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Business Growth Conference 2017 - Tim Williams

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Tim Williams, Founder of Ignition Consulting Group's presentation on 'Activating new pricing strategies starting tomorrow'.

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Business Growth Conference 2017 - Tim Williams

  1. 1. IMPLEMENTING NEW PRICING STRATEGIES Presented by Tim Williams, Ignition Consulting Group
  2. 2. WHAT IS A CYNIC? OSCAR WILDE
  3. 3. We have armies of people estimating, tracking, and defending our costs.
  4. 4. But who is estimating, tracking, and defending our value?
  5. 5. Customer Value Price Cost Product
  6. 6. Customer Value Price Cost Product
  7. 7. Customer Value Price Cost Product COSTING
  8. 8. Customer Value Price Cost Product COSTING PRICING
  9. 9. Customer Value Price Cost Product COSTING PRICING A JudgmentA Calculation TACTICAL STRATEGIC
  10. 10. PRICING TEAM
  11. 11. PRICING TEAM Effectiveness Orientation Pricing Innovation Professional Selling Profit Protection Pricing Professionalism Packaging Value
  12. 12. 1. Packaging Value: Identifying, understanding and packaging the value we create for our clients. 2. Professional Selling: Meeting the predictable tactics of professional buyers with the proven techniques of professional sellers. 3. Pricing Innovation: Developing a diversified set of pricing strategies in place of a single standardized approach. 4. Effectiveness Orientation: Replacing the obsession with efficiency with a focus on effectiveness. 5. Profit Protection: Putting profitability ahead of revenue growth. 6. Pricing Professionalism: Institutionalizing pricing as a core competency of the organization.
  13. 13. Identifying, understanding and packaging the value we create for our clients. PACKAGING VALUE PACKAGING VALUE 1
  14. 14. PACKAGING VALUE
  15. 15. PACKAGING VALUE
  16. 16. Sell the hole, not the drill PACKAGING VALUE
  17. 17. PACKAGING VALUE
  18. 18. PACKAGING VALUE
  19. 19. Describe your solutions, not your services. PACKAGING VALUE
  20. 20. We use these METHODS To create these PROGRAMS That deliver these RESULTS STRATEGY Engagement Bootcamps Consumer Mindset Immersion Studies Feasibility Analysis Program Ideation Workshops Engagement Program Playbooks ACTIVATION Concept Sprints Rapid Program Prototyping Creative Development Content Strategy, Planning, and Execution Digital Platform Integration and Development Program Management OPTIMIZATION KPI Dashboards Engagement Surveys Insight Reports Innovation Labs Welcome Programs Create great first impressions that welcome new owners into the family – reinforcing their purchase decision, helping them get the most out of their new purchase, and setting an exciting foundation for ongoing engagement. Access Programs Immerse owners in content-rich, omni-channel experiences that educate, motivate, and inspire them to pursue their passions. Deliver VIP treatment and behind the scenes access for owners only. Community Programs Connect owners to the brand and each other through community platforms that create a shared sense of belonging to something bigger than oneself. Empower owners to engage with the brand and community, sharing their voice and leaving their mark. Advocacy Programs Incentivize and activate owners to share their experiences and preferences with others outside the brand. Leverage influencers and create opportunities for word of mouth and active advocacy. 
 Increase customer satisfaction, preference, and devotion Increase product usage, shorten repurchase cycle, and increase the likelihood of upgrades Increase average spend and total share of wallet Increase positive reviews, active advocacy, and qualified referrals Compile rich customer data that drives meaningful insights GS is a consumer engagement firm. We help premium brands optimize the post purchase experience through content, programs, and platforms that fuel owner passion, loyalty, and evangelism. EXAMPLES Welcome Kits Email Programs Onboarding Apps EXAMPLES Brand Publishing Owner Websites Owner Apps Concierge Programs EXAMPLES Community Websites Community Management Local Activation Programs EXAMPLES Bounty programs Influencer programs Describe your solutions, not your services. PACKAGING VALUE
  21. 21. Decouple your higher-value and lower-value offerings. PACKAGING VALUE
  22. 22. Decouple your higher-value and lower-value offerings. PACKAGING VALUE
  23. 23. Identify high-value solutions for further development. PACKAGING VALUE
  24. 24. Identify high-value solutions for further development. PACKAGING VALUE
  25. 25. Meeting the predictable tactics of professional buyers with the proven techniques of professional sellers. PROFESSIONAL SELLING PROFESSIONAL SELLING 2
  26. 26. Meeting the predictable tactics of professional buyers with the proven techniques of professional sellers. PROFESSIONAL SELLING PROFESSIONAL SELLING Move away from the language of cost to the language of value.
