Goals for this presentation about pricing analytics 1. To leave you with an understanding or a deeper understanding of the Importance of Pricing & its potential bottom line impact 2. To Show how Pricing & Value analytics could help you measure, manage & improve your pricing effectiveness 3. To show you also some of the limits of analytics & give you a few simple recipes to get more out of them For more information : http://privaledge.net

1. Competing on Pricing Analytics

2. Goals for the session
1. To leave you with an understanding or a deeper understanding of the
Importance of effective Pricing Analytics & its potential bottom line
impact

3. Goals for the session
2. To Show some of the more advanced
Pricing & Value analytics that could help
you measure, manage & improve your
pricing effectiveness

4. 3. To show you also some of the
limits of analytics & give you a
few simple recipes to get more
out of them

5. Agenda
• Stakes & Levers
•
Framework
•
Cases studies
•
Do’s & Don’t’s

6. Agenda
• Stakes & Levers
•
Framework
•
Cases studies
•
Do’s & Don’t’s

7. Pricing analytics - Objectives
Objective: Developing better prices & value propositions…
The perfect Price
•
•
•
•
•
•
Is coherent & below ‘perceived value’
Leaves no money on the table
Anticipates competitive reaction
Is fair
Exceeds costs (and the cost of capital)
Supports our strategic objectives
(Growth/Margin/Profit trade off)
The perfect Value Proposition
•
•
•
•
•
•
Taylored to segment needs & priorities
Optimizes the ‘perceived value to cost ratio’
Provides defendable differentiation
Can be communicated effectively
Is coherent with the Brand image & positioning
Supports group strategy
… and making it happen in the field

8. PRICING EXCELLENCE
Performance Levels
5
Excellence
(<1% of Cos..)
Strategic & integrated
4
Optimisé
(<10% of Cos..)
Optimized Value & Pricing
3
2
1
Base Valeur (20% of Cos..)
Pricing Base Valeur / Solutions
Sous Contrôle (35-40% of Cos..)
Customer Pricing Alignment & control
Out of control
(30% of Cos..)
Weak processes & control , ad-hoc prices

9. Agenda
• Stakes & Levers
•
Framework
•
Cases studies
•
Do’s & Don’t’s

10. Pricing & Value Analytics framework
• Pricing & Value Analytics (P&VA) is the capability to transform
customer knowledge, data, into value through an extensive use of
scientific methods.
• More precisely, P&VA helps leading companies:
– Promise superior & targeted client value propositions
– Deliver on that promise
– Price products to reflect / capture that value

11. 1
From P&VA to Pricing Strategy
assemble key
info
2
Get insights & develop business cases,
with strong analytics
3
consensus & support
to implementation
Client Value Intelligence
Info Collection
•Transactions
•Market
surveys
•Internal
surveys
•Competitive
info
•….
•Value Drivers & ratings
•Financial Value Models
•Willingness to pay
•Value Based Segmentations
Margin Intelligence
•Cost Drivers & levels
•Product Margins
•Segment margins
•Fixed / variable
Analysis
•Margins
•Discounts
•Value Curves
•FVM,
Win/Loss
•Segmentation
•Competitive
moves
•Benchmark
•Performance
•….
Competitive & Market Intelligence
•Market dynamics & cycles
•Competitive mapping
•Market Fencing / clashes
•Competitors strategies
Pricing Intelligence
•Key factors for pricing structure
•Reaction to past Price changes
•Promotional effectiveness
•Packages / solutions / …
Group Pricing
Strategy
•By Market /Brand
•Competitive fields
•Value Pricing
•Price positioning
•Pricing guidelines

12. Which data ?
Transaction
Analysis
Market
Research
Customer
Feedback

13. Pricing Tools
Price
Elasticity
Price
Waterfall
Value
Curve
Simulation
Tools
Win / Loss
Analysis
Value based
Design
Value/Price
Segmentation
Price
Corridors
On-line
Research
Discount
Toolbox

14. Managing Pricing Performance
improvement is about 2 things
« The price is
right »
Getting it right
Pricing
Performance
Quick Wins
Client rebates &
incentives well
spent
Making it
happen
Diagnostic
Sustainability
Developing
Pricing
capabilities
14

