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Pps Taking Art Out Of Bto B Pricing Final Sb 32906
1.
Taking the Art
Out of Pricing in Business-to-Business Markets
2.
The Age of
the Pricing Professional • Pricing is now viewed as a strategic priority • Core concepts of good pricing practices are converging • This is a good thing! • Means that pricing can be: – More widely understood across functions – Based on consistent, repeatable processes – That are more likely to be accepted • Pricing is now more science than art! © 2006 Holden Advisors Corp., Concord, MA 2
3.
Moving From Art
to Science • B2C pricers have some great tools – Conjoint analysis – Price optimization software • Unfortunately these are of limited use in B2B – Complex buying centers – Smaller segments – Driven more by financial value than attitudes/perceptions • The focus for B2B pricers – consistent: – Definitions – Criteria for what is/isn’t effective – Processes © 2006 Holden Advisors Corp., Concord, MA 3
4.
What Every Pricing
Program Must Have Pricing Defined Strategy Polices & Pricing Controls Approach List List Net Prices Prices Prices Pricing Model Measurable Results Price Offering Price Metrics Matrix Levels © 2006 Holden Advisors Corp., Concord, MA 4
5.
Choosing a Pricing
Approach The Expert believes that there is only one answer. The Master knows there are many answers. • “Value-based” pricing is the long-run objective – Often difficult to start here • Requires cross-organizational buy-in – And capabilities development • Need to consider other options – Better cost-plus pricing – Better market-based pricing – Pricing to value • Better to plan for evolution - not revolution © 2006 Holden Advisors Corp., Concord, MA 5
6.
Pricing Strategy Making the
Best Choice Three Choices 1. Skim 2. Penetration 3. Neutral Principal Drivers Influencers • Product Lifecycle • Market Economics • Value position relative to • Competition • Cost position competitors • Response profile and history • Differentiated • Parity • Disadvantaged • Objectives for product/service line © 2006 Holden Advisors Corp., Concord, MA 6
7.
Elements of a
Price Model Good Price Metrics • Relate to customer’s – Profit model – Ability to pay – Willingness to pay • Can be easily audited • Limit gaming by sales and clients • Examples: – Power by the hour – Assets under management © 2006 Holden Advisors Corp., Concord, MA 7
8.
Elements of a
Price Model The Matrix • The specific offering elements and bundles that have prices attached to them • Objective is to enable segmented pricing • Think in terms of platforms – Silver - for price buyers – Gold - for the majority of customers – Platinum - for relationship buyers • Add in a la carte elements to move between – Provides means to trade price and value © 2006 Holden Advisors Corp., Concord, MA 8
9.
Price Levels Align process
with approach Better Better Pricing Cost-Plus Market-Driven to Value Pricing Pricing • Adjust cost multipliers • Base prices on: • Must understand based on perceived offering cost and • Qualitative indicators value revenue impacts for the of value customer • Low for low value or • Competitor price undifferentiated • And differentiation levels offerings relative to the competition • Use costs as • Higher for differentiated benchmark for low end offerings • Take a “fair” share of possible price range • Reasonable to target 10% - 40% © 2006 Holden Advisors Corp., Concord, MA 9
10.
Tying It All
Together Pricing Model Architecture Example - Region Deal - Competition Guidance - Strategic Importance +% - Project Risk Price Levers Price Levers Initial Fixed-Price Level Base Gold +% -% Package Package Set by: Type of Application Size Complexity -% +% SLA’s SLA’s Criticality Deal Guidance -% © 2006 Holden Advisors Corp., Concord, MA 10
11.
Process and Task
Level Criteria Criteria for effective pricing processes System Level Definition Repeatable Same input = same output Visible Communicated and well understood across entire organization Scalable Supports growth and staff transitions Trackable Data generated at key points in process and is easily accessible Standardization XX% of pricing covered in standard process, YY% exceptions Point to key information and process needs Relative Model & Transaction Value Competitive Comm- Process Customer Drivers Scanning unications Measures Policies Price Mgmt. Value © 2006 Holden Advisors Corp., Concord, MA 11
12.
Final Thoughts • There
is a science to pricing • Emphasize standards, processes, and definitions • Facilitates understanding of the pricer’s role • Predictability and visibility build – Trust – Confidence – Buy-in © 2006 Holden Advisors Corp., Concord, MA 12
13.
Thank You! Mark Burton Vice
President, Holden Advisors mburton@holdenadvisors.com
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