Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Pricing and the ceo may 2018 for xpeg

280 views

Published on

Pricing should be a critical issue for the CEO as it is one of the most powerful levers in the business. Successful pricing also depends on clear goal and strategy alignment, which is the role of the CEO. This presentation was made in Seattle to a group of business leaders interested in improving pricing leadership.

Published in: Leadership & Management
  • Loved it. Very clear presentation and the perfect slides to introduce pricing challenges to the non pricing experts. Thanks for sharing!
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here

Pricing and the ceo may 2018 for xpeg

  1. 1. May 17, 2018 Steven Forth steven@ibbaka.com | +1 604 763 7397 Pricing and the CEO
  2. 2. • Hooked on early-stage innovation (Founder of Thoughtshare, Agreement Express, LeveragePoint, TeamFit and now Ibbaka) • Got into pricing while at Monitor-Deloitte and working with Tom Nagle (Author of The Strategy and Tactics of Pricing) • Advise companies on go-to-market strategy with a focus on pricing (Everything from Fortune 500 to Pre Revenue Startups) • Blend Design Thinking & Pricing Strategy because pricing requires design A bit about me Steven Forth Managing Partner - Ibbaka steven@ibbaka.co +1 604 763 7397 @StevenForth TeamFit Skill Profile
  3. 3. • Are you in B2B, B2C, B2G? Anyone in M2M? (Machine to Machine) • Who in you organization is responsible for pricing • Goals • Strategy • Execution • What role do you currently play in pricing? A bit about us Strategy Execution Goals
  4. 4. • How to lead pricing • Who should ‘own’ pricing • How to set pricing • The key questions to ask Themes for this morning
  5. 5. Why Pricing? Pricing is where it all comes together How you create value Who you sell to How you communicate value How you capture value
  6. 6. The innovation cycle Create Communicate CaptureDeliver Understand Pricing VALUE
  7. 7. What is your product development process? Product Cost Price Customer? Value?? Customer Value Price Cost Product Common Process Value-Based Process
  8. 8. • Establish a common language and concepts (help people to use them consistently) • Set clear goals • Ask questions • Give people space to execute (and make mistakes) How to lead pricing
  9. 9. • Pricing methods • Value – emotional and economic • Price – packaging, model, price setting Value Metric connects to Pricing Metric • Strategy - that will deliver your goals • Tactics – that will execute strategy A common language
  10. 10. Common Language - Pricing methods • Use when customer has controlCost Plus • Use for fungible commoditiesMarket Based • Use for differentiated offersValue Based
  11. 11. Emotional Economic Always relative to an alternative Common Language - What is value?
  12. 12. Emotional value Maslow’s Hierarchy PricingPower
  13. 13. Common Language - Economic value Price of Alternative Your Positive Value Drivers Your Negative Value Drivers
  14. 14. Common Language - Economic value Price of Alternative Your Positive Value Drivers Your Negative Value Drivers Differentiation Value Economic Value
  15. 15. Economic value Price of Alternative Your Positive Value Drivers Your Negative Value Drivers Differentiation Value Economic Value Normal Price Range
  16. 16. Common Language - What is differentiation? Customer Needs Your Offer Alternative Unmet Needs Commodity Your Differentiation Irrelevant Competitor Differentiation
  17. 17. Common Language - What is differentiation? Customer Needs Your Offer Alternative Unmet Needs Commodity Your Differentiation Irrelevant Competitor Differentiation Baseline Positive Value Negative Value
  18. 18. • Grow market • Improve pipeline conversions and velocity Increased Revenues • Improve efficiency • Reduce rework Reduced Operating Expenses • Defer Investment • Extend asset life Reduced Capital Expenses • Accelerate cash collection • Reduce inventory Reduced Operating Capital • Switching costs • Training Your Unique Costs • Compared to the alternativeYour Shortcomings Economic value drivers
  19. 19. • For B2B Pricing • Understand how you impact your customer’s P&L • Understand how your customer impacts its customers’ P&L Understand your customers P&L
  20. 20. Penetrate Price low, grow market share, win first mover advantage Common Language - Pricing strategies Market following Price relative to an alternative Premium Price to communicate and capture differentiated value
  21. 21. Your pricing strategy needs to support your brand Market Positioning Brand Attributes Value Drivers Target Customers Pricing Strategy Pricing
  22. 22. “The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you've got a terrible business.” Warren Buffet Common Language - Pricing power
  23. 23. Common Language - Putting the pieces together Price of Alternative Your Positive Value Drivers Your Negative Value Drivers Positive - Brand - Transfer Pricing - … Negative - Risk - Switching costs - - …
  24. 24. Common Language - Putting the pieces together Price of Alternative Your Positive Value Drivers Your Negative Value Drivers Positive - Brand - Transfer Pricing - … Negative - Risk - Switching costs - - … Premium Market Following Penetration
  25. 25. Common Language - SegmentTargetPostion Pricing is part of positioning
  26. 26. Connecting pricing to value GE Jet Engines Land Fill Pay per Click ??? How will you do this?
  27. 27. Tracks Value Discriminates Segments Makes it Easy to Buy Enforceable Simple Common Language – Pricing Metrics Pricing Metric
  28. 28. Who should lead pricing Changes over the product lifecycle • Should be led by whoever is closest to the customer • This tends to be product management at first and then migrate to product marketing or sales over time Collaborative effort • Needs the involvement of executive leadership, finance, marketing sales and in some cases operations (when pricing is used to manage load or keep facilities at capacity)
