Celebrate – Pricing Power
Pricing principles that capture value and enhance profitability
Pricing can no longer be an after-thought, with the pricing strategy and rate structure applied after the service offering is developed. Increasingly, clients want unique pricing structures that include shared accountability – this applies not only to agencies, but is part of a larger trend across many service-business industries. Successfully aligning interests requires integrating the pricing strategy as a core component of the offer – using price to help determine: What is included? How is success defined? How services are delivered. This discussion will take lessons learned from both advertising, and other segments to frame the role of pricing in the sales process. We will also discuss the ways leading-class pricing organizations find success with client procurement teams – who have been very effective at driving down rates. This includes the importance of differentiating cost vs. fees vs. value. Successful alternative fee programs are not positioned as new forms of discounting, but are leveraged as a different way to measure and compensate for value. And, finally, we will discuss the concept of "losing on price."
Speaker:
Scott Lippstreu, Principal, Deloitte Consulting LLP
Deloitte vendavo sept 2010 - outcome based approachTheo Slaats
Vendavo Pricing Seminar Düsseldorf september 2010
Presentation by Theo Slaats, co-leader Deloitte EMEA Pricing and Profitability Management Center of Excellence
How Collinson Grant helps retailers to maximise operational excellenceCheshire East Council
Collinson Grant helps retail businesses to become more profitable. Our consultants have worked in food, fashion, personal care, electrical, DIY and sporting goods; and for large multiples, specialist/niche chains, luxury brands and discounters.
This presentation explains how we find opportunities for improvement in the supply chain, for savings at head office and in the procurement function, and describes the programme management skills we bring to bear to realise them.
The work we do for retailers includes:
improving the performance of supply chains; reducing costs of supply, improving merchandise availability; and minimising margin loss;
installing and integrating multi-channel planning and operating processes; improving systems, organisation and controls, and reducing operating complexity and costs;
increasing the effectiveness of procurement and reducing indirect expenditure on GNFR;
reducing indirect costs and improving productivity of, and return on, assets employed – people, inventory, space and cash;
improving operating results by managing change programmes or by restructuring after acquisitions or disposals.
We apply tools and techniques used to improve performance at the sector's largest organisations. Our consultants are experienced senior managers who have completed major projects for Tesco, Levi Strauss Europe, Boots, Dixons, Argos, Marks and Spencer, Burberry and Kingfisher.
Collinson Grant aims is to give clients a financial return worth ten times the amount spent on our services. We only recommend action if we believe it will lead to a sustained improvement. We are not afraid to give bad news, or to champion ideas that may not be welcome.
Find out more at www.collinsongrant.com or e-mail Les Murray: lmurray@collinsongrant.com
Presentation of Theo Slaats, partner at Deloitte, on "Pricing technology as enabler for impacting business and bottom-line" at the Vendavo Pricing seminar on October 28, 2009 in Brussels.
Deloitte vendavo sept 2010 - outcome based approachTheo Slaats
Vendavo Pricing Seminar Düsseldorf september 2010
Presentation by Theo Slaats, co-leader Deloitte EMEA Pricing and Profitability Management Center of Excellence
How Collinson Grant helps retailers to maximise operational excellenceCheshire East Council
Collinson Grant helps retail businesses to become more profitable. Our consultants have worked in food, fashion, personal care, electrical, DIY and sporting goods; and for large multiples, specialist/niche chains, luxury brands and discounters.
This presentation explains how we find opportunities for improvement in the supply chain, for savings at head office and in the procurement function, and describes the programme management skills we bring to bear to realise them.
The work we do for retailers includes:
improving the performance of supply chains; reducing costs of supply, improving merchandise availability; and minimising margin loss;
installing and integrating multi-channel planning and operating processes; improving systems, organisation and controls, and reducing operating complexity and costs;
increasing the effectiveness of procurement and reducing indirect expenditure on GNFR;
reducing indirect costs and improving productivity of, and return on, assets employed – people, inventory, space and cash;
improving operating results by managing change programmes or by restructuring after acquisitions or disposals.
We apply tools and techniques used to improve performance at the sector's largest organisations. Our consultants are experienced senior managers who have completed major projects for Tesco, Levi Strauss Europe, Boots, Dixons, Argos, Marks and Spencer, Burberry and Kingfisher.
Collinson Grant aims is to give clients a financial return worth ten times the amount spent on our services. We only recommend action if we believe it will lead to a sustained improvement. We are not afraid to give bad news, or to champion ideas that may not be welcome.
