Pricing Maturity Report_All Industry Benchmarks

Addendum - Industry benchmark

European Pricing Maturity

2013
Results and key findings per industry


Content
3

1. Industry Benchmark: Chemicals
2. Industry Benchmark: Postal & Logistics

6
9

3. Industry Benchmark: Telecommunications
4. Industry Benchmark: HighTech

12

5. Industry Benchmark: Automotive

15

6. Industry Benchmark: Life Sciences

18

7. Industry Benchmark: Machinery & Equipment

21

8. Industry Benchmark: FMCG & Retail

24

Page 2 of 26


Chemical industry – observations
2nd highest actual
pricing maturity

Respondents from the Chemical industry believe that they have a
somewhat higher pricing maturity score than they do in reality. In
reality, they come second only to the HighTech industry in terms of
the highest actual pricing maturity.
The pricing managers who completed the survey all have more than
3 years of experience in a pricing function, while 60% indicate that
their teams worldwide comprise of more than 4, but less than 15
dedicated pricing people.
For this group of respondents, 60% indicated that they are
convinced that a dedicated price optimisation strategy is a “must
have” business initiative.
80% of respondents believe that Big Data Analytics will lead to higher
profit margins.
Perceived pricing maturity
2,80 = LEVEL 2

Figure 1: Distribution of respondents within the Chemicals industry
Perception

Reality

Ambition

0%

20%

0%

20%

80%

20%

80%

0%

80%

0%

0%

0%

Level 1: Price list
maintenance
Level 2: Transactional
control
Level 3: Full value
capturing
Level 4: Full profit
optimisation

Source : EPP European Pricing Maturity Study – 2013
Figure 2: Distribution of respondents within the Chemicals industry
perception

reality

80%

ambition

Actual pricing maturity
2,33 = LEVEL 2

80%

0% 0% 0%
80%

Level 4:
Profit Optimisation

Ambition within 12 months
3,28 = LEVEL 3

0%
Level 3:
Full Value Capturing
20%

Level 2:
Gain transactional control
and optimize

20%
0%

20%

0%

Level 1:
Price List Maintenance

You sell the right products
to the right cutomers at the
right prices

C
H
A
S
M

You develop end-user
solutions with different
revenue models

You sell segmented
solutions at value based
prices

You try to sell anything to
anyone at all prices


Page 3 of 26


Chemical industry – gap analysis
Based on the gap analysis for the Chemical industry, we have
highlighted a number of attention points and possible actions that
will improve pricing maturity of these components of the Pricing
Framework. These are based on the widest gaps between actual
and desired performance.

Price strategy

Price policy & setting

Discount strategy

Number 1 focus for the rest of 2013 needs to be pricing segmentation.
Once the segmentation is in place, set specific pricing goals per
segment (ideally also per product line, customer etc. where possible),
and a targeted price positioning vs. competition.
Use price/value maps (price positioning: perceived value vs. price)
to steer portfolio and price strategy, pay attention to price elasticity,
move towards a better understanding of value components per
segment. Consider using pricing research to help with these aspects
– this is highlighted again in the Tools & Systems section where a
specific need for more attention to pricing research is expressed by the
respondents.
Though respondents indicate that the move towards a performance
based discounting structure has already started or is at least on the
table at the moment, the challenge will be in implementing it with the
buy-in of the sales team, as well as the customers..

Figure 3: Gap analysis: Chemicals industry

Actual PMI score

Gap with Ambition

Tendering

1.10

Governance & Org.
System & Tools

1.00

0.84

Monitoring
Price Execution

0.90
0.83

Discount Strategy
Price Policy Setting

1.00
1.03

Price Strategy

1.15
0.00

1.00

2.00

3.00

4.00

Figure 4: Distribution of maturity scores across components of
the pricing framework
Reality

Ambition

Price Strategy

2,45

3,60

Price Policy & Setting

2,27

3,30

Discounting strategy

2,80

3,80

Price Execution

2,27

3,10

Monitoring

2,15

3,05

System & Tools

2,10

3,10

Governance & Org.

