Having a pricing framework is invaluable for breaking up complex B2B pricing challenges into components that can be prioritized and addressed as discrete projects. In this presentation we review some of the elements that form part of the framework and some of their features, such as price waterfalls, pricing decision processes, etc.

1. B2B pricing framework elements
February 2017

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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:
ian@eenconsulting.com

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Introduction
• A previous slide deck introduced the topic of why improving B2B
pricing is worth doing but difficult, and how to get started
• Here we review examples of different types of pricing frameworks
that are helpful in organizing and prioritizing pricing activities (the
WHAT of pricing)
• Look for these related presentations on:
• Practical steps for how to improve pricing, from the WHAT and HOW,
to gaining PERMISSION, making the changes SUSTAINABLE, and
SHOWING progress
• Some practical tools that help improve pricing
• How to improve your price guidance to support negotiated sales

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HOW to build a bridge to better pricing
Insights, knowledge, best practices Learn WHAT to do
Pricing and supporting skills HOW to get it done
Pricing team brand/reputation PERMISSION to do it
Improve processes, technology, data Make it SUSTAINABLE
Measure progress SHOW progress to maintain support
The focus of
this presentation

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Building pricing insights, knowledge, best practices
● Break the problem into pieces – build a framework
- Adds value by simplifying the problem
while framing the conversation
- Keep tweaking, enriching,
deepening as you learn more
- Keep communicating the core
concepts so they become part of
the company DNA
● Ruthlessly prioritize. Be transparent
about it
● Start with a few projects targeted to
help build up the knowledge base

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Five dimensions of WHAT to build for a pricing
framework that works
Clear priorities that should
influence pricing decisions
Company Goals
Harmonized processes &
data etc. to leverage scale
Standards
Who makes decisions based
on insights, skills
Organization
Data and direction to
support decision-makers
Information &
Guidance
Process and technology to
support and sustain
Consistent
execution
A Pricing
Process that is:
• Effective
• Efficient
• Sustainable

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The framework will include multiple elements that can
be scaled and embedded into core processes
• Foundational
• Pricing Framework
and Process
• Waterfall
• Segmentation
• Value Maps
• Pricing dashboards
• Process oriented
• Price opportunity
prioritization workshop
• New Product Pricing process
• Annual price change process
• Commercial Terms design
• Negotiated price exception management
• Specialized
• Price/Volume trade-off workshop
• Pack-size pricing logic
• Tail-product pricing logic
• FX reaction playbook

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Example pricing framework (1)
Pricing Strategy
Sets the pricing
principles and priorities
that apply to all
activities.
Price Setting
Set the list prices.
Set the pocket price corridor targets
Commercial Terms and Policies
Design the discounts, rebates, policies for channel
partners and customer segments
Price Execution
Set rules for negotiated sales and support.
Manage customer price exceptions.
Monitor results
Price Admin
Administer agreed
prices with high
accuracy
Collect data to support
guidance and analysis

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Bain & Company Example framework (2)

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Example Pricing Framework (3, top level)
Strategy
+ Goals
Pricing
Structure
Execute
Monitor
+ React
● 2-5 simple, easy-to-
understand elements
● Clear boundaries between the
different elements

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Example Pricing Framework: 2nd level elements (3, details)
• 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

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• Start with company goals
(short- and long-term)
• Assess impact on core
processes:
• Portfolio Pricing
• Commercial Terms
• Price Execution
• Price Administration
• Recognize constraints and
trade-offs: be challenging
but realistic
• Design-in local flexibility and
exceptions
• Seek buy-in from leadership
Pricing goals must be driven by company
goals & constraints
Pricing Goals
Tactics, Resources,
Skills, Organization,
Processes, Tools

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High-level pricing decision process flowProduct
Marketing
Customer
Marketing
Sales,Sales
Managment
Set List Prices
Set Price
Outcome Targets
Set available
discounts &
rebates
Set standard
national /
segment offers
Define opt-in
offers
Assign opt-in &
customized offers
Approve
Exceptions
Approve
Exception
(Sales Manager)
Approve
Exceptions
Price Setting
Commercial
Terms & Policy
Price Execution
(sales)
Define sales
pricing flexibility
Price
Execution
(approvals)

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Design a price waterfall to help understand
and harmonize the business
• Can you get to one waterfall across
the company?
• Not to complex! It’s not the only
view of pricing
• Align definitions of key intersection
points with finance
• Adapt pricing reporting to align to
the harmonized waterfall
• Establish a common control point
(pocket price corridor)
• Continually reinforce the concepts
and language

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Establish a core pricing segmentation scheme,
coordinated with sales and marketing segmentations
• Different customer segments may have
very different requirements. It’s important
to understand the value of the products to
different segments
• Typical hierarchy of segments
• Usage (e.g. industry) most important
• Geography
• Channel
• Behavioral most challenging
• Varying prices across segments requires
having “fences” between customer
segments
• Build by doing: start simple and enhance
(note pricing segmentation often differs
from marketing and sales segmentations)

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A strong price guidance framework for negotiated sales is
based on the pricing power
Product&Service
ValueDifferentiation
Reduced Cost
Direct
Added Value
Less Tangible
Added Value
• Features that make the
product more attractive
to end-users
• Raises the “willing to
pay” by indirect means,
e.g. more reliable,
simpler, etc.
• Reduces the cost to
supply the end product
Value Differentiation Competitive Intensity
Customer perceived performance
Customerperceivedprice
Value advantaged
Value disadvantaged
• Brand position, strength
• Number of competitors
• Market shares
• Channel influence
• Supply/Demand situation
• Supply coverage
Customer
Segmentation
Strategic
Goals
Pricing
Power

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A Channel Partner Commercial Terms Library helps focus
CT effectiveness and clarity while enabling automation
What are the
BU’s strategic
objectives?
Meet
aggregate
sales targets
Total sales value
incentive
Sales growth rate
incentive
Sales target
achievement
incentive
Meet product
level sales
targets
Drive channel
collaboration
Reduce BU
risk exposure
Reduce BU
costs to serve
Respond to
market
changes
General product
incentives
Product value /
volume incentive
Product sales growth
incentive
Product sales target
incentive
Early commitment
incentive
Joint mktg / tech
support incentive
Information sharing
incentive
“Basic hygiene”
penalties
Exclusivity incentive
Cash on / before
delivery incentive
Early payment
incentive
General customer
incentives
Self pick up incentive
Large order size
incentive
Reducing returns
incentive
Managed
discretionary
Payment mode
incentive
Loyalty programmes
CT based on sales outcomes Specialised CTCT based on activities
How can CT
support these
objectives?
Cross sales incentive
Outsourced logistics
payments
Channel inventory
reduction
Share of
wallet incentive
Grow / defend
topline revenue
Improve
profitability:
products
Strengthen
channel
partnerships
Manage risks
Improve
profitability:
costs

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info@eenconsulting.com