Find out more at www.collinsongrant.com or e-mail Les Murray: lmurray@collinsongrant.com
Presentation of Theo Slaats, partner at Deloitte, on "Pricing technology as enabler for impacting business and bottom-line" at the Vendavo Pricing seminar on October 28, 2009 in Brussels.
Price Effectiveness is the #1 lever to accelerating value creation and driving a step-change in sustainable profitable growth. It is unquestionably more valuable to a business than cost-optimisation alone. Yet, many businesses are unable to maximise the value delivered from their pricing initiative, whether supported by traditional finance spreadsheets and home-grown macros, or, by a multi-million dollar investment in a Price and Margin Management platform.
What is preventing full value capture from a pricing initiative?
This paper addresses your organisational maturity and general readiness to capture the full value from your price and margin initiative. It looks beyond “pure pricing” to determine the ability of other critical business functions to help drive a shift-change in business performance.
Strategic Pricing - International CEO Forum 2011Pricing Insight
Strategic pricing - driving improved profitability and earnings growth. Presented by Ron Wood, Director of Pricing Insight at the International CEO Forum, 18th October 2011
Delivering measurable results through pricing (DMRTP) outlines challenges faced by organizations in delivering transformational results through pricing and approaches that have proven to be effective in overcoming those challenges. I delivered this presentation at PPS fall 2011 conference in Las Vegas
What is your company's pricing capability? How do we protect and expand revenue and profits? What can we do to drive short term and long term margin improvements? Pricing Insight can help.
This webinar covers the fundamentals of Value Pricing so that participants can:
Understand the relationship of pricing with the other elements of the marketing mix.
Achieve the value you deserve through optimal pricing strategies that maximize profits.
Ensure that marketing is more proactive to optimize value for new products and maintaining value over different life cycles.
High Performance Through Procurement: The Role of TechnologyEmptoris, Inc
An Emptoris and Accenture white paper discussing the role of technology on the journey to procurement excellence.
For more information, please visit:
Emptoris website: http://www.emptoris.com/
Emptoris blog: http://blog.emptoris.com/
YouTube channel : http://www.youtube.com/emptoris
Pricing requirements vary by market and are unique to every organisation. In this webinar we will discuss some of the common pricing models, PTW, Pricing strategy and presenting the Price data in proposals.
Noted pricing expert Dr. George Cressman describes how companies achieve above average profitability by proactively managing price realization or "pricing maturity." Learn which stages a company must take to be on the path to price maturity, as well as the risks of taking shortcuts. George's advice is absolutely essential for every B2B manager involved in pricing today.
Why value propositions matter? How to create a true value proposition for B2B businesses? Implementation ready toolkit to design a superior value propositions
Price Effectiveness is the #1 lever to accelerating value creation and driving a step-change in sustainable profitable growth. It is unquestionably more valuable to a business than cost-optimisation alone. Yet, many businesses are unable to maximise the value delivered from their pricing initiative, whether supported by traditional finance spreadsheets and home-grown macros, or, by a multi-million dollar investment in a Price and Margin Management platform.
What is preventing full value capture from a pricing initiative?
This paper addresses your organisational maturity and general readiness to capture the full value from your price and margin initiative. It looks beyond “pure pricing” to determine the ability of other critical business functions to help drive a shift-change in business performance.
Strategic Pricing - International CEO Forum 2011Pricing Insight
Strategic pricing - driving improved profitability and earnings growth. Presented by Ron Wood, Director of Pricing Insight at the International CEO Forum, 18th October 2011
Delivering measurable results through pricing (DMRTP) outlines challenges faced by organizations in delivering transformational results through pricing and approaches that have proven to be effective in overcoming those challenges. I delivered this presentation at PPS fall 2011 conference in Las Vegas
What is your company's pricing capability? How do we protect and expand revenue and profits? What can we do to drive short term and long term margin improvements? Pricing Insight can help.
This webinar covers the fundamentals of Value Pricing so that participants can:
Understand the relationship of pricing with the other elements of the marketing mix.
Achieve the value you deserve through optimal pricing strategies that maximize profits.
Ensure that marketing is more proactive to optimize value for new products and maintaining value over different life cycles.
High Performance Through Procurement: The Role of TechnologyEmptoris, Inc
An Emptoris and Accenture white paper discussing the role of technology on the journey to procurement excellence.
For more information, please visit:
Emptoris website: http://www.emptoris.com/
Emptoris blog: http://blog.emptoris.com/
YouTube channel : http://www.youtube.com/emptoris
Pricing requirements vary by market and are unique to every organisation. In this webinar we will discuss some of the common pricing models, PTW, Pricing strategy and presenting the Price data in proposals.