  27. 27. Meeting the predictable tactics of professional buyers with the proven techniques of professional sellers. PROFESSIONAL SELLING PROFESSIONAL SELLING Move away from the language of cost to the language of value. Cost Hours Rates Labor Time of Staff Billable Time Charge-Out Rates Rate Cards Estimates FTEs Utilization Burn Rates Write-Offs Multiples Reconciliation Overhead Recovery
  28. 28. PROFESSIONAL SELLING
  29. 29. PROFESSIONAL SELLING RESPONSE TO RFP
  30. 30. PROFESSIONAL SELLING RESPONSE TO RFP “Unlike other agencies, we don’t sell time; we sell intellectual capital and business results. In fact, we believe the traditional ways agencies charge works against the best interests of both parties. Hours and time of staff are focused on efficiency, and we don’t believe you’re buying efficiency. You’re buying marketplace effectiveness.”
  31. 31. PROFESSIONAL SELLING Establish the practice of always presenting pricing options.
  32. 32. PROFESSIONAL SELLING OPTION 1 OPTION 2 OPTION 3 BASE COMPENSATION US$2,500,000 US$5,000,000 US$7,500,000 $ PER CAR SOLD ADDITIONAL COMPENSATION $57 per car $8,550,000* $35 per car $5,250,000* $15 per car $2,250,000* TOTAL POTENTIAL COMPENSATION US$11,050,000 US$10,250,000 US$9,750,000 *Based on estimated 150,000 cars sold in North America Establish the practice of always presenting pricing options.
  33. 33. PROFESSIONAL SELLING Redirect pricing discussions away from costs incurred to value created. VISIBLE TO AGENCY OUTPUTS OUTCOMES PRICEINPUTS
  34. 34. PROFESSIONAL SELLING Redirect pricing discussions away from costs incurred to value created. VISIBLE TO AGENCY OUTPUTS OUTCOMES PRICEINPUTS VISIBLE TO CLIENT
  35. 35. Developing a diversified set of pricing strategies in place of a single standardized approach. PRICING INNOVATION PRICING INNOVATION 3
  36. 36. PRICING INNOVATION Create a “pricing stack” in place of a standard rate card.
  37. 37. PRICING INNOVATION X Create a “pricing stack” in place of a standard rate card.
  38. 38. PRICING INNOVATION DYANMIC PRICING ROYALTIES LICENSING SUBSCRIPTION-BASED USAGE AND MORE … FIXED PRICE OPTIONS REVENUE SHARING PRICING STACK X Create a “pricing stack” in place of a standard rate card.
  39. 39. PRICING INNOVATION Improve overall margins by diversifying your revenue streams. UNIFORM PRICING Cost-plus calculations based on a formula
  40. 40. PRICING INNOVATION Improve overall margins by diversifying your revenue streams. UNIFORM PRICING Cost-plus calculations based on a formula
  41. 41. PRICING INNOVATION Improve overall margins by diversifying your revenue streams. UNIFORM PRICING Cost-plus calculations based on a formula VARIABLE PRICING Varying pricing approaches based on customer value
  42. 42. PRICING INNOVATION Develop usage-based pricing for products created from agency IP.
  43. 43. PRICING INNOVATION Develop usage-based pricing for products created from agency IP. LOWER MARGIN Labor Intensive HIGHER MARGIN Technology-Enabled PRODUCTS SERVICES HARDER TO SCALE EASIER TO SCALEPROGRAMS
  44. 44. Putting effectiveness ahead of efficiency. EFFECTIVENESS ORIENTATION EFFECTIVENESS ORIENTATION 4
  45. 45. EFFECTIVENESS ORIENTATION Enforce a process that puts “Scope of Value” ahead of Scope of Work.
  46. 46. EFFECTIVENESS ORIENTATION Enforce a process that puts “Scope of Value” ahead of Scope of Work.
  47. 47. EFFECTIVENESS ORIENTATION Create a menu of success metrics that can be used in outcome-based agreements.
