AIPMM Webinar: Offering Tiers and Levers to Control Price Negotiations

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Mark Burton is co-founder of Holden Advisors and a strategic marketing expert for more than 16 years. As a formulator of the firm’s project methodologies and analytical processes, Mark is the driving force in creating offering and pricing strategies for firms in industries such as IT outsourcing, semiconductor, financial and business services, and enterprise software and maintenance.

About The AIPMM
The Association of International Product Marketing and Management (AIPMM), founded in 1998, promotes worldwide excellence in product management education and provides training, education, certification and professional networking opportunities. With members in 65 countries, the AIPMM is the Worldwide Certifying Body of product team professionals and offers globalized trainings and credentials localized for specific markets designed to meet the challenges of a constantly changing business landscape. As the only professional organization that addresses the entire product lifecycle from inception to obsolescence in any industry, the AIPMM supports strategic partners with offerings in Europe, the Middle East, Australia, and SouthEast Asia, as well as North America.

AIPMM Membership benefits include the national Product Management Educational Conference, regional conferences, the Career Center, peer Forums, tools, templates, publications and eligibility to enroll in the Certification Programs. The Agile Certified Product Manager® (ACPM), Certified Product Manager® (CPM), Certified Product Marketing Manager® (CPMM), Certified Brand Manager® (CBM), and Certified Innovation Leader (CIL) programs allow individual members to demonstrate their level of expertise and provide corporate members an assurance that their product professionals are operating at peak performance.
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Moderated by Cindy F. Solomon, CPM, CPMM
Founder, Global Product Management Talk @ProdMgmtTalk
http://www.prodmgmttalk.com
http://bit.ly/nbw9Yr

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AIPMM Webinar: Offering Tiers and Levers to Control Price Negotiations