2,68

3,52

Tendering

2,05

3,14


Page 4 of 26


Chemical industry – Tendering
60% of respondents in the Chemical industry make use of tendering.
Next to price strategy, this is aspect also represents the most
prominent gap between actual performance and desired level of
performance for the respondents.

Timely & complete
information
Improve margin
Critically evaluate
info

While it seems sufficient for this industry to have the final price
decision resting with the sales director instead of collaborating with
the pricing director, respondents do indicate that they need to work
on making complete information about the tender (item line-level)
available to decision-makers in a timely manner.
Strive to offer margin improvement alternatives when possible
instead of simply offering exactly what customers ask.
They also want to move to a situation where information is collected
well before the tender, and is checked, critically assessed and
actively used in pricing.

Page 5 of 26


Postal & Logistics industry – observations
Highest perceived
pricing maturity

Together with respondents from the Chemicals sector, they have
the highest perceived pricing maturity at 2,80, while reality paints a
different picture with their pricing maturity being only 2,27.
However, they do have significantly more dedicated pricing team
members at worldwide level (headquarter incl.) than the Chemical
industry -- 40% of respondents have more than 15 persons working
exclusively on pricing in their organisations and the same percentage
have more than 10 years of experience in their functions.
All of them attach great importance to a proper big data analytics
infrastructure and 80% find that a price optimisation strategy is an
absolute “must have” business initiative.

Figure 5: Distribution of respondents within the Postal & Logistics
industry
Perception

Reality

Ambition

0%

20%

0%

20%

80%

60%

80%

0%

40%

0%

0%

0%

Level 1: Price list
maintenance
control
Level 3: Full value
capturing
optimisation


2,80 = LEVEL 2
2,27 = LEVEL 2

Figure 6: Distribution of respondents within the Postal & Logistics
industry
perception

reality

80%

ambition

3,12 = LEVEL 3

40%

80%

Level 4:
Profit Optimisation
60%
0%
Level 3:

20%

Level 2:
and optimize

20%
0%

0%

Level 1:

0% 0% 0%

right prices

C
H
A
S
M

revenue models

You sell segmented
prices



Page 6 of 26


Postal & Logistics industry – gap analysis
With European postal markets opening up in 2011 and 2013, price
will be one of the most important factors for customers when new
entrants with similar service levels appear in markets (Kleindorfer &
Szirmay, 2009). Below, we highlight a number of attention points
and possible actions which arise from the gap analysis in Figure 3.

Tools & Systems

Price execution

Conduct a price positioning exercise per segment and align with
marketing strategy. Pay attention to responsiveness of consumers to
fluctuations in price to help determine optimal pricing.
There seems to be a great need for the further development of pricing
research tools within the Postal & Logistics industry. These tools
need to provide insights on segmentation, value attributes, price
perception, willingness to pay, and price elasticity in the very least.
As far as tools are concerned, if we look at this aspect, together with
the results of Monitoring, we see that though a wealth of customer
data is gathered in this industry, but there is very little regular advanced
analysis of this information. A reliable tool which integrates all
sources of quantitative and qualitative data needs to be put in place
for effective reporting, monitoring and price guidance.
Improve value selling skills of sales force, provide them with
value argumentations per product line, across each segment.
Don’t underestimate importance of the economic value calculation
exercise in this.

Figure 3: Gap analysis: Postal & Logistics industry

Actual PMI score

Gap with Ambition

Tendering

0.79

Governance & Org.
System & Tools

0.68
1.10

Monitoring
Price Execution

0.60
1.00

Discount Strategy

1.00
1.13

Price Strategy

0.80
0.00

1.00

2.00

3.00

4.00

Reality

Ambition

Price Strategy

2,40

3,20


2,10

3,23


2,40

3,40

Price Execution

2,07

3,07

Monitoring

2,30

2,90

System & Tools

1,90

3,00

Governance & Org.

