useful b2b pricing tools

Some useful B2B pricing tools

Ian Tidswell

February 2017

© een Consulting GmbH 2

Ian Tidswell Biography

Founder of een Consulting, focused on helping B2B companies develop best-in-class end-to-end sustainable pricing processes

Professional Experience

• Since 2016, Independent Professional, Switzerland

• 4 years, Global Head of Pricing, Syngenta, Switzerland

• 2 years, Pricing Transformation Lead, Medtronic, Switzerland

• 6 years Partner, Head of Business Consulting, Vendavo Consulting, UK and USA

• 4 years, Director, i2 Technologies, USA

• 4 years, to Engagement Manager, McKinsey & Company, USA

Selected Experiences

• Developed a pricing framework & process for pricing innovations for out-licensing for leading diversified industrial company

• Built the HQ global pricing team for Syngenta. Indirect management of in-country pricing managers

• Lead multiple in-country projects for Syngenta to diagnose pricing opportunities and actions to address price setting, commercial terms management & price execution challenges

• Lead development of a global commercial terms/policy framework and playbook to align CT/P with strategic goals in each country within Syngenta, improved CT/P performance and enabled automation

• Headed the strategic initiative to substantially improve, harmonize and automate Medtronic International’s pricing processes across all major markets. Drove improved pricing & risk exposure

• At Vendavo successfully led discovery, design and deployment of Vendavo price system at multiple customers including chemicals, distributor, semiconductor, tire and mobile phone manufacturers

• Frequent speaker at global pricing conferences

Education

• Ph.D. Physics, Harvard University, Cambridge, Massachusetts, USA• B.Sc. in Physics, Imperial College, London University, UK

At a glance

• Former McKinsey senior consultant with line management experience in MedTech and agri-chemicals business

• Proven B2B Pricing transformation leader

• Practical, hands-on approach with track record in value delivery

• Based in Basel Switzerland

• LinkedIn Profile

• Email: [email protected]

https://www.linkedin.com/in/iantidswellpricing

mailto:[email protected]


24Project Stakeholder Management6

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9Pricing Management Frameworks2

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5© een Consulting GmbH

Introduction to pricing tools

• The attached are tools that I have found useful in various initiatives to improve different aspects

• By no means meant to be exhaustive, I will update occasionally

Tool Purpose and explanation

Pricing Maturity Assesses the relative maturity of pricing activities. Useful for identifying opportunities, tracking progress on initiatives and measuring progress of price maturity

Pricing Management Frameworks

Helps to define the major pricing process steps and decision points. Useful for breaking pricing challenges into manageable pieces

Prioritization Workshop Helps to identify opportunities in a BU or country organization. Ensures buy-in from the local management team on initiatives (solving “their” problems). Helps to balance the mix of short- and long-term impact projects

Value Maps Tool for understanding the relative position of a product offering versus competing products

Type of Pricing Helps to drive alignment on key factors that affect price

Project Stakeholder Management

For major initiatives ensures that the stakeholder landscape is understood, so influencing efforts can be focused on appropriate stakeholders



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Four pricing maturity assessment dimensions

Portfolio Pricing Commercial Terms & Policy Pricing Execution Supporting

Pricing strategy alignment Customer and channel Segmentation

Price Governance Management support

Collection and use of market price data

CT/P aligned with strategic goals

Track and Monitor Pricing KPIs

Core Pricing Team Capabilities

Portfolio pricing setting CT/P effectiveness & efficiency

Customer price exception management

Extended pricing team skills (sales, marketing, finance)

New product pricing Product Push balance Price Communication Pricing relevant data

Product Segmentation Customer loyalty programs Pricing system

Price corridor setting Promotions

• An assessment of pricing maturity can be useful to identify focus areas to address going forward, AND help track and drive progress as a management tool

• Using pre-define levels to assess

• Current level

• Target level (in 6-12 months and long-term goal)

• Importance of the level


Area Minimal Low Team assessment High High Performing Importance

Pricing strategy alignment

Collection and use of market price data

• No price tracking • No new product

price research• No centralized

collection from sales• No/limited analysis

of own price trends

• Price tracking of all products with >$20m revenue

• Customer DCM analysis of new product with target 5y revs > $100m

• Structured process for collecting competitive intel quarterly

• Regular, consistent analysis of own price trends. Results leveraged

L / M / H

Portfolio pricing setting

New product pricing

Product Segmentation

Price corridor setting

Pricing Maturity Assessment: Portfolio Pricing

Today Target

PARTIAL EXAMPLE

• Multiple levels defined and should be customized to your situation

• Levels should be as unambiguous as possible



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Overall Pricing Framework (example)

• Offer Design• Product & Customer Segmentation• Price Setting (List Price)• Price Guidance (Pocket Price Corridor)• Delegation of Authority, Incentives • Capability development• Communication (internal, external)

• Product & Service Design(Value Architecture)

• Waterfall Design• Comm. Terms & Policies Menu• Process & Automation model• Price Governance model