  48. 48. EFFECTIVENESS ORIENTATION Create a menu of success metrics that can be used in outcome-based agreements. PROGRESSIVE PRICING STRATEGIES THE PRACTICES ãIgnition Consulting Group | www.ignitiongroup.com Company Metrics Metric Description Transactional Sales volume Total sales volume for a period. Volume growth Change in total sales volume for a given period. Organic revenue growth Growth from existing capacity (people, markets, assets, etc.). Baseline sales Sales of the brand at a non-discounted price. Incremental sales The lift in sales resulting from a promotion (price promotion or other). Same store sales growth Change in total sales for an individual store in a given period. Cost per sale Costs invested as ratio of total sales. Revenue per unit sold Revenue generated divided by number of units sold. Unit market share Unit sales as a percent of total unit sales in the category. Brand penetration Buyers of brand as percent of total population. Incremental profit Profit generated over baseline profit. Return on sales Net profit as a percentage of total sales revenue. Unit margin Unit price less the unit cost. Average price per unit Total revenue divided by total sales. Percent of full-price sales Total percent of sales at full price vs. discounted price. Stock price Average stock price for a given period. Brand equity Total value of company minus tangible assets. Return on marketing investment Incremental revenue attributable to marketing in a given period. Store traffic Total number of store visits in a given period. Average transaction value Total revenue per earned per purchase as an average. Behavioral Average employee tenure Average length of employment. Internal brand adoption Degree to which brand is understood by employees. Unintentional turnover Percent of workforce that leaves voluntarily. Attitudinal Positive internal brand attitudes Degree to which employees have positive views of brand. Belief company living the brand Degree to which employees believe practices are in line with brand. Likelihood staying with company Intent of employees to retain their employment status. Employee satisfaction Degree to which employees are satisfied working for the company. Would refer company to friend Likelihood employees would recommend the company to a friend. COMPANY METRICS PROGRESSIVE PRICING STRATEGIES THE PRACTICES ãIgnition Consulting Group | www.ignitiongroup.com Customer Metrics Metric Description Transactional Cost per lead Marketing program costs divided by number of inquiries. Trial rate First-time users as percent of target population Cost per impression Impressions divided by cost of media. Reach Number of people with potential to receive a brand message. Number of new customers Total number of new customers in a given period. Revenue per customer Total sales divided by total customers. Customer retention rate Customers in current period as % of customers in previous period. Customer acquisition cost Acquisition spending divided by no. of new customers acquired. Share of wallet Percent of customer’s total income spent on a specific brand. Share of customer Share of total business the customer does in the category. Price premium Price of brand divided by average price in the market. Behavioral Ever tried brand Percent of target population that has tried brand at any time. Repeat purchase Customers who buy from one period to the next. Purchase frequency Frequency of purchase, including quantity purchased. Inquiries Total requests for more information (calls, clicks, etc.). Online registrations Number of people who register as user on a website. Click through rate Number of click throughs as a percent of number of impressions. Website unique visitors Number of unduplicated visitors to a web page in a given period. Online search volume Increase in total volume of searches for brand.. Online endorsements Endorsements of brand published online in a given period. Customer referrals Number of referrals received from customers in a given period. Attitudinal Unaided brand awareness Percent of target that has top-of-mind awareness of brand. Aided brand awareness Percent of target population that recognizes brand when prompted. Brand knowledge Percent of target population knowledgeable about brand. Brand fame Degree to which brand is seen as having momentum. Brand preference Percent of target that prefers brand over competitive brands. Purchase intent Percent of target population that intends to purchase brand. Brand likeability Degree to which brand is seen as likeable or “like me.” Willingness to recommend Percent of customers that would recommend brand to a friend. CUSTOMER METRICS PROGRESSIVE PRICING STRATEGIES THE PRACTICES ãIgnition Consulting Group | www.ignitiongroup.com Channel Metrics Metric Description Transactional Channel coverage Percent of population covered by resellers of brand. Sales force coverage Percent of potential channels covered by company sales force. Channel stock positions Calculation of in-and-out-of-stock ratios. Return on inventory investment Profit as a percent of investment in current inventory. Inventory turns Brand revenues divided by average level of inventory for brand. Inventory days Number of inventory turns divided by 365. Channel margins Channel profits as percent of channel selling price. Facings Total number of package views in stocking outlet. Share of SKUs Average share of SKUs in average channel outlet. SKU profitability Average profitability per SKU. Average sale per dealer Spending on channel support divided by channel sales. Channel referrals Number of referrals received by channel partners. Behavioral Channel inquiries Number of inquiries received from potential channel partners. Ideas from channel partners Number of ideas received by company from channel partners. Co-op support requests Number of co-op advertising requests received by company. Brand standards compliance Degree to which channel complies with brand standards. Channel turnover Degree to which channel partners or sales outlets change. Attitudinal Channel perceptions Perceptions of key channel stakeholders about brand. CHANNEL METRICS
  49. 49. EFFECTIVENESS ORIENTATION Redefine and manage “scope” as work delivered instead of hours worked.