15. Pricing & Value Analytics framework
Key Take aways
• 4 key angles to the analytics
–
–
–
–
Client Intelligence
Competitive Intelligence
Margin Intelligence
Pricing Intelligence
• Many Sources & Many tools…..
…. Use them appropriately
• Get results now (Quick wins)…..
…. But manage your pricing capabilities for the long term
(sustainability)

16. Agenda
• Stakes & Levers
•
•
•
Framework
Cases study
Do’s & Don’t’s

17. Management of conditions at client level show a large
potential for improvement
Lack of control &
discipline
Large discounts given
to small accounts
/ not taken away from
reduced
Large accounts
put at risk by
unfair treatment

18. Quick Wins:
Pricing actions for
short term profit impact

19. Pocket prices reflect average discounts of up to 40%
depending on the region
Before
Discretionary discounts vary from 2 to 11% between AM!!
Page 19

20. Waterfall management at regional level was
clearly an Issue
Page 20

21. The treatment of exception must also be tightened ….
At lirst levels, over 70% of escalated ‘exceptions’ were approved
Huge work required just to examine ‘escalated exceptions’

22. Synthetic Business case
Improvement management of Client Conditions
Business Impact
Business Case
Insights
1. Stricter &
clearer
guidelines for
client conditions
Most Sales rep not fully aware of
guidelines or applying obsolete ones
2. Strict &
Controlled
Exceptions
Management
System
-24% of deals are “exceptions”
-At each level, a minimum of 70% of
exceptions are approved
-Up to 30% of Sales rep time spent in
Internal negociations & Exceptions Admin
∆Top Line
(€)
∆ Bottom
Line (€)
Assumptions
2.0 M€
1.5 M€
• Porfolio fit
• Channel willingness
• Other factors stable
4.0 M€
3.0 M€
- Exceptions reduced to <5% of deals
No organized communication &
discussions of changes
- Average price realization improved
by 4%
- 2% Lost Volumes
3. Increase
Rebales 20% &
reduce
discounts by
same amount
- Higher rebates for a Given total
(rebates + discounts) results in
significantly higher SoA performance
6.0 M€
5.0 M€
• Porfolio fit
• Adjusted client level volume
objectives
• Channel willingness
• Other factors stable

23. Case Studies

24. Understand & quantify Value Drivers
Page 24

25. Measure segment level elasticity
Page 25

26. Visualise / simulate competitive dynamics
Page 26

27. Pricing Analytics case studies
Key Take aways
• Whatever your current level of performance, Pricing analytics can
help
–
–
–
–
–
Identify & prioritize opportunities
Develop consensus around required changes
Support in-field implementation of the strategy
Control & monitor implementation
Sustain the level of performance
• Pricing & value analytics is about …. Control & monitoring,
measuring value, but also helping you develop your pricing
capabilities
• Powerful, focused tools such as PriValEdge’s ‘Valumizer’ can make a
bid difference in your ability to use analytics to support decisions
• It takes its full meaning as part of a change management effort…

28. • Data visibility
• Granularity
• Ability to compare
Page 28

29. Agenda
• Stakes & Levers
•
Framework
•
Cases studies
•
Do’s & Don’t’s

30. From Data to Decision Support
Data
Information
Insights
Decision
Support
•
Through an extensive use of methods, Pricing analytics become a key
competitive weapon for world class pricers.

31. •Develop strong insights
•Build Business cases
•Achieve consensus on required actions
•Pragmatically prioritize Value / Pricing initiatives
•To Potential Impact
•To strategic objectives
•To Client acquisition & lifetime value
•Use systems & analytics to support & guide implementation

32. Pricing & Value Analytics
Final take aways
• Difficult to make it all happen without a dedicated Pricing
Management function
– Not that sophisticated but still requires expertise
– Change management requires a leader / owner
– Link between the 3 Stakeholders (Marketing, Finance, Sales)
• Data … Information … Insights…Decision support…..
…. Don’t get lost in the early stages
• It will take a while…
…. But support & determination can speed things up

33. Pricing Excellence
…. It’s a journey