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.

1. Monthly Webinar Series - January 2012
The Right Path to Pricing Maturity
with George Cressman
World Class Pricing, Inc.
…dedicated to creating world class pricing managers…
Copyright © 2012 by LeveragePoint Innovations Inc.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means —
electronic, mechanical, photocopying, recording, or otherwise — without the permission of LeveragePoint Innovations Inc.
This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.
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2. the Software Solution for Value-Based Pricing
Build the Value-Based Strategy
Execute Value-Based Strategy
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3. Today’s Presenter
George C
G Cressman is founder and president of World Class
Pricing, a consultancy specializing in helping clients build world class
pricing managers. George has nearly 30 years of experience in the
chemicals industry having held business sales and marketing
industry, business, sales,
management positions at DuPont, Monsanto, and Union Carbide.
Currently, George is a member of the advisory board for the Institute
for the Study of Business Markets, has served as a Trustee for the
Marketing Sciences Institute, and is a Visiting Scholar at the University
of Virginia. He is an adjunct faculty professor at the University of
Delaware and Drexel University He has written extensively on
University.
business and marketing strategy and has been quoted in The
Economist and a number of trade journals.
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4. Pricing Maturity
Pricing Maturity is
is….
The ability to actively manage price realization to
Achieve above average industry profitability.
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5. Pricing Maturity In Organizations
Organizations – and their
managers – grow pricing
capabilities in predictable patterns.
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6. Developing Maturity in Pricing Practices
Manage
Pricing
Linkages
Manage
Increasing Value
Profitability Delivery
Manage
Pricing
Process
Manage
Price
Discrepancies
Increasing Managerial Control
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7. Pricing Practices Maturity:
Driven By Culture Change
For most companies, developing pricing practices
involves significant cultural changes that involve:
• How customer targets are chosen.
• How offerings are designed.
• How offerings are communicated.
communicated
• How channel decisions are made.
• How pricing decisions are made.
• How negotiations with customers are conducted.
These changes impact decision rights, and
rights
so are not always readily implemented.
This change takes time and effort!
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8. Skipping Stages
Skipping stages dooms the process of b
k d h f becoming pricing mature:
• Underlying skills are not developed.
• Organizational will falters.
g
There are no shortcuts!
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9. Stage One: Manage Price Discrepancies
Objectives:
• Raise awareness of pricing challenges and
opportunities.
• B i “self funding” of the maturation process.
Begin “ lf f di ” f th t ti
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10. Maturity Stage One: Manage Price Discrepancies
A.
A Identify customer accounts with unacceptable price
deviations.
B. Develop an understanding of causes of unacceptable price
deviations.
C. Implement plan to reduce/eliminate unacceptable price
deviations.
Important Control Plots:
p
• Realized Price – Volume
• Customer Profit – Volume
• Customer Profit – Price
• Realized Price – Sales Person
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11. Stage Two: Manage Pricing Process
Objectives:
• Begin pricing process management.
• Standardize decision making effort.
• Eli i t random decision making activities.
Eliminate d d ii ki ti iti
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12. Maturity Stage Two: Manage Pricing Process
Bring system to the pricing process -
Address:
1. How are pricing decisions made?
2. Using what criteria?
3. By whom?
Develop controls for how pricing decisions are
made and begin centralization of the pricing
process.
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13. Stage Three: Manage Pricing Process
Objectives:
• Institute a value based pricing process.
• Centralize control of the pricing effort.
• B ild pricing capabilities broadly across the firm.
Build i i biliti b dl th fi
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14. Maturity Stage Three: Manage Value Exchange
Price Setting
Establish Prices That Capture A Fair
Portion of The Delivered Value
Buyer Behavior – V l Negotiation
B B h i Value N ti ti
Design Negotiation Practices That Force
Customers To Acknowledge and Pay for Value
Value Communication
Communicate The Menu’s Value
Delivery To Customers In An Understandable Manner
Offering Structure
Create An Offering Menu That Gives
Customers Valuable Options
Value Assessment
Understand Drivers Of Value For Customers And Determine
The Offering’s Value Delivery
Foundation: Customer Targeting
Select C
S l Customer Targets Where The Business Can Deliver Differential Value At
h h i C li iff i l l
Competitive Advantage
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15. Stage Four: Manage Pricing Linkages
Objectives:
• Align the entire business around value delivery.
• Integrate value delivery processes across the firm.
• B ild customer and competitor intelligence systems.
Build t d tit i t lli t
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16. Elements of Strategic Pricing Strategy
Profitable Pricing Strategy is founded on three interacting components:
Customers
Manage the value exchange so customers are
forced to acknowledge and pay for value delivery
Profitable Pricing
Strategy
Competitors Resources
Manage industry interactions Assign resources to the
for consistent profitability most profitable activities
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17. Maturity Stage Four: Managing Pricing Linkages
Customer Target Selection
Competitive Managing Pricing Resource
Strategy Linkages Allocation
Offering Portfolio Customer Communication Channel Decision
What value should How do we communicate the How do we deliver
we create? value? the value?
Product-Service Value based mass and/or
Menu communication Channels Direct
Value based product Value based sales
communication Intensity/Types/Activities
development
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18. Maturity Stage Four: Managing Pricing Linkages
Implementation Frame
I l i F
Organization
Structure Pricing Process Pricing Intelligence Pricing Policy
Design for value Decision rules Customer/Competitor/ Price table
creation and delivery defined Cost
Discount/Rebate
Cross-Functional
C F ti l Decision
D i i makingki Integrated data bases rules consistently
design and linkages centralized enforced
Rigorous validation
techniques
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19. Summary
• Achieving pricing maturity yields dividends in market
control and profitability.
l d fi bili
• Manage the four stages – don’t skip stages.
• Allow the organization to grow to maturity.
• Invest in building the appropriate skills and implementation
infrastructure – don’t skimp!
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20. Thanks for watching!
www.WorldClassPricing.net
George.Cressman@WorldClassPricing.net
George Cressman
(912) 882 – 1232
www.leveragepoint.com
jmanson@leveragepoint.com
Jay Manson
(781) 727 – 5977
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