The document summarizes an agenda for an AFC Pricing Workshop on basics of pricing put into practice that will be held on November 24, 2010. It will include an introduction, a session on pricing basics, and a case study on Continental Courier. The House of Marketing is a marketing consultancy that provides expertise in strategic and operational marketing areas to clients across many sectors. Pricing is an important lever to increase profits but organizations often face challenges in pricing strategy and execution including misalignment between departments and not effectively communicating value to customers. The workshop will discuss determining customer value and costs, as well as identifying competitive scenarios, to help set optimal prices.

1. AFC Pricing WorkshopBasics of pricing put into practice24 November 2010Check our website: http://www.thehouseofmarketing.beFollow us on Twitter. LinkedIn or Facebook

2. 2Agenda18h00-18h15 Intro 18h15-19h15 Basics of pricing19h15-20h00Continental Courier Case

3. AFC and The House of Marketing: a win-win partnership3Marketing expertise and support to AFC customer projectsWorkshops to AFC members

4. The House of Marketing: a strong concept fueling continuous growthConceptBridgingthe Knowing-Doing gapFounded in 1994 and growing

5. Privately owned, Belgium based company

6. 50+ marketing consultants / experts

7. Pool of experienced freelancersHistory & Size Serving clients based in Europe, Middle East and Africa

8. Team of consultants with different nationalities and cultural backgrounds enabling us to easily integrate the local culture while managing the multicultural differencesGeography & Nationality4

9. Located in Mechelen5

10. Marketing expertise delivered in both strategic and operational areasI. Strategic MarketingMarket Intelligence & assessment

11. Segmentation

12. Branding & Positioning

13. Business & Marketing Planning

14. Innovation

15. Sustainability II. Go-to-MarketPricing

16. Product/ Brand/ Category/Services Management

17. Communication

18. Online marketing

19. Sales & Channel Management

20. Customer Relationship Management

21. Customer ExperienceIII. Organization capabilitiesCustomer Process Management

22. Organizational design & Change Management

23. Marketing Audit

24. Marketing Coaching & Training

25. Employer Branding IV. Performance ManagementMarketing Audit

26. Marketing Dashboards & KPI’s

27. Customer Lifetime Value & Return on Marketing Investments (ROMI)6

28. Clients across many different sectorsICT & MediaUtilities & ResourcesFinancial & Other ServicesConsumer Goods & RetailHealthcare & Public SectorTransport & Logistics7

29. 8Agenda18h00-18h15 Intro 18h15-19h15 Basics of pricing19h15-20h00Continental Courier Case

30. Who am I?Name: Maarten Bosschem Working @ THoM since 2007Education: Commercial engineeringMaster in Marketing ManagementProfessional milestones:Marketing Consultant & Pricing expertise lead @ THoMTravelled around Europe to help Microsoft with a reseller engagement model

31. Assisted Electrabel with their websites, pricing & channels

32. Analyzed and installed new pricing levels @ The House of Marketing

33. Designed and integrated new websites for Zoo Antwerp

34. Launched new product for NetlogPersonal information:Live in Ghent, play soccer competitively, cannot choose between snowboarding and skiing, love electro and house festivals & parties, South-America is my favorite holiday destination.…9

35. 10Pricing in The NewsIncreasing priceInBev & AlkenMaes increase beer prices*23/08/2010, De TijdNMBS increases tariffs*16/08/2010, deredactie.be$Lowering priceor price image Delhaize decreased prices of 1000 products 01/04/2010, De TijdDanone launches discount range of yoghurt 12/09/2008, Le Figaro$Cutting Costs Solvay keeps on cutting costs in 201018/02/2010, De Standaard VW stops its production for a week23/02/2009, De Tijd* Note: Common reasons given are increased costs of raw materials and other resources., reduced sales and high inflation

36. Pricing is a huge lever to increase profit11Profit + 13%Improve Price by 5%Profit increaseProfit + 50%Total Revenue = 100Fixed Cost = 65Profit = 10Variable Cost = 25Reduce Variable Costs by 5%Improved price realization of 5% generates 50% profit improvement** Note: Assuming Average Fortune 500 Company

37. 48% agree that it is hard for them to introduce price increases

38. 33% of respondents confirms that there are typically conflicting agendas or priorities around pricing decisionsTHOM Pricing Survey: Pricing is top of mind & perceived as difficult to change in market50% of marketers think their customers will become more price sensitive because of current economical situation

39. 32% said prices will definitely have to be lowered in coming year

40. Only 14% of respondents said would raise prices, and in 10% of the cases, would raise prices less than the increase in costs, putting additional strain on margin

41. And yet… 62% of respondents say their customers perceive their product as offering a unique solution and are willing to pay a premium for itSource: THOM Pricing Survey 2009 – preliminary results of 700 participants12

42. 13Organizational misalignment around pricing 1Gaps in price execution and management (Unwarranted variance in field, reactive pricing...)2Offer not aligned to different value requirements of segments or desired customer behaviors3Failure to drive and sustain value differential4Not effectively communicating value to change customer’s perceptions5From our experience, companies face many barriers to achieving higher price realizationTarget price Price realizedValue based pricing is about addressing these gaps to increase profitability

43. 1Organizational misalignment around pricingDiffering, and at times conflicting goals, relating to pricing within same company can limit the effectiveness of pricing strategies“Get me both higher market share and profit . . . now”PresidentMarketingFinanceR&DSalesBU General ManagerOperations“This is the best product with the best technology on the market. It should be worth millions”“This product took years to develop and our prices need to recapture this huge investment”“If we bundle in more services we can justify higher prices and drive market share”“Customers are saying our price is too high and competitors have and lowered price”“We are well behind this quarter. Let’s do what it takes to start driving volume now”“Special requests from customers are killing us. It’s driving our costs through the roof”Pricing should be addressed strategically after finding common grounds and approaches on pricing and value management14

44. OutliersAcceptablelineOutliers2Price execution gaps: Unwarranted variance across pricingSophisticated customers use your discounting policies to gain unwarranted discountsResults50%45%40%35%30%Actual discount25%20%15%10%5%€0€100.000€200.000€300.000€400.000€500.000€600.000€700.000€800.000€1.000.000€900.000Sales revenues15