2,40

3,08

Tendering

2,39

3,18


Page 7 of 26


Postal & Logistics industry – Tendering
Tenders are widely used in the Postal and Logistics industry (80%
of respondents), and all respondents indicate that improvement is
necessary. These are the 3 key areas they would like to focus on in
the next 12 months:

Timely & complete
information
Improve margin
Life time value
calculation

How tender information is obtained: Information should be collected
well before the tender, it should be checked and critically assessed
by the commercial team and then actively used in pricing the tender.
How item selection for a tender takes place: Margin improvement
alternatives should be identified and offered whenever possible.
The use of formal life time value calculation when evaluating
tenders: Formal calculation needs to take place, taking all possible
factors (e.g. account year-end rebates and bonuses of sales team,
etc.) into account.

Page 8 of 26


Telecommunications industry – observations
“most experienced”
industry in pricing

With 80% of respondents having more than 5 years of experience in
a pricing function, that makes this sector the “most experienced” in
pricing.
We also notice that 80% of the respondents have pricing departments
worldwide that comprise more than 15 people.
Not hard to imagine that this is necessary if we take into account the
profound changes that this industry has experienced in the last 20+
years with the move of revenue streams from fixed to mobile. Just
as a matter of interest, did you know that the mobile penetration rate
in Europe in 2010 was already at 128%? (Whitehead, Phillips, Page,
& Molina, 2011).
Being such a technology driven industry, the importance of Big Data
Analytics is more than clear and is also illustrated by the fact that
their survey scores reveal a strong need to further develop the
systems and tools to complement their pricing initiatives.

Figure 9: Distribution of respondents within the Telecommunications
industry
Perception

Reality

Ambition

0%

40%

0%

40%

40%

40%

60%

20%

60%

0%

0%

0%

Level 1: Price list
maintenance
control
Level 3: Full value
capturing
optimisation

Figure 10: Distribution of respondents within the Telecommunications
industry
perception

reality

ambition

2,60 = LEVEL 2

60%

60%
0% 0% 0%

2,24 = LEVEL 2

20%

40% 40% 40%

3,27 = LEVEL 3

40%
Level 2:
and optimize
0%

0%

Level 1:

right prices

Level 3:

C
H
A
S
M

Level 4:
Profit Optimisation
revenue models

You sell segmented
prices



Page 9 of 26


Telecommunications industry – gap analysis
On the right, we highlight a number of attention points and possible
actions which arise from the gap analysis in Figure 11.

Tools & Systems

Price execution


Urgent attention to pricing tools & systems needed: Improve
availability of cost price info amongst pricing decision makers.
Trigger automatic signal for sales price updates to avoid realising too
late that there were serious cost price fluctuations.
Actively enforce systematic win/loss analysis by the sales team and
analyses plus feedback by the pricing/analytics team – use as input
for action plans. Better prepare price increases and equip sales
force with value argumentations. Link sales force’s incentive scheme
to price realisation and margin optimisation targets.
Establish clear value components per segment and use them for
guiding value pricing. Review pricing policy minimum twice per year
and follow up deviations with corrective actions. Investigate the price
elasticity of offerings and use it to anticipate and prepare for the
outcome of pricing initiatives.

Figure 11: Gap analysis: Telecommunications industry

Actual PMI score

Gap with Ambition

Tendering

0.93

Governance & Org.
System & Tools

0.92
1.40

Monitoring
Price Execution

0.95
1.33

Discount Strategy

1.00
1.23

Price Strategy

0.70
0.00

1.00

2.00

3.00

4.00

Reality

Ambition

Price Strategy

2,45

3,15


1,93

3,17


1,80

2,80

Price Execution

1,93

3,27

Monitoring

2,55

3,50

System & Tools

1,90

3,30

Governance & Org.

2,56

3,48

Tendering

2,21

3,14


Page 10 of 26


Telecommunications industry – Tendering
Price to win vs.
optimise margin

While the percentage of respondents who make use of tendering is
rather small in the Telecom industry, half of the respondents find that it
is sufficient to maintain a philosophy of winning the tender first (price
to win) and then looking at opportunities to increase the margin within
the agreed price. The other half is more in favour of moving to the best
practice of having a margin improvement plan per tender in place with
regular account reviews taking to check the life time value of the tender.
Other areas they have identified for improvement are:

Thorough evaluation
of info
Item selection
Life time value
calculation

How tender information is obtained: Information should be collected
well before the tender. It should be checked and critically assessed
by the commercial team and then actively used in pricing the tender.
How item selection for a tender takes place: Margin improvement
alternatives should be identified and offered whenever possible.
Calculate the total amount of sales revenue the tender customer
contributes to the company over the life of the relationship, taking all
possible factors (e.g. account year-end rebates and bonuses of sales
team, etc.) into account.

