Given at the Spring 2016 PPS Conference, this presentation describes how to gain credibility and impact an organization when initially given the charge of owning a pricing function.

1. The First Steps to Pricing Management
PPS Chicago 2016
JD Dillon
May 6, 2016

2. First Steps to Pricing Management
As a result of this session, attendees can expect to:
• Use practical financial examples to immediately impact pricing mindsets
• Implement these principles to reinforce pricing self-awareness
• Apply principles and a metric to operationalize theory
Change Management DEMANDS Buy-In at all levels.
But, what do you do when you do not have that?
This approach works with limited buy-in and significant push-back
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3. First Steps to Pricing Management
Coming from pricing background at disciplined $1B/Yr company…
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Aspects Evolution of Pricing Management Influence
Program McKinsey Value-Based Selling 2007 Launch
Team 25 Pricing Team Members 563 Salespeople
Workload 30K Quotes + 40 Contracts per Quarter Transactional Control
Metrics ASP Variance, Pricing Index, Cycle Time Profit Dollars
Tools Economic Value Calculator Camp Negotiation
Sales Incentive Price Index Bonus $500K Budget
Profit Impact CEO Estimated $25M per year
Executive CEO Priceless

4. … to a company
full of problems…
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“… customer incentive
programs of such
opacity…”
“… following 4-year
omnishambles …”
“… money tugboat
tow this leaky ship
off the reef …”

5. … and very little pricing competency
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6. Demonstrate Prowess with Simple Math
Pricing Change leads to Volume Increase Required
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CAPTURE
DATASET
CONSTANT
MARGIN
VOLUME
INCREASE
DROP PRICE CONSTANT
VOLUME
PROFIT
DECREASE

7. Quick Win with Simple Math
Pricing Change leads to Volume Increase Required [or] Profit Loss
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DROP PRICE
CAPTURE
DATASET
CONSTANT
VOLUME
PROFIT DECREASE
CONSTANT
MARGIN
VOLUME INCREASE

8. JDD 050 – OCZ Pricing Principles 150511
Released after four months of extensive research
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Purpose: This memo captures a series of Principles that guide our pricing decision making. The
objective is to evaluate special requests, potential deals, and individual opportunities against these
Principles in order to determine our direction. The scope is intended to be all inclusive: region, product,
market, individual, and customer.
Pricing Principles: (Ordered from abstract concepts to more specific guidelines)
1. Treat OCZ money like it’s your own
2. Discounting is an investment and should be treated like a purchase order
3. Price reductions must drive an offsetting volume that match or exceed lost profit dollars
4. We must remove the mentality of selling on margin
5. We are not the lowest price, but expect to be within spitting distance (10-15%)
6. Pricing structure and actual numbers can and will vary between markets
7. Enterprise is not priced with margin sheets; no discounts because we “can”
8. Use the right tool for the job; exercise segmentation by quoting the right solution
9. We always give a quick (but not necessarily low) price; never hold pricing hostage
10. Emerging markets & new biz can be low priced, but no negative margin deals
11. Selectively drive low price deals for needle-moving (5% of BOQ) volume
12. Aggregate package deal of Client drives must show positive margin

9. JDD 050 – OCZ Pricing Principles 150511 (Pg. 2)
After some discussion, I added more practical details
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Pricing Principles put into practice: (What do they practically mean?)
1. Treat OCZ money like it’s your own money – Whether buying a house, a car, a washing
machine, or gasoline, every one of us would react strongly to a 10% price change. Naturally, our
customers do as well. We ought to treat a drop in price like it’s coming out of our own wallets.
2. Discounting is an investment and should be treated like a purchase order – For a 2Ku order,
if book price is $100 and the request is for $92, that reduction is similar to a purchase order for
$16K and ought to be approached in a similar fashion.
3. Price reductions must drive an offsetting volume that match or exceed lost profit dollars –
In the same example as above, if our cost is $80, that price reduction would require an increase of
1.3Ku in order to keep the same profit dollars.
4. We must remove the mentality of selling on margin – A dollar of profit is a dollar of profit.
Saying “we can do the price” forgets about paying your salary and paying for the chair you are
sitting in. Return to Principle #1. Should we do the price (regardless of margin)?
5. We are not the lowest price, but expect to be within spitting distance (10-15%) – There will
always be a competitor offering lower price. The overall Toshiba strategy is to not be a price leader
and as such, OCZ will also not be the price leader. Not “matching” the lowest competitor does not
imply a lack of belief or understanding, it’s our strategy.