• Transaction Price Process• Exception Management

• Metrics• Pricing Process• Price Outcome

(absolute, relative)• Adjust tactics, goals

Strategy + Goals

Pricing Structure

Execute

Monitor + React ● 2-5 easy-to-understand elements

● Clear boundaries between thedifferent elements

● Facilitates breaking problems into manageable pieces

● Facilitates clear roles and responsibilities


High-level pricing decision process flow (example)

● Documents who and where pricing decisions are made

● Ensures a clear, robust decision process with reduced errors

● Enables automation


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Preliminary prioritization of opportunities

Value potential

Ease

to

ach

ieve

Ignore

Quickwins

Majorproject

Big wins(rare)

● Use a flip-chart with the axes pre-drawn

● Write on Post-It notes possible pricing challenges faced by the organization (gathered via pre-workshop interviews)

● Team(s) position Post-It notes with the opportunities on the chart

● Write new Post-It’s for new opportunities or sub-opportunities

● 10-15 minute exercise

● Teams discuss and adjust

● Afterwards prioritize, balancing major projects with quick wins and available resources



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Value Map: understanding the value and price relationship versus alternative options

• Value Maps compare perceived performance and price, indicating which products/services are relatively ‘good’ or ‘poor’ value

• Value Maps can be built from expert opinion ormarket survey data:

• Expert opinion is useful as a starting point

• Market survey data (like a Key Buying Factor –KBF, or Discrete Choice Model – DCM) provide real information

• The position on the Value Map helps predict a products likely trajectory:

• Value disadvantaged products will tend to lose market share over time

• Value advantages products will tend to gainmarket share

• Fair value products with maintain market share

Customer perceived performance

Custo

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perc

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Value

advantaged

Value

disadvantaged

Individual product


Where to get information on price and sources of value?

Opportunity Assessment

Sales Analysis

Internal Experts

‘Standard’ Market

Research

‘Custom’ Market

Research

Insights from internal expert (sales, marketing) experiences, facilitated price/volumeworkshops, etc.

Analysis using internally sourced sales data : ● Revenue, price, volume, mix

trends by brand● Product cost trends

Market Research targeted to addressing a specific question relevant to the opportunity● End user pain points (Key Buying

Factors - KBF)● Value discovery (Discrete Choice

Modeling - DCM)

Off-the-shelf or ongoing Market Research tracking overall trends: ● Market trends, forecasts etc. ● Competitor analyses● Market structure analysis● Market economics (manufacturer & channel)



Custo

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Value

advantaged

Value

disadvantaged

Value Map insights 1: when off the ‘fair value’ line, actions to take

• When a product is out of the Fair Value Zone, two actions can be taken:

• Improve the perceived value with education, marketing, product/service adjustments etc.

• Adjust the price to move closer to fair value

• Some combination of the two



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Value

advantaged

Value

disadvantaged

Value Map insights 2: target areas which have less competition

• In this case the top and bottom of the value map have a number of competitors (red circle) and at high risk of price erosion

• The middle of the value map (green) is much less competitive. New or repositioned products in this area may capture a larger market share



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Value Map insights 3: risks of price wars when lowering prices

• Lowering the price of a product into the value advantaged zone can have the effect of increasing market share…

• …but competitor reactions may result in a price war, permanently lowering the fair-value zone and taking value out of the market


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Typical pricing involves a balance of the 3 types of core pricing approaches

• Undifferentiated products• No supply constraints• Low market discipline:

“compete on price”

• Supply/demand dynamic• Low product differentiation• Many competitors

• Highly differentiated products• Significant unique value• Low competition

ValuePricing

Cost+Pricing

CompetitivePricing

Excess supply vs. demand


Identify the reference price and your differential

1. Identify the Reference Price: what is the customers next best alternative?

2. Place a dot which indicates the approximate mix of the three types of pricing that affect the Reference Price

3. Define your sources of differential value and place a second dot at a position relative to the Reference Price

4. Document the pricing implications in thetable (see next slide)

Note this is a qualitative exercise, helping toidentify the key price drivers and implications. For new category products, several references may be appropriate.

ValuePricing

Cost+Pricing

CompetitivePricing


Example of pricing approach

ValuePricing

Cost+Pricing

CompetitivePricing

Tomato seed Product Pricing Implications

Reference “Big Beef” Tomato Track seed prices to growers

Differentiation New Variety – higher yield, longer lifetime after harvest

Add differential based on cost saving to grower and higher price achieved for crop



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For key initiatives assess the influence and attitudeof stakeholders

• Regularly review the stakeholder map for key initiatives with close allies

• For key stakeholders, develop a plan

• Why they are important to the project

• What’s important to them

• Their reason for support/resistance

• Who “owns” the relationship

• Specific actions to be taken

• Keep this confidential!

Influential non-supportersMeet their needs,

keep satisfied

Weak supporters

Show consideration, keep informed

Influential supportersKey players,

engage closely

Weak non-supporters

Minimal effortMonitor

Support of stakeholders

Infl

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https://www.linkedin.com/in/[email protected]

https://www.linkedin.com/in/iantidswellpricing

mailto:[email protected]