li></ul></ul><ul><ul><li>Multiple Bubbles </li></ul></ul><ul><ul><li>Global Scope </li></ul></ul>Copyright © 2009 John Hogan
  3. 3. Despite the Emerging Recovery: Pricing will be Tough in the Coming Year A recent survey of CMO’s found that price is the top concern for customers in the second half of 2009 Source: AMA CMO Survey August 2009 Copyright © 2009 John Hogan
  4. 4. The Challenge of the Times… As we focus on recovery, our markets are undergoing massive structural change Copyright © 2009 John Hogan Globalization Shifting Demand Patterns Sustainability Transformative technologies
  5. 6. What is Pricing’s Role in the New World?
  6. 7. In the New Economy: Successful Pricers Will Move… Copyright © 2009 John Hogan Setting prices… $9.99 From: Monetizing the Value Net… To:
  7. 8. Salesforce.com Fueling Growth through their Value Network Founded in 1999, SF has grown to over $1bn in sales through delivery of CRM services to the SMB market <ul><ul><li>Based on Software as Service platform </li></ul></ul><ul><ul><li>Growth fueled by custom apps from independent developers </li></ul></ul>Copyright © 2009 John Hogan
  8. 9. The Revenue Model is Becoming More Complex… <ul><ul><li>Multiple Transaction Types </li></ul></ul><ul><ul><li>Different & Complex Value Propositions </li></ul></ul><ul><ul><li>Maintained profits through recession </li></ul></ul>… and More Profitable! Copyright © 2009 John Hogan
  9. 10. In the New Economy: Successful Pricers Will Move… Copyright © 2009 John Hogan Marking up costs… From: Proactively managing costs with price… To:
  10. 11. Ingram Micro: Regaining Share from Low Price Competitors Ingram Micro, a leading technology distributor reversed market share declines by encouraging customers to engage in lower cost behaviors <ul><ul><li>Losing share to lower price / lower service competitors </li></ul></ul><ul><ul><li>Higher costs from high-touch service model </li></ul></ul><ul><ul><li>Segmented market with high variability in willingness-to-pay </li></ul></ul>Copyright © 2009 John Hogan
  11. 12. The Game Changed with a Low-Price / Low Cost Offer <ul><ul><li>New offering reduced value delivered and cost to serve </li></ul></ul><ul><ul><li>Regained share profitably </li></ul></ul><ul><ul><li>Minimized volume and margin loss in high value segments </li></ul></ul>New Service Menu Copyright © 2009 Monitor Company Group, L.P.
  12. 13. In the New Economy: Successful Pricers Will Move… Copyright © 2009 John Hogan Measuring the demand curve… From: Mining the demand curve… To:
  13. 14. Dow Corning: Creating a New Offering for an Overserved Segment Facing growing share loss in its Silicones business, Dow Corning recognized that it was delivering more value (at higher cost) than customers wanted <ul><ul><li>Increasing price pressure from customers </li></ul></ul><ul><ul><li>Price declines fueled by “low value” competitors </li></ul></ul><ul><ul><li>Experiencing significant share loss </li></ul></ul>Copyright © 2009 John Hogan
  14. 15. Dow Launched a New Brand: Xiameter Since its inception in 2002, Xiameter has grown to account for over 30% of Dow Corning Sales. <ul><ul><li>Created value by subtraction </li></ul></ul><ul><ul><li>$70 million investment broke even in 6 months </li></ul></ul><ul><ul><li>Becoming core to Dow Corning business model </li></ul></ul>Copyright © 2009 John Hogan
  15. 16. Pricing Leadership Preparing to Win in the New Economy <ul><li>Get your data warehouse in order </li></ul><ul><ul><ul><li>Track purchase trends </li></ul></ul></ul><ul><ul><ul><li>Look at market and company data </li></ul></ul></ul><ul><ul><ul><li>Build analytic capabilities </li></ul></ul></ul><ul><li>Partner with sales and marketing to manage price, value, and cost </li></ul><ul><ul><ul><li>Bring something to the table (e.g., insight or opportunities) </li></ul></ul></ul><ul><ul><ul><li>Build a case for change using data </li></ul></ul></ul><ul><li>Improve efficiency and quality of pricing processes </li></ul>Copyright © 2009 John Hogan
  16. 17. Copyright © 2009 John Hogan Thank You! [email_address]

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