Page 11 of 26


HighTech industry – observations
Highest pricing
maturity in Europe

HighTech respondents score significantly higher than any other
industry on their pricing maturity. They come in ahead of all the rest
at 2,62.
When looking at the possible reasons, we discover that 86% have
more than 15 people working exclusively on pricing globally, with
the remaining 14% having between 8 and 15 people focussing on
pricing.
Significantly, approximately 71% of respondents have held their
pricing function for more than 3 years.
All respondents indicated that they are convinced that a price
optimisation strategy is a “must have” business initiative which has
to be worked on continually, and with support from the top.
Big data analytics form a substantial part of the strategic arsenal
with which every respondent in this sector handles their pricing and
profit optimisation.

Figure 1: Distribution of respondents within the HighTech industry
Perception

Reality

Ambition

14,29%

28,57%

0%

28,57%

28,57%

28,75%

42,86%

42,86%

57,14%

14,29%

0%

14,29%

Level 1: Price list
maintenance
control
Level 3: Full value
capturing
optimisation

Figure 2: Distribution of respondents within the HighTech industry
perception

reality

ambition
57%

2,57 = LEVEL 2

43% 43%

14%

14%
0%
Level 4:
Profit Optimisation

2,62 = LEVEL 2

Level 3:

29% 29% 29%

3,36 = LEVEL 3

29%
Level 2:
and optimize

14%
0%
Level 1:

right prices

C
H
A
S
M

revenue models

You sell segmented
prices



Page 12 of 26


HighTech industry – gap analysis
The survey confirms what we have observed first hand during the
EPP HighTech Forum in 2013. Senior management in European
high-tech companies are increasingly focused on further developing
pricing and profit optimisation skills in their organisations. They
have indicated the topics on the right as key focus areas for the
coming 12 months:


Monitoring

Organisation &
Governance

The collective goal of the HighTech respondents is to understand
the value attributes of their offering, as well as the value per
attribute better, so that this can be used in value based pricing
per segment. Another point for improvement is the use of price
elasticity analysis in predicting and anticipating the outcome of
pricing decisions.
Periodic reporting and net prices per customer / segment / channel
need to be available so that the sales force can perform what-if
analysis to guide them in offerings. Cost price evolution needs to
be readily available and immediately shared with relevant pricing
decision makers, who should in turn receive a signal to check
sales price of particular items which had an increase/decrease in
cost price. Price promotions need to be systematically monitored
and discussed with marketing/sales to come to better insights for
next promotions.

Figure 3: Gap analysis: HighTech industry

Actual PMI score

Gap with Ambition

Tendering

0.33

Governance & Org.
System & Tools

0.80
0.71

Monitoring
Price Execution

0.82
0.76

Discount Strategy

0.57
0.83

Price Strategy

0.57
0.00

1.00

2.00

3.00

4.00

Ambition

Price Strategy

3,07

3,64


2,40

3,24


Need to evolve to a stage where permission to overrule prices in the
system is very limited, and controlled/monitored by price management
team. Root causes of price overrides need to be investigated to
decrease occurrence.

Reality

2,71

3,29

Price Execution

2,52

3,29

Monitoring

2,29

3,11

System & Tools

2,64

3,36

Governance & Org.

2,63

3,43

Tendering

3,24

3,57


Page 13 of 26


HighTech industry – Tendering
43% of HighTech respondents make use of tendering.

Satisfied with current
performance
Improve margin
Improve pricing
strategy
Life time value
calculation

While about two thirds of the group indicate that they are satisfied with
their current performance on tendering, the remaining third indicate that
they still need to improve the following aspects during the coming 12
months:
Install a margin improvement plan with specific margin targets and
responsibility for reaching it before the tender is submitted.
Apply an aggressive overall price strategy, taking into every item in the
tender.
Use a formal life time value calculation when evaluating your tenders,
taking into account year-end rebates and bonuses of sales team.