  50. 50. EFFECTIVENESS ORIENTATION Redefine and manage “scope” as work delivered instead of hours worked. X
  51. 51. EFFECTIVENESS ORIENTATION Redefine and manage “scope” as work delivered instead of hours worked. “SCOPE” DEFINED ① Project Structure ② Constraints ③ Phases and Milestones ④ Assumptions ⑤ Deliverables ⑥ Functional Requirements ⑦ Project Change Control X
  52. 52. Putting profitability ahead of revenue growth. PROFIT PROTECTION PROFIT PROTECTION 5
  53. 53. PROFIT PROTECTION Identify and cultivate the 20% of your clients who produce 80% of your revenue.
  54. 54. PROFIT PROTECTION Identify and cultivate the 20% of your clients who produce 80% of your revenue.
  55. 55. PROFIT PROTECTION Recommend which clients should be “outplaced” due to lack of profitability or potential.
  56. 56. PROFIT PROTECTION Recommend which clients should be “outplaced” due to lack of profitability or potential.
  57. 57. PROFIT PROTECTION Identify the true economic buyers and their key value drivers. Based on a framework developed by Miller Heiman
  58. 58. PROFIT PROTECTION Identify the true economic buyers and their key value drivers. Based on a framework developed by Miller Heiman THE TECHNICAL BUYER The person responsible for following the purchasing rules of the company.
  59. 59. PROFIT PROTECTION Identify the true economic buyers and their key value drivers. Based on a framework developed by Miller Heiman THE USER BUYER The person who will actually use your solution after the purchase decision has been made. THE TECHNICAL BUYER The person responsible for following the purchasing rules of the company.
  60. 60. PROFIT PROTECTION Identify the true economic buyers and their key value drivers. Based on a framework developed by Miller Heiman THE ECONOMIC BUYER The person with the ability to commit the funds and the authority to make the purchase. THE USER BUYER The person who will actually use your solution after the purchase decision has been made. THE TECHNICAL BUYER The person responsible for following the purchasing rules of the company.
  61. 61. PROFIT PROTECTION Develop a brief “buyer persona” for every key stakeholder in the purchase process.
  62. 62. PROFIT PROTECTION Develop a brief “buyer persona” for every key stakeholder in the purchase process. BUYER PERSONAS Multidimensional descriptions of each individual type of buyer at the client organization, describing their objectives, attitudes, motivations, and role in the buying process.
  63. 63. Institutionalizing pricing as a core competency of the organization. PRICING PROFESSIONALISM PRICING PROFESSIONALISM 6
  64. 64. PRICING PROFESSIONALISM BEFORE Outline and communicate the new internal pricing process. AFTER
  65. 65. PRICING PROFESSIONALISM BEFORE Outline and communicate the new internal pricing process. Account team sends estimate to client New assignment Project management estimates hours and builds a staffing plan Project management hands off to finance Finance costs out staff plan accordingly Finance hands back to project management who provides account team with final cost AFTER
  66. 66. PRICING PROFESSIONALISM BEFORE Outline and communicate the new internal pricing process. Account team sends estimate to client New assignment Project management estimates hours and builds a staffing plan Project management hands off to finance Finance costs out staff plan accordingly Finance hands back to project management who provides account team with final cost AFTER Define the Scope of Value Estimate the Value Determine the Scope of Work Estimate the Cost Determine the Price Develop Pricing Options Present to Client
  67. 67. PRICING PROFESSIONALISM Publish and distribute tools and that support the new pricing process.
  68. 68. PRICING PROFESSIONALISM Publish and distribute tools and that support the new pricing process.
  69. 69. PRICING PROFESSIONALISM Conduct “After Action Reviews” at the end of major assignments.
  70. 70. PRICING PROFESSIONALISM Conduct “After Action Reviews” at the end of major assignments. How well did we capture value? Did we leave money on the table? What did we learn? How could we have added even more value? How well did we measure our success and communicate it to our client? Did we equal or exceed our client’s expectations? How could we have enhanced our client’s perception of value? If we were pricing this assignment again, how would we do it differently? THE AFTER ACTION REVIEW
  71. 71. PRICING PROFESSIONALISM Benchmark and track success.