  1. 1. September 28, 2012 AIPMM Webinar Series www.aipmm.com© AIPMM 2012
  2. 2. © AIPMM 2012 http://www.aipmm.com
  3. 3. Today’s Speakers Moderator: Cindy F. Solomon, CPM, CPMM Global Product Management Talk , Startup Product Talks, Startup Product Summit Twitter: @cindyfsolomon @prodmgmttalk @startupproduct Presenter: Mark Burton Vice President, Co-founder | Holden Advisors Linkedin: http://www.linkedin.com/in/pricingwithconfidence email: MBurton@holdenadvisors.com Blog: http://markrburton.wordpress.com/ Twitter: @M_R_Burton© AIPMM 2012 @AIPMM #prodmgmt http://www.aipmm.com
  4. 4. Mark’s Book: Pricing with Confidence Stay on to win! "This book helped take complex pricing topics and issues and make them simple enough so that virtually anyone in our business can use the insights and learnings and put them into practice." http://www.pricingwithconfidencebook.com/© AIPMM 2012 http://www.aipmm.com
  5. 5. FEATURED PRESENTATION© AIPMM 2012 http://www.aipmm.com
  6. 6. How to Use Offering Tiers and Leversto Control Price NegotiationsSeptember 28, 2012
  7. 7. Today‘s Agenda• Why today‘s pricing environment is so challenging• The rise of the economic buyer• Why traditional approaches no longer work• Solutions to take back control of price negotiations© 2012 Holden Advisors Corp., Concord, MA 7
  8. 8. The Legacy of The Great Recession:Procurement has Emerged as ―The Winner‖―We are in the middle of amajor transformation in the ―B2B purchase decisions more than everB2B sales model driven are being driven by financial requirements,by customer‘s enterprise- such as enabling growth, improvingwide strategic procurement profitability, and reducing costs leavinginitiatives‖ economic buyers in clear control‖Forrester Research IDC Research B2B buyers are becoming more demanding and sophisticated in purchasing.© 2012 Holden Advisors Corp., Concord, MA 8
  9. 9. Procurement is Flexing its Muscles • 86% have expanded their control over the last five years1 • Procurement now controls 64% of major spend categories2 • 70% of CPOs carry VP title • 42% report to the C-suite2 • Procurement monitors supplier health closely (66%), using market intelligence (75%) and sensing from frontline staff (55%)31. Supply Management 2011 survey of CPO‘s2. Supply‘s Organizational Roles and Responsibilities, 2011, F. Fraser Johnson and Michiel R. Leenders, CAPs Research, Arizona State University3. CPO Agenda, January 2012 © 2012 Holden Advisors Corp., Concord, MA 9
  10. 10. And Leaning on Suppliers to Help Deliver Savings • Procurement must deliver 5- 10% overall savings annually, with up to 20% on sourcing initiatives1 • Skeptical that suppliers always offer the best price • 81% have asked suppliers for price cuts2 • And reign in ―rogue spending‖ by departments and ―back- Unless your sales team is well door selling‖ by reps prepared, you could be outmatched1. CPO Agenda, January 20122. CPO Agenda, Summer 2009 © 2012 Holden Advisors Corp., Concord, MA 10
  11. 11. When Customer Relationships Change, theResponse of Selling Firms is Predictable… Invest more in relationship selling Create value-added bundles of products and services Sell more value …and often completely ineffective© 2012 Holden Advisors Corp., Concord, MA 11
  12. 12. Why Isn‘t Value Enough? Because Not AllCustomers Want Value. • While need is similar, customers have different view of vendors: – Price-oriented – Relationship-oriented – Value-oriented – Poker players • Based on ―view,‖ customers require different pricing/offering approaches© 2012 Holden Advisors Corp., Concord, MA 12
  13. 13. How To Identify Poker Players • Buyers grab control from the real customer and block access to anyone else in company • Will qualify multiple vendors often with an RFP • Their internal promise: ―Watch This‖ • Need to understand their real power not their stated power—it‘s often a bluff© 2012 Holden Advisors Corp., Concord, MA 13
  14. 14. Want to Play the Game Better? Create anOffering That Forces Trade-offs• Match with needs of target customers• Meet/beat competitor in low value flanking offering• Augment with value features/service• Create offering levers.• Can be driven by – Customer value – Cost to serve/deliver – Performance risk© 2012 Holden Advisors Corp., Concord, MA 14
  15. 15. Example of Offering Tiers Small Business AccountingSource: Intuit company website © 2012 Holden Advisors Corp., Concord, MA 15
  16. 16. With Tiers Established Optional Services Increase RevenuesSource: Intuit company website © 2012 Holden Advisors Corp., Concord, MA 16
  17. 17. Criteria Help Determine Where to Place aFeature or Service in the TiersCriteria – is the Description Best tierfeature…?Necessary to Product does not work without it CorefunctionNot necessary but Typical customer requires it to be Expectedexpected by most minimally satisfiedcustomersHigh value Significantly affects customer Expected or Premium performance, or is demanded by a if possible select group of customersDifferentiated Is unique to your firm Expected or Premium if possibleAble to be turned off Given present architecture, feature or If yes – use above service an be disabled If no – evaluate full set of ―always on‖ features© 2012 Holden Advisors Corp., Concord, MA 17
  18. 18. Use Pre-Planned Offering Tiers to Flush Out thePoker Player Relationship 24/7/365 Buyer Service Offering Value Integration Buyer Offering Core Price Product Buyer Offering The most effective approach is based on clearly defined differences in value© 2012 Holden Advisors Corp., Concord, MA 18
  19. 19. Using Fences to Control Access • Fences control customer access to valued attributes • Need to be disciplined • Based on objective criteria • Clear to sales, service and customers© 2012 Holden Advisors Corp., Concord, MA 19
  20. 20. Dow Corning‘s High and Low Value Offering Use of Fences to Manage High- and Low-Value OfferingsDow Corning Xiameter7000 Products 350 ProductsPremium Price 20% Price DiscountRapid Delivery 7-20 Day DeliveryFull Technical Service No Technical ServiceCustom Lot Sizes Full Truck or Pallet OrdersInternational Terms Limit to 6 Currencies © 2012 Holden Advisors Corp., Concord, MA 20
  21. 21. For Services, a Detailed List of Offering Levers isRequired to Manage Negotiations Outsourced application development example Lower Prices Higher Prices Offering Levers Offering Levers –% SLAs Expected Feature SLAs +% Package Initial Price Level Set by a neutral price strategy and: Size Delivery Delivery –% Complexity +% Model Criticality Model© 2012 Holden Advisors Corp., Concord, MA 21
  22. 22. Underlying Each Offering Lever is an Analysis ofValue, Cost or RiskOffering Levers Price Lower Price Neutral Price HigherTechnology Supplier Strategic Supplier strategic Not an Supplier strategic capability capability eg, .net, Java capability (standard environment)Delivery Location More than 80% off shore 80% best shore, 20% Greater than 20% on–shore on–shoreArchitecture Control Supplier Controlled Agile – Supplier Control Customer Controlled No compliance with Supplier customer standards – have to technology policy be definedCompression or Supplier controlled and Optimal +/– % from the Customer defined and moreRelaxation of Schedule ability to manipulate to estimating model aggressive schedule drive down cost – optimal scheduleRequirements Detailed requirements Well defined, detailed Incomplete, high–level, orCompleteness captured by the client in requirements already ambiguous business Supplier preferred toolset captured by the client requirementsProduction Supplier controlled Supplier controlled Customer controlledInfrastructure Competitor infrastructure in place Primary Price Driver Value Cost Risk© 2012 Holden Advisors Corp., Concord, MA 22
  23. 23. Preparing for the Game: No Detail is Too Small• Prioritize your options internally – Both ‗gives‘ and ‗gets‘• What is the cost of each give, and the value of each get?• Attach ―prices‖ to everything• Tightly control the process – Prevent ―nibbling‖ – List customer benefits – and their corresponding obligations – Charge extra fees if they fail to perform – List anything that‘s off the table© 2012 Holden Advisors Corp., Concord, MA 23
  24. 24. What‘s Required to Make it Work?• Clear, unambiguous evidence of the damage that is being done• Logical, well-defined give-gets – That are relevant (and sometimes painful) to customers – And easy for the sales team to understand• Supported by clear data on value, costs, or risk – Needed as much for internal support as external justification• An understanding that negotiations are theater• Senior leaders that understand their role in the play• The ability to stay cool under pressure © 2012 Holden Advisors Corp., Concord, MA 24
  25. 25. Any Questions?Thank you for joining us today. If you have anyadditional questions, please reach out to:Mark BurtonVice President, Co-founderHolden Advisorsmburton@holdenadvisors.com617-285-2963© 2012 Holden Advisors Corp., Concord, MA 25
  26. 26. Please Join Us Again! AIPMM Webinars Oct 3 Role Of Product Management In The Success Of Your Company Oct 12 From Idea to Reality with Glen Lipka,VP UX, Marketo Oct 19 Developing A Compelling Business Case Product Talk Podcast & Twitter Chat #ProdMgmtTalk Mondays Oct 1 From Idea to Reality w/ Glen Lipka, VP UX Listen http://www.blogtalkradio.com/prodmgmttalk More http://www.prodmgmttalk.com Newsletter: http://www.aipmm.com/subscribe LinkedIn: http://www.linkedin.com/company/aipmm Membership: http://www.aipmm.com/join.php Certification: http://aipmm.com/html/certification/© AIPMM 2012 @AIPMM http://www.aipmm.com

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