Noted pricing expert Dr. George Cressman describes how companies achieve above average profitability by proactively managing price realization or "pricing maturity." Learn which stages a company must take to be on the path to price maturity, as well as the risks of taking shortcuts. George's advice is absolutely essential for every B2B manager involved in pricing today.
Why value propositions matter? How to create a true value proposition for B2B businesses? Implementation ready toolkit to design a superior value propositions
The changing face of reward examines how the business drivers of reward are changing due to the impact of the global downturn and other macroeconomic trends in the global economy.
A Value-Based connection: Aligning Commercial Strategy with Sales ExecutionAlex Rumble
AS PRESENTED AT THE - BEYOND THE PILL - CONFERENCE - EYE FOR PHARMA
* Identifying and understanding the "value-Gaps" and applying impact and control segmentation
* A holistic approach for commercial alignment throughout the revenue life cycle (Marketing, Sales and Finance)
* Embed the operating code into processes and systems with pervasive performance measurement
Management
13 Teams
__
Average talent teams that get along well with each other are more productive than gifted teams that don’t get along. It doesn’t matter how well a team with low emotional intelligence is in control of the numbers. They can’t even decide what to try to do.
14 Stress
___
Difficulties at work and in our relationships put us under stress. Stress makes it difficult for us to find solutions to problems. When we can’t find solutions to problems, we get more stressed. To get rid of this dead end, we need to know how to manage our stressful situations.
15 Marriage
____
The secret of long and happy marriages is sincerity in your feelings. If your marriage was not built on this basis of intimacy from the very beginning, it will begin to crack over the years. Even small problems become unsolvable. You have to be emotionally open at the beginning of the road.
16 Leadership
______
Leadership does not mean dominance. Leading your colleagues to a common goal and making them believe in the reality of this purpose. Successful leaders are those who can keep their team’s motivation alive for many years. You have to make them desire the work to be done.
17. Emotions Are All Normal
___
Anger, hatred, love, happiness… You can understand when and under what circumstances these feelings will emerge by following yourself. You may have these feelings depending on how you interpret the events you encounter. The important thing is to be able to react independently of your feelings. You may find yourself making promises that you cannot keep because you are happy, or you may resort to violence when you are angry.
18/ Being able to Express Your Emotions
____
Not everyone’s level of empathy can be very good. You may be in a difficult situation immediately. You may feel bad, but people may not understand it. In these situations, you may need to express your feelings a little more directly.
19/You Are Not Your Emotions
______
Keep doing what you need to do, no matter how you feel. Success is achieved by people who cannot give up no matter what their feelings and thoughts are. Don’t let your feelings affect your actions.
20/ Timing
__
As soon as you feel a different emotion, try to think before you act. Because emotional intelligence moves faster than rational intelligence, it can make you act irrationally and make you say any unnecessary words.
Thanks for reading
~ 𝗧𝗼𝗻𝗴𝘀𝗮 𝗚𝘂𝘆
Book:- https://amzn.to/3XsVTz2.
13 Teams
__
Average talent teams that get along well with each other are more productive than gifted teams that don’t get along. It doesn’t matter how well a team with low emotional intelligence is in control of the numbers. They can’t even decide what to try to do.
14 Stress
___
Difficulties at work and in our relationships put us under stress. Stress makes it difficult for us to find solutions to problems. When we can’t find solutions to problems, we get more stressed. To get rid of this dead end, we need to know how to manage our
This white paper focuses on two types of services that should be explored instead of direct cost reduction measures. Those that: 1. Bring in value through better realization of benefits 2. Take measures to reduce costs through optimization channels
Investing in such services, especially during these times, will allow service providers to better position themselves in the challenging competitive arena.
Quantify the ROI of Your Experimentation ProgramOptimizely
How do you measure the financial impact of experimentation on your business? At Optimizely, we’ve built a new ROI model that enables you to calculate the potential ROI of your experimentation program. In this session, you’ll learn how organizations such as The Venetian Casino Resort Las Vegas rigorously quantify the value of their experiments using ROI modeling, and how you can get started with this technique.
In this session you’ll learn:
- How The Venetian Resort created an ROI model to quantify the value of experimentation
- How to get started quantifying the ROI of experimentation at your company with Optimizely’s model
- How to avoid common pitfalls in your attribution strategy and in quantifying impact across multiple experiments
The Strategy accelerator - Business models with sustainable competitive advan...Alfred Griffioen
Innovate your business model to gain higher ROI. Determine your sustainable competitive advantage (market relevancy or a unique product) and choose your strategy: ally, combine, excel or consolidate. This presentation in English is based on the Dutch book 'De strategieversnelling'. See www.strategy-accelerator.com
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Fireside Chat with Media Company CEO
Media company CEO on vision, leadership, building and re-imagining business in a digital- and technology-enabled world.
with Lori Hiltz, CEO, Havas Media, NA
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Artie Bulgrin, ESPN's presentation deck.