10. Approved Written OCZ Pricing Principles
Four Simple Principles to be Communicated, Discussed & Measured
1. Treat OCZ money as your own, every penny matters
2. OCZ will not be the lowest Client price, but competitive to within 10-15%
3. Enterprise products are priced on value in the marketplace, not by margin
4. Provide right product for customer compared to equivalent competition
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11. Client Pricing Principle
Aligned with OCZ Mission & Toshiba approach to pricing
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OCZ will not be the lowest Client price, but competitive within the bottom
25th percentile of end-user pricing
• Rationale:
– Aligned with OCZ Mission & Toshiba Mentality
– Price leadership would, over the long term, fail for OCZ
– Does not mean that we will not be aggressive on spot deals
• Key Words:
– Competitive = Generally in the range of like products
– Bottom 25th Percentile = Middle of bottom ½ of high/low range
– End User Pricing = Weekly metric of on-line everyday competitors

12. Client Pricing Principle Methodology
Use competitive graphs to look at range and OCZ’s positioning
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Defects >40% or <5% require review and action (or not)
100%
0%
AVG = $189.87
25%
OCZ = 4.3%

13. Client Pricing Principle Output
Trend, Defects, Snapshot, Analysis
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Client Pricing Summary (7-August)
Number of charts 73
OCZ Percentile 24.4%
Defects High (>40%) 6
Defects low (<5%) 8
APAC Defects
Value 240 – Trion – 3.4%
Value 480 – ARC100 – 0.0%
Enthusiast 240 – VTR180 – 88.3%
Enthusiast 480 – VTR180 – 76.4%
Enthusiast 960 – VTR180 – 55.3%

14. Client Pricing Principle Output
Trend, Defects, Snapshot, Analysis
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Client Pricing Summary
Number of charts 73
OCZ Percentile 17% (17%)
Defects High (>40%) 18 (24)
Defects low (<5%) 27 (23)
EMEA
Defects High (>40%) 1 (1)
Defects low (<5%) 12 (9)
APAC
Defects High (>40%) 17 (24)
Defects low (<5%) 4 (3)
U. S.
Defects High (>40%) 0 (0)
Defects low (<5%) 11 (11)
16
13
9 7 7
14
17 18
23
27
17 23
26
27
30
28
25 25
24 18
19.4%
22.9%
26.5%
28.1%
30.0%
26.4%
24.6%
21.1%
17.0% 16.7%
-
10
20
30
40
50
60
70
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
OCZ Client Pricing Metric
25th Percentile Target vs. Competition
Hi Defects
Lo Defects
UCL
Actual
Target
LCL

15. 15
GERMANY
ENTH 120 VTR180 (7) 0.0%
ENTH 240 VTR180 0.0%
ENTH 480 VTR180 3.0%
ENTH 960 VTR180 0.0%
Value SS 480 Trion (5) 0.0%
Value 960 Trion 78.7%
Value 120 Trion 4.8%
Value 240 Trion (2) 0.0%
UNITED KINGDOM
ENTH 120 VTR180 (7) 0.0%
ENTH 960 VTR180 0.0%
Value 120 Trion (2) 1.4%
Value 240 Trion (3) 3.0%
Value 480 Trion (2) 0.0%
Residual Black Friday pricing accounts for 6
of the low defects.
Bombed price on 960GB Ultra II accounts for
high defect on Trion 960GB
Residual Black Friday pricing accounts
for 4 of the low defects.
Client Pricing Principle Output
Defect Analysis for EMEA

16. Approved Written OCZ Pricing Principles
Four Simple Principles to be Communicated, Discussed & Measured
1. Treat OCZ money as your own, every penny matters
2. OCZ will not be the lowest Client price, but competitive to within 25%
3. Enterprise products are priced on value in the marketplace, not by margin
4. Provide right product for customer compared to equivalent competition
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17. Principle regarding “every penny matters”
Pricing Theory = Transactional Control
1. Treat OCZ money as your own, every penny matters
2. OCZ will not be the lowest Client price, but competitive to within 25%
3. Enterprise products are priced on value in the marketplace, not by margin
4. Provide right product for customer compared to equivalent competition
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18. Principle to set B2C pricing +/- 25% of competition
Pricing Theory = Competition-Based Pricing
1. Treat OCZ money as your own, every penny matters
2. OCZ will not be the lowest Client price, but competitive to within 25%
3. Enterprise products are priced on value in the marketplace, not by margin
4. Provide right product for customer compared to equivalent competition
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19. Principle for B2B using value as a driver
Pricing Theory = Value-Based Pricing
1. Treat OCZ money as your own, every penny matters
2. OCZ will not be the lowest Client price, but competitive to within 25%
3. Enterprise products are priced on value in the marketplace, not by margin
4. Provide right product for customer compared to equivalent competition
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20. Principle ensuring we compare apples-to-apples
Pricing Theory = Segmentation
1. Treat OCZ money as your own, every penny matters
2. OCZ will not be the lowest Client price, but competitive to within 25%
3. Enterprise products are priced on value in the marketplace, not by margin
4. Provide right product for customer compared to equivalent competition
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21. First Steps to Pricing Management Conclusion
Attendees can expect should now be able to:
• Use practical financial examples to immediately impact pricing mindsets
– Capture Dataset, Drop Pricing, Constant Margin, Volume Increase Required
– Capture Dataset, Drop Pricing, Constant Volume, Profit Decrease Results
• Implement these principles to reinforce pricing self-awareness
– SoundPricingTheory
– FollowKISS(Keep-It-Simple-Stupid)Concept
– UseLayman’sTerms
• Apply principles and a metric to operationalize theory
– Generally align principles with corporate mission and mentality
– Remember Lord Kelvin – and measure it
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22. First Steps to Pricing Management
Conclusion and Questions
James (JD) Dillon
Chief of Staff
Toshiba Americas SSD Business Unit
(408) 772-3169
James.Dillon@TAEC.Toshiba.com
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