Matching Professional Sellers With Professional Buyers (TAAN)

MATCHING PROFESSIONAL BUYERS
WITH PROFESSIONAL SELLERS
Presented by Tim Williams
Ignition Consulting Group
www.ignitiongroup.com

THE PRICING WATERFALL
Matching Professional Buyers With Professional Sellers

PROFIT POOL
A 1% improvement (reduction) in variable costs will improve profit by: 4%
A 1% improvement in volume (revenues) will improve profit by: 7%
A 1% improvement in pricing will improve profit by: 11%
3%A 1% improvement (reduction) in ﬁxed costs will improve profit by:
PROFIT
IMPROVEMENT

COSTINGPRICING
THE COST TO THE SELLERTHE VALUE TO THE BUYER
Requires the expertise of production
and ﬁnance professionals
=
A CALCULATION
TACTICAL
A JUDGMENT
STRATEGIC
Requires the expertise of
pricing professionals

A PRICING REVOLUTION
Dynamic pricing. Setting ﬂexible prices
for products/services based on current
market demands.
Razor and blades. The practice of selling
a base product or service at a low price
then making all the margin on sales of
items required to keep the product/
service functioning.
Freemium pricing. Offering a basic
product/service for free, while charging
for "premium" features or functionality.
Pay what you want. Buyers pay any
desired amount for a given product/
service.
Add-ons pricing. A strategy that
attempts to increase the amount
customers spend by offering individually-
priced “extras”
Bundled pricing. Starting with a
company's popular products/services
and adding other (usually less popular)
products/services to sell as a "bundle."
Congestion pricing. Charging for excess
demand, as in electricity or parking.
Skim pricing. Setting a high price on a
product/service before other
competitors come into the market.
Economy pricing. A lower price for a "no
frills" version of a product/service
(economy cabin in an aircraft, generic
supermarket brands).
Options pricing. Offering several
different versions of the product/service,
each with different levels of value.
Tiered pricing. Pricing is reduced when
buyers hit certain thresholds or "tiers" of
purchases.
Use now, buy later. Customer is able to
use either a trial or full-featured version
of product/service for a ﬁxed time
period.
Per use. Charging for what the product
actually does, rather than for the product
itself.

PAY YOUR AGE

Not jet engines,
but “uninterrupted
ﬂying time”

COMPETITOR-BASED
Penetration Pricing
Skim Pricing
CUSTOMER-BASED
Solution-Based
Value-Based
WEAK
Pricing
Competency
MODERATE
Pricing
Competency
STRONG
Pricing
Competency
PRICING
PRACTICES
COST-BASED
Cost Plus
Hourly Billing
PRICING
PARADIGM
PRICE TAKER
PRICE FOLLOWER
PRICE MAKER
THE (R)EVOLUTION OF PRICING

KNOWLEDGE
WORK
MANUAL
WORK
COST-BASED
Time Spent
Cost of Labor
Cost Plus

The industry1
The buyer (your clients)2
The seller (you)3
WHOSE JOB IS IT TO
CHANGE PRICING?

SELLERS ROUTINELY RE-EDUCATE BUYERS
ABOUT PRICING IN ALL TYPES OF MARKETS
Software

Airlines

Professional Services

Not a fair ﬁght
Agency-side sellers and
client-side buyers
An even match?

THE WORLD OF THE
PROFESSIONAL BUYER

©Ignition Consulting GroupMatching Professional Buyers With Professional Sellers
Seven ways you can
begin transforming
your pricing practices
starting tomorrow

Outcomes
Results, market effects
Outputs
Deliverables, work product
Inputs
Hours, time of staff
Sell your value
instead of your costs
1
DRIVEN BY
COST TO
THE SELLER
DRIVEN BY
UTILITY TO
THE BUYER
INPUT-BASED PRICING
OUTPUT-BASED PRICING
OUTCOME-BASED PRICING
Move the dialogue
away from inputs
to what clients
really buy: outputs
and outcomes.

Inputs
Hours, time of staff
Outputs
Deliverables, work product
Outcomes
Results, marketplace effects
Hours worked
multiplied by
an hourly rate
Fixed fee of
$25 million
3% of box office
revenues
How did Tom Hanks price his
performance in Forrest Gump?

Trade the language
of cost for the
language of value
A change in language
is a critical precursor to
a change in behavior.
COST BASED
LANGUAGE
CUSTOMER VALUE BASED
LANGUAGE
Cost
Estimates
Hours
Rates
Billable Time
Labor
Utilization
Time of Staff
FTE’S
Price
Talent
Results
Solutions
Outcomes
Results
Value
Metrics of success
Accountability
2

Align the economic
incentives
Instead of a discussion
about who gets the biggest
slice of pie, show how you
can grow the entire pie.
3

Align the economic
incentives
3
“The agency offers
pay-for-performance
compensation: it gets
paid when an agreed-
upon business result is
achieved. ‘We put our
own skin in the game,’
says Deloitte Digital
principal Mike Brinker.”

Focus on transparency
of expectations in place
of transparency of costs
Guide your client to
focus on “Scope of
Value” before getting
to Scope of Work.
4

Attach different
pricing to different
classes of value
Proactively decouple
your high and low
value services.
5

Put your value in
perspective by
offering options
Options provide context
for the value you’re
providing and change
the dialogue away from
inputs to outputs and
outcomes.
6

Apply the same
creativity to pricing
as you do to solving
marketing problems
Once you take
hourly billing off the
table, there are
virtually unlimited
ways to get paid for
the value you create.
7

UNIFORM PRICING
Cost-plus calculations
based on a formula
VARIABLE PRICING
Varying pricing approaches
based on customer value
TO MAXIMIZE YOUR RETURN,
DIVERSIFY YOUR PORTFOLIO

THE POWER OF
OPTIONS
VARIABLE PRICING
Varying pricing approaches
based on customer value

CPOChief Procurement
Ofﬁcer
PURCHASING AS A
CORE COMPETENCY
CPOChief Pricing
Ofﬁcer
PRICING AS A
CORE COMPETENCY
PRICING COUNCIL
AT THE CLIENT AT THE AGENCY

ESSENTIAL ROLES OF THE
PRICING COUNCIL
Identifying and championing the multiple dimensions of value
the firm creates for its clients.
Experimenting with various pricing approaches to maximize
profits and diversify the firm’s pricing portfolio.
Developing tools that will keep the firm focused on value
instead of cost, including changing the language.
Overseeing the development of pricing options and presenting
pricing proposals to current and prospective clients.
Creating new revenue streams by cultivating, packaging and
monetizing the firm’s intellectual property.

NEGOTIATE SOMETHING BOTH
PARTIES WANT TO MAXIMIZE
COST PRICE VALUE
SELLER’S PROFIT
(Agency)
BUYER’S PROFIT
(Client)

SHARED VALUE

INFLUENCER
WELCOME TO THE
PRICING REVOLUTION
TWilliams@IgnitionGroup.com
@TimWilliamsICG
linkedin.com/in/TimWilliamsICG
Presented by Tim Williams
© 2016 Ignition Consulting Group, Inc.

Matching Professional Sellers With Professional Buyers (TAAN)

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