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(panel discussion)
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Kevin Knight, Head of Agency and Brand Strategy, Pinterest presents at 4A's Transformation 2015 as part of " Creating Innovative Brand Experiences on Social Media" in Austin, TX
Who Owns Content Creation?
As marketers rely more and more on branded content, what are they looking for? And
are agencies or media brands taking the lead?
Elena Sukacheva, Managing Director of Global Content Solutions Group, The Economist Group, part of a panel discussion at 4A's Transformation 2015, Austin, TX.
Jonah Berger, PhD, Marketing Professor, The Wharton School at the University of Pennsylvania and author of Contagious: Why Things Catch On, presents at the 4A's Strategy Festival 2014, Monday October 6, 2014 in Chicago.
Eliza Esquivel, VP Global Brand Strategy, Mondelez International presents "Exploring Planning's Future at 4A's Strategy Festival 2014, Monday October 6, 2014 in Chicago, IL.
Storytelling vs. Storydoing™
Taking storytelling to the next level
Rosemarie Ryan, Co-Founder & Co-CEO, co:
Visit http://www.4astransformation.com for more information.
Top-to-Top Interview
Todd Pendleton, CMO, Samsung Telecommunications America
Michael Nyman, Chairman & CEO, PMK•BNC
Visit http://www.4astransformation.com for more information.
More from American Association of Advertising Agencies (20)
4A's Transformation 2014 - March 18 - Todd Pendleton, Samsung
4A’s Transformation 2013 - March 10 - MPF - Deloitte - Scott Lippstreu
1. Celebrate Pricing Power
Pricing principles that capture value and enhance profitability
Scott Lippstreu
Deloitte Monitor Consulting LLP
slippstreu@deloitte.com
March 10, 2013
2. Overview of today’s discussion
I. Evolution of Pricing
Moving from Labor-Based Pricing to Performance-Based Pricing
II. Fundamentals of Performance Pricing
Components, Execution, and Obstacles to Effective Pricing Strategies
1
3. Evolution of Pricing
Increased pressure on rates and margins are causing ad agencies to
work more for the same total fees
Total Ad Spend & Ad Agency Revenue Growth 2006-2012
400 10%
% Revenue Growth
Total Ad Spend $B
300 5%
200 0%
100 -5%
0 -10%
2006 2007 2008 2009 2010 2011 2012
Ad Spend Agency Revenue Growth
Drivers of Rate Pressure
• New digital elements disrupted the traditional value chain
• Shift to targeting led to decrease in campaign size
• Clients demanding discounts or rate freeze
• Increasing role of procurement – either advising or even limiting CMO
• Increasingly looking at “un-conventional” providers of advertising services
• Increasingly asking for alternative fee arrangements – with limited success…
Source: IBISWorld Advertising Agency in the US Industry Report; Yahoo Finance
2
4. Evolution of Pricing
Rate pressure has evolved new pricing strategies to take hold across
service industries
Deloitte Consulting’s Challenge Response & Capabilities
Designated Value Pricing Experts:
Dedicated senior resources who look at deals and
manage a portfolio
Clients asked us
to put our fees at Investment Approach: Take real risks that
represent an investment portfolio, rather than a
risk, tied to the
series of one-sided offers
outcome
Proactive: Not only ready to respond to clients,
but actively seek opportunities and deals
Cultural Fit: Aligned leadership behind the
concept and managed risk to individual delivery
partners
We are the world’s leader in the performance-base services
model, looking at hundreds of deals a year
3
5. Evolution of Pricing
Guiding Principles of Performance Pricing at Deloitte Consulting
Transparency – The client is entitled to know what the fees would be if the job was
priced traditionally
Measurement and Baselines –measurable goals must be defined and the means to
compare those measures to a baseline must be established
Risk/Reward – A portion of fees will be invested in the success of the program
Goal Alignment – It is essential that all stakeholders that will influence the success of
the program have goals aligned with it
Scope Commensurate with Goals – The scope of work provided must be
commensurate with the goals and measurement of the risk/reward arrangement
Beneficiary is Sponsor – The executives whose span of responsibility is most
impacted by the program must be the key program sponsors
Exit Conditions – Conditions may occur that render this type agreement unfair to one
party and they should be identified at the outset
4
6. Evolution of Pricing
Why Performance Pricing is Difficult to Replicate…
Common Obstacles
Difficult to measure or baseline
Account Executives aren’t skilled at estimating work
Integrity of the client or at settlement Client forgets the spirit of the