  72. 72. PRICING PROFESSIONALISM Benchmark and track success.ignition consulting group | www.ignitiongroup.com QUANTITATIVE MEASURES CURRENT GOAL ACHIEVED 1. Year-over-year profitability (EBIT) 2. Profit per FTE 3. Percent of remuneration agreements that could be characterized as high-risk/high-reward. 4. Percent of remuneration agreements that could be characterized as medium-risk/medium-reward. 5. Percent of remuneration agreements that could be characterized as low-risk/low-reward. 6. Percent of new clients (won this year) with whom we have non- traditional remuneration agreements. 7. Percent of total revenue from "high-value" services or solutions (vs. production, execution, implementation, distribution). 8. Percent of total revenue tied to outputs or outcomes (vs. inputs) 9. Percent of revenue derived from sale or licensing of IP 10. Percent of assignments priced as options 11. Percent of revenue derived from changes in scope (as an indicator of good scope tracking and scope management) 12. For major assignments completed, percent of time we held an "After Action Pricing Review" Quantitative Measures
  73. 73. PRICING PROFESSIONALISM Benchmark and track success.ignition consulting group | www.ignitiongroup.com QUANTITATIVE MEASURES CURRENT GOAL ACHIEVED 1. Year-over-year profitability (EBIT) 2. Profit per FTE 3. Percent of remuneration agreements that could be characterized as high-risk/high-reward. 4. Percent of remuneration agreements that could be characterized as medium-risk/medium-reward. 5. Percent of remuneration agreements that could be characterized as low-risk/low-reward. 6. Percent of new clients (won this year) with whom we have non- traditional remuneration agreements. 7. Percent of total revenue from "high-value" services or solutions (vs. production, execution, implementation, distribution). 8. Percent of total revenue tied to outputs or outcomes (vs. inputs) 9. Percent of revenue derived from sale or licensing of IP 10. Percent of assignments priced as options 11. Percent of revenue derived from changes in scope (as an indicator of good scope tracking and scope management) 12. For major assignments completed, percent of time we held an "After Action Pricing Review" Quantitative Measures ignition consulting group | www.ignitiongroup.com QUALITATIVE MEASURES* CURRENT GOAL ACHIEVED 1. We have re-engineered and renamed our product/service offerings as solution sets instead of just serving up lists of functions and activities. 2. Our client-facing documents and conversations use the language of value in place of the language of cost. 3. We have sorted our products and services into different classes of value and have applied different pricing approaches to each. 4. We consistently avoid providing information about our costs to prospective clients and have taken the position that as a rule we don’t sell our services based on hourly rates. 5. We have developed a position regarding ownership of intellectual property (in its various forms) that we have adopted as a default position in contract negotiations. 6. We are actively experimenting with various pricing approaches one opportunity at a time. 7. We have identified areas where we can “productize” our intellectual capital and are actively creating new forms of IP that have the potential to produce new revenue streams. 8. In pricing discussions with clients and prospects, we start and keep the dialogue focused on the value of outputs or outcomes rather than the cost of inputs. 9. We consistently present clients and prospects with several options rather than a single proposed price. 10. We precede all major discussions of Scope of Work with a discussion about Scope of Value (expected outcomes) and include an SOV section on all major plans and proposals. 11. We have implemented approaches that define and manage Scope as the completion of outputs or the achievement of outcomes, not the expenditure of inputs. 12. Our people are incentivized to be effective (produce results), not efficient (hold hours to estimate, meet billable time targets, etc.). * Rated on a scale of 1 to 10 where 1 = Strongly Disagree and 10 = Strongly Agree Qualitative Measures
  74. 74. 1 2 3 4 5 6 7 8 9 9 IN 909 KEY INITIATIVES IN 90 DAYS
  75. 75. Re-label documents with the language of value in place of the language of cost. Create new “boilerplate” responses that focuses on value created instead of costs incurred. Recast the firm’s offerings as outputs and/or outcomes instead of inputs. Develop templates for pricing options. Establish a model for decoupled pricing. Inject “Scope of Value” at the beginning of all scope documents, proposals, and RFP responses. Identify existing and potential IP for development as new revenue streams. Create a metrics menu for potential outcome-based agreements. Recommend and implement approaches for diversifying the firm’s pricing portfolio. 1 2 3 4 5 6 7 8 9 9 IN 909 KEY INITIATIVES IN 90 DAYS
  76. 76. “Learning to implement a more professional approach to pricing is like learning a new sport. You get better and better with practice.” Tim Williams, Ignition Consulting Group twilliams@ignitiongroup.com
  77. 77. “Learning to implement a more professional approach to pricing is like learning a new sport. You get better and better with practice.” Tim Williams, Ignition Consulting Group twilliams@ignitiongroup.com

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