If you would like more information or to arrange an informal discussion
on the issues raised in the EPP European Pricing Benchmark
Study and how they affect your organisation, please contact:
Project Manager:
Nicolene Barnard
Nicolene.Barnard@pricingplatform.eu
President & Founder of EPP:
Pol Vanaerde
pva@pricingplatform.eu
Page 14 of 26


Automotive industry – observations
Price optimisation
strategy is essential

With sales in the automotive industry in 2013 at its lowest level since
records began in 1990, according to industry association ACEA,
there seems to be much more focus on pricing, not only at “finished
good” level, but also on the aftermarket playing field.
77% have between 8-15 or more people responsible for pricing on a
daily basis at worldwide level.
32% of respondents have more than 5 years of experience in
pricing, but the biggest portion, 45%, have between 3-5 years of
experience.
The majority, 81%, agree that a specific price optimisation strategy
cannot be missed in their companies and these same respondents
are also convinced of the important role played by big data analytics.
As if to strengthen this point, their maturity scores show that price
monitoring and reporting emerges as one of the key areas on which
they would like to focus during the coming 12 months.

Figure 17: Distribution of respondents within the Automotive industry
Perception

Reality

Ambition

18,18%

45,45%

0%

22,73%

45,45%

36,36%

59,09%

9,09%

63,64%

0%

0%

14,29%

Level 1: Price list
maintenance
control
Level 3: Full value
capturing
optimisation

Figure 18: Distribution of respondents within the Automotive industry
perception

reality

ambition
64%

59%

2,41 = LEVEL 2

Level 4:
Profit Optimisation
9%

2,18 = LEVEL 2
3,17 = LEVEL 3

14%
0% 0%

45%

Level 3:

36%
23%
45%
Level 2:
and optimize

18%
0%
Level 1:

right prices

C
H
A
S
M

revenue models

You sell segmented
prices



Page 15 of 26


Automotive industry – gap analysis
Organisation &
Governance
Price execution

Monitoring

Move to a situation where permission to overrule prices in the system
is very limited, and controlled/monitored by price management
team. Ideally, overrule authorisations should be reserved only for
strategic pricing decisions at director level.
Provide sales force with value argumentations per product(line),
across each segment and decision making unit. Implement full and
regular win/loss analysis and use it as input for new solution
development. Ensure alignment throughout Sales, Marketing and
Product Management by means of training on value pricing and value
selling. Pay attention to ensure that discount structure does not
trigger channel conflicts or grey markets. Eliminate unconditional
discounts, replace by performance based incentives/discounts.
A better view on competitor intelligence would bring the Automotive
industry a step ahead according to respondents. Information should
be systematically gathered, monitored and translated into corrective
actions or changes in pricing policy where necessary. Translate this
info into a competitor attack plan. Monitor the results of any price
promotions, share it with sales and marketing and develop new
promotions based on the insights gained.

Figure 19: Gap analysis: Automotive industry

Actual PMI score

Gap with Ambition

Tendering

0.71

Governance & Org.
System & Tools

0.94

1.25

Monitoring
Price Execution

1.11
1.23

Discount Strategy

1.08

Price Strategy

0.99

0.95

0.00

1.00

2.00

3.00

4.00

Reality

Ambition

Price Strategy

2,18

3,17


2,45

3,41


2,03

3,11

Price Execution

2,00

3,23

Monitoring

1,97

3,08

System & Tools

2,23

3,17

Governance & Org.

2,09

3,34

Tendering

2,35

3,07


Page 16 of 26


Automotive industry – Tendering
60% of Automotive respondents filled in the tendering section of the
survey. Points for improvement during the next 12 months are:

Improve margin

Life time value review

Move beyond the philosophy of winning the tender first (price to win)
and then looking at opportunities to increase the margin within the
agreed price. Respondents indicate that they want to focus on having a
margin improvement plan per tender in place before actually submitting
the tender.
Build in regular account reviews to check the life time value of the
tender.