agreement
Firm not comfortable with true risk
Misunderstandings
Inappropriate upside (payouts or risk profiles)
Client doesn’t agree with price --- Agency must sell value before
Alternate Fee can succeed
5
7. Evolution of Pricing
Cornerstone of any performance fee structure is making sure the
client understands and believes the value
Define the value
– Don’t let client think a “just as good for less” offering exists
– Align the value of the service with the price
Re-think basis of pricing: Cost (billable hours) vs. results
When using Gain-Sharing:
- Recognize it’s not a way to “lower” prices
- Offer must be fair to both parties
- Be proactive (with the offer)
Compete on value not on price
6
8. Evolution of Pricing
Recent research suggests selling on value how companies survive
in the long term
The Three Rules:
How Exceptional Companies Think
By Michael Raynor & Mumtaz Ahmed
1 Prioritize better value over cheaper prices
Prioritize revenue over cost side of profitability
2
equation
3 The only rules are 1 & 2
Source: “The Three Rules: How Exceptional Companies Think” by Michael Raynor and Mumtaz Ahmed; Available May 30th, 2013
7
9. Fundamentals of Pricing
Whether it is performance or fixed pricing, it is important to hit the
fundamentals
SOME PRICING FUNDAMENTALS
Understand the drivers of economic profitability at the transaction level
Use reliable data that are relevant to the economic profitability (not
allocation of accounting burdens)
Identify and control the variance in your current pricing execution
Define, document, measure and manage the sales and pricing process to
promote profitable behavior
Build profit accountability into your organization and processes
Guard against policies and procedures that have unintended consequences
or loopholes that promote misaligned incentives
Clearly define discounting policies, exception processes, and
the chart of authority for approvals
8
10. Fundamentals of Pricing
This is a visualization of transactional data
Overall Transactional Database Waterfall
Needs to be built at the customer and transactional level
100
20 Revenue Cost to Allocated Costs
80
10 Elements Serve
10
60 5
100 5
5
40 3
6
2
55 5
20 6
39 4
26
11
0 4
List Invoice Net Pocket Margin
Price Price Price Price
Common Challenges and Obstacles to Data
Lack of proper Rate Card use Services delivered, yet not tracked
Omission of oft-missed discounts No transactional cost analysis
Lack of data management and Use of allocations
pricing processes to improve revenue
9
11. Fundamentals of Pricing
This is a price bands visualization of price variability
600% Realized Price by Customer Size
Key Analytics
500% Realized
Target
Bands can be run by product or
400% Mean customer segment
Price (% to Mean)
300%
The goal is for the bands to be
tight, or little variability
200% It is important to differentiate
between mature and new products
100%
0%
0 6
Affiliate
Mega
Large
Small
Medium
Opportunistic
10
12. Fundamentals of Pricing
24 Years of Pricing Transformations – Lessons Learned:
Pricing strategy – Where possible, link pricing to value, and use a rate
structure the client can understand
Pricing Governance
– Have clarity for pricing and discounting authority
– Have a process that get’s to “no”
Pricing Execution
– Reward AEs for “quality of revenue” - not just quantity
– Hold your clients accountable
Have the Data – pricing is an art and a science!
Selling:
– Never discuss price without discussing value
– Never let yourself be commoditized (& avoid procurement)
Closing Thought: An organization that “never loses on price”
probably does
11
15. A balanced approach across six core competencies enables the
journey to a value-based pricing strategy
Foundational
Price Execution
Executing defined policies and processes that govern profitable decision making on a daily operational
level
Pricing Strategy Organizational Alignment &
Defines a pricing framework that supports Governance
Competitive Advantage
business objectives by understanding and Effectively managing the people and cultural
capturing the value of an offering relative to dimensions of an organization so that it can
Sustainability
competitive alternatives and customer demands
sustain pricing excellence
Advanced Analytics & Price Pricing Technology & Data
Setting Management
Determining profit-maximizing prices for products Designing and deploying pricing analytics,
and/or services optimization and execution tools to enable effective
pricing decisions and to enhance quality and
consistency of pricing processes
Tax & Regulatory Effectiveness
Proactively managing the tax, regulatory compliance and governance issues related to pricing decisions
Profit Retention
14