  29. 29. Who should lead pricing – product lifecycle Early Market Product Bowling Alley Direct Sales Tornado Marketing Main Street Collaborative
  30. 30. Who should lead pricing - collaboration Product List Price Sales Management Discount policy Sales Operations Contract Tactical Sales Rebates & Terms Finance From Tim Smith at Wiglaf Pricing
  31. 31. How to set price 1. Set your goals 2. Understand the value 3. Choose where to play 4. Design 1. Monitor and adapt
  32. 32. How to Set Price - Pricing goals 1. Grow the market 2. Grow market share 3. Grow revenue 4. Improve gross profit 5. Price for unit economics (Lifetime Value of Customer, Customer Acquisition Costs) 6. Price for capacity utilization
  33. 33. How to Set Price - Understand the value • Where do you have differentiation value • Relative to which alternatives • For which customer segment • Remember that value is emotional and economic
  34. 34. How to Set Price - Choose targets • Segment market on how customers get value • A good segment is one where potential customers get value in the same way and buy in the same way • Do not price for every segment • Target segments where you offer exceptional differentiated value • Also consider customer acquisition costs and cost to serve the segment • Sequence targeting so that one segment sets up the next
  35. 35. How to Set Price - Design pricing • Choose pricing metrics that track value metrics • Design to support • Your goals (market growth, market share, revenue, etc.) • Your target segment • To differentiate segments • In tiered price designs • Understand the role of each tier (Is it to upsell or to better cover the demand curve?)
  36. 36. How to Set Price - Set levels • Set price levels to capture a reasonable amount of differentiated value depending on your strategy • Avoid excessive discounting but plan for some discounting (preferably 5-10% but up to 30% in some industries) • Prepare for some form of dynamic or performance- based pricing in the next decade
  37. 37. How to Set Price - Monitor and evolve • Pricing changes • You are playing chess (competitors will respond to your pricing) • Customer needs change • New alternatives enter the market • You may not get it right the first time • Collect data to see how you are doing and if the system is performing as designed • Get better at prediction
  38. 38. 1. Are we in alignment on pricing goals? It is the CEO’s job to set the goals. 2. What is our pricing strategy? 3. How are prices set? 4. What is our value metric? (or value metrics) 5. How does our price track the value we deliver? 6. Which customers get the most value from our products and services? 7. How and when do we give discounts? 8. What data are we tracking to improve our pricing? 9. Do we lead with value in our sales process? Questions the CEO should ask
  39. 39. Benchmarking – Self Assessment Tool Simple self assessment tool Generates a custom report Try having different people in your company take this and then compare results https://www.ibbaka.com/se lf-assessment
  40. 40. Pricing Innovation Cloud IoT AI Pricing innovation
  41. 41. • Predictive value – Can you predict how much value a customer will get? • Behavioral pricing – Apply behavioral economics and cognitive science to pricing • Dynamic bundling – Built bundles in real time based on value and cost • Dynamic pricing – Price is generated in real time • M2M Auctions – Price is negotiated between bots What the future looks like
  42. 42. Understand Value • Research and validate value drivers for all market participants • In multisided platforms, map interactions between market participants (see next slide) Segment the Market and Target Customers • Find segments that get value in the same way and buy in the same way • Target segments that get the most value with a reasonable CAC (Customer Acquisition Cost) Design a Pricing Model • Identify all of the value metrics (the measures of how users get value) • Use these to design the pricing metric (how users are charged) and the pricing architecture Set and Monitor Prices and Performance • Set prices to optimize for company goals (market share, revenue, profit, cash flow) • Establish monitoring system to ensure continuous improvement The best approach
  43. 43. • Pricing is based on the value you provide to your customer • Value has economic and emotional aspects – both matter • Market segmentation is the foundation of your pricing strategy • Pricing is a place to innovate • Connect the value metric and pricing metric Key takeaways
  44. 44. 1. Figure out if you have pricing power. • Can you raise prices? • What can you do to increase your ability to raise prices? 2. Ask ‘What role does each of my tiers play?’ • Does each tier have a well defined role? • Is it actually fulfilling that role? 3. Answer ‘Which of our customers gets the most value from our offer?’ Three Things to Do Tomorrow
  45. 45. Discussion • Pricing challenges? Let’s discuss. • What are the risks of pricing innovation? • Are you collecting the data you need? Do you have the rights to use the data the way you want to?
  46. 46. Contact Us Pricing consultancy and technology company built by experienced entrepreneurs We understand innovation because we live it Our passion is improving product launch and in market success through better strategic pricing and execution Understand the larger picture of segmentation, targeting, value modeling, value propositions and pricing architecture Steven Forth Managing Partner steven@ibbaka.co +1 604 763 7397 TeamFit Skill Profile Karen Chiang Managing Partner karen@ibbaka.co +1 778 628-4085 TeamFit Skill Profile Ibbaka on Twitter Ibbaka on LinkedIn Website

×