Page 17 of 26


Life Sciences industry – observations
3rd most represented
industry in this study

With its 12,4% of representation this is the third most represented
industry in the survey, after Machinery Manufacturers and Automotive.
It encompasses Medical Technology, Pharmaceutical and
Biotechnology companies.
Approximately two-thirds of respondents for this sector have more
than 3 years of experience in a pricing function, with about 20% of
this group having more than 10 years of experience.
60% of respondents have pricing departments at a worldwide level
that comprises more than 15 people.
The vast majority of respondents (93%) believe that a pricing
optimisation strategy is a must have business initiative in today’s
day and age and that this has to be supported by the appropriate
big data analytics set up, though this appears to be a particular
challenge for several firms.
2,27 = LEVEL 2

Figure 21: Distribution of respondents within the Life Sciences industry
Perception

Reality

Ambition

20%

40%

6,67%

40%

53,33%

20%

33,33%

6,67%

66,67%

6,67%

0%

6,67%

Level 1: Price list
maintenance
control
Level 3: Full value
capturing
optimisation

Figure 22: Distribution of respondents within the Life Sciences industry
perception

reality

ambition
67%
7%
33%

2,10 = LEVEL 2
40%

3,23 = LEVEL 3

Level 3:
20%

40%
20%
7%
Level 1:

Level 2:
and optimize
right prices

C
H
A
S
M

7%

Level 4:
Profit Optimisation
7%

53%

0%

revenue models

You sell segmented
prices



Page 18 of 26


Life Sciences industry – gap analysis
The sheer complexity of the environment in which Life Sciences
firms operate leads us to expect a much higher pricing maturity
than what was measured in the PMI survey of Q2 2013. On the
right we take a closer look at where these companies believe that
they need to improve.

Monitoring


Tools & Systems

Improve monitoring of effects of price promotions. Respondents
indicate that urgent action is needed on capturing competitive
intelligence from scattered sources, and to improve accuracy of cost
information and availability of this info to pricing team.
Per product launch, price elasticity research by means of advanced
tools (e.g. conjoint) needs to be performed. Important here to note
that 73% of the respondents are from the MedTech sector and 13%
from Biotech. For the pharma respondents, this type of research is
already used much more extensively. For all Life Sciences respondents,
more attention to price positioning is essential. More specifically:
draw up price/value maps per segment, and align with market
strategy. They also need to gain a clear understanding of value
components per segment and use them for value pricing.
Convince management to invest in pricing research & pricing
software to take full advantage of pricing intelligence gathered for
effective operational and strategic initiatives.

Figure 23: Gap analysis: Life Sciences industry

Actual PMI score

Gap with Ambition

Tendering

0.79

Governance & Org.
System & Tools

1.23

0.95

Monitoring
Price Execution

1.37
1.22

Discount Strategy

1.20

Price Strategy

1.13

1.27

0.00

1.00

2.00

3.00

4.00

Reality

Ambition

Price Strategy

2,30

3,43


2,00

3,27


1,93

3,13

Price Execution

1,93

3,16

Monitoring

1,67

3,03

System & Tools

2,07

3,30

Governance & Org.

2,40

3,35

Tendering

2,27

3,07


Page 19 of 26


Life Sciences industry – Tendering
This sector, especially Pharmaceuticals, is quite well-known for its
use of tendering in the sales process. 87% of respondents of this
survey indicated that they use tendering. The aspects of the process
on which they feel that most improvement is possible are:

Tender information
Pricing strategy

The degree to which tender information is collected, compared,
critically analysed and used in price setting for a tender.
Pay attention to the pricing strategy for tendering in general, and
also look at a margin optimisation strategies per tender. More
emphasise needed on margin targets and responsibility for reaching
it before the tender is submitted. Margin targets need to take into
account the life time value of the tender.

Page 20 of 26


Machinery & Equipment industry – observations
Most realistic industry
and most ambitious

This is the most represented industry in the Q2 2013 survey of
Pricing Maturity in European Organisations, with 28% of respondents
classifying themselves in the machinery & equipment industry.

Figure 25: Distribution of respondents within the Machinery & Equipment industry
Perception

Reality

Ambition

29,41%

41,18%

5,88%

35,29%

52,94%

23,53%

35,29%

5,88%

70,59%

0%

0%

0%

Level 1: Price list

This is also the most realistic industry. Their perceived and actual
pricing maturity is almost a perfect match at 2,06 vs. 2,08. Interestingly,
they are also the most ambitions, with their desired end state after
12 months being 3,24.

maintenance

5,88% of these respondents are already operating on level 3 of
pricing maturity. They score quite high on price and policy setting,
discount strategy, price execution and monitoring. Nonetheless,
they are still striving to improve their operations across the scope of
pricing activities in their organisations.

capturing

Half of all respondents in this sector, have global pricing departments
with more than 8 persons.
56% of respondents have more than 3 years of experience in pricing,
leaving a rather big portion of respondents with 2 years or less of
pricing experience.

control
Level 3: Full value
optimisation

Figure 26: Distribution of respondents within the Machinery & Equipment industry
perception

reality

ambition

71 %

0% 0%

35%

2,06 = LEVEL 2
2,08 = LEVEL 2
3,24 = LEVEL 3

6%

53%

Level 3:

35%
24%
41%
29%
6%
Level 1:

Level 2:
and optimize
right prices

C
H
A
S
M

0%

Level 4:
Profit Optimisation
revenue models

You sell segmented
prices



Page 21 of 26


Machinery & Equipment industry – gap analysis
Monitoring

Tools & Systems

Price setting

26% of respondents still work in Excel sheets with pricing knowhow dispersed in the organisation, while 53% have moved to more
centralised price and discount grids, linked to the ERP system which
means that specific price reports can be generated in addition to
financial reports. All these respondents feel that a move towards a
pricing software solution, fully integrated in ERP and CRM is a step
forward. The pricing software needs to be managed by the pricing
team and used by whole organisation for effective reporting, monitoring,
price guidance and deal making.
Similar to the Automotive industry, their biggest and most immediate
challenge is to develop a system for their sales force to capture
competitor intelligence effectively. In addition to that, they need to
consistently measure effectiveness of price promotions. Ultimately
their goal is to move away from price promotions towards value
promotions to enhance value perception.
Pay attention to understanding the value components per segment
and use it to determine willingness to pay. Better manage
unconditional discounts by moving to a performance based system,
preferably with off-invoice discounts. Perform price elasticity analysis,
even if only via transactional price data analysis, it is better than not
doing this important exercise at all, as the case is now with 58,8% of
respondents.

Figure 27: Gap analysis: Machinery & Equipment industry

Actual PMI score

Gap with Ambition

Tendering

1.03

Governance & Org.
System & Tools

1.41

1.15

Monitoring
Price Execution

1.22
1.17

Discount Strategy

1.15

Price Strategy

1.17

1.19

0.00

1.00

2.00

3.00

4.00

Reality

Ambition

Price Strategy

2,23

3,40


1,98

3,16


2,12

3,26

Price Execution

1,99

3,16

Monitoring

2,06

3,28

System & Tools

1,91

3,32

Governance & Org.

2,14

3,29

Tendering

2,24

3,27


Page 22 of 26


Machinery & Equipment industry – Tendering
55,88% of respondents make use of tendering. These are the main
areas identified by them for improvement during the coming 12 months.

Life time value
Margin improvement
alternatives

Like most other respondents in this survey, very little attention is paid
to the life time value of a tender customer. 47% of respondents do
not measure life time value at all.
In most cases (53% of respondents), item selection is based on
an exact match with what the customer asks. Sometimes (21%
of respondents), alternatives with better margin are available and
known by the person selecting items, but not always offered. One of
the goals within the next 12 months according to respondents is to
make sure that these margin improvement alternatives are always
offered when possible.

Page 23 of 26


FMCG & Retail industry – observations
Lowest actual pricing
maturity

The only B2C industry represented in this study, and remarkably, the
industry with by far the lowest actual pricing maturity in Europe
(according to the Q2 2013 survey). Interesting to note that respondents
significantly underestimated their own pricing maturity.
40% of respondents have 8 or more people working on pricing in
their organisations worldwide.
All respondents have 3-5 years of experience in their functions as
pricing/revenue managers.
According to respondents, a price optimisation strategy and a strong
data analytics system is much more than a “nice to have” business
initiative. They all agree that it is of utmost importance during the
journey to pricing maturity.
Since tendering hardly features amongst respondents of this survey,
with only 1 person using it, this report will focus on some extra
pricing performance gaps which respondents identified, instead of
devoting a section to tendering as in the other industry reports.

Figure 29: Distribution of respondents within the FMCG & Retail industry
Perception

Reality

Ambition

60%

100%

0%

40%

0%

20%

0%

0%

80%

0%

0%

0%

Level 1: Price list
maintenance
control
Level 3: Full value
capturing
optimisation

Figure 30: Distribution of respondents within the FMCG & Retail industry
perception

reality

80%

ambition

0% 0%

2,06 = LEVEL 2
2,08 = LEVEL 2

0%

Level 4:
Profit Optimisation

100%
0% 0%

40%

Level 3:

60%

20%
0%

3,24 = LEVEL 3

Level 2:
and optimize
0%
Level 1:

right prices

C
H
A
S
M

revenue models

You sell segmented
prices



Page 24 of 26


FMCG & Retail industry – gap analysis

Tools & Systems

Price execution

In 60% of the cases, the discount structure grew historically and is
not monitored very well. This needs to be reviewed to make sure
that there are no channel conflicts. Also, respondents indicate that
they would like to move towards a more performance based
discounting structure, eliminate unconditional discounts. Think,
for example, of loyalty programmes etc. On the other side of the
spectrum, they also indicate that price increases need to be better
prepared, again in 60% of the respondents companies increases are
poorly prepared and effects are not monitored.
Every single respondent from this sector in the Q2 2013 survey
indicated that pricing know-how is stored in Excel sheets and
dispersed throughout organisation. Next step for them is to centralise
price lists and discount grids and link it to their ERP system to
enable specific price reporting. Retailers are often drowning in the
amount of data available to them, but they lack the insight into how
to use it and the resources to help them move forward.
Develop and implement value argumentations to support the sales
force and enforce win/loss reporting and analysis. Prepare and
monitor the effects of price increases (and decreases) closely to
improve future promotional efforts. To the degree possible, move
towards an incentive system which is linked to target price realisation.
Reduce deviation from standard contract terms by implementing and
enforcing authorisation structure.

Figure 31: Gap analysis: FMCG & Retail industry

Actual PMI score

Gap with Ambition

Tendering

1.00

Governance & Org.
System & Tools

1.24
1.90

Monitoring
Price Execution

1.50
1.57

Discount Strategy

2.00
1.40

Price Strategy

1.40
0.00

1.00

2.00

3.00

4.00

Reality

Ambition

Price Strategy

1,90

3,30


1,73

3,13


1,40

3,40

Price Execution

1,73

3,30

Monitoring

1,75

3,25

System & Tools

1,30

3,20

Governance & Org.

1,96

3,20

Tendering

2,00

3,00


Page 25 of 26


FMCG & Retail industry – gap analysis
Product/price
life cycle
Price positioning

Price elasticity

80% of respondents admit that there is only limited management of
product life cycles at their organisations, and that this is mostly not
integrated in their pricing strategy. They often end up with obsolete
stock.
Life cycle pricing needs to be focussed on, with the goal in the near
future being to establish active fade in, fade out pricing strategies.
FMCG & Retailers need to better understand the relation between
perceived value and price. Price/value maps need to be installed per
segment and aligned with market strategy.
Price elasticity needs to be explored and understood at least via
transactional price data analysis, if not via advanced research tools.
4/5ths of respondents indicate that knowledge about the responsiveness
of consumers to fluctuations in price is not readily available to the
pricing team.

Page 26 of 26

Pricing Maturity Report_All Industry Benchmarks

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