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B2B pricing framework elements
February 2017
© een Consulting GmbH 2
Ian Tidswell Biography
Founder of een Consulting, focused on helping B2B companies develop best-in...
© een Consulting GmbH 3
Introduction
• A previous slide deck introduced the topic of why improving B2B
pricing is worth do...
4© een Consulting GmbH
HOW to build a bridge to better pricing
Insights, knowledge, best practices Learn WHAT to do
Pricin...
5© een Consulting GmbH
Building pricing insights, knowledge, best practices
● Break the problem into pieces – build a fram...
6© een Consulting GmbH
Five dimensions of WHAT to build for a pricing
framework that works
Clear priorities that should
in...
7© een Consulting GmbH
The framework will include multiple elements that can
be scaled and embedded into core processes
• ...
© een Consulting GmbH 8
Example pricing framework (1)
Pricing Strategy
Sets the pricing
principles and priorities
that app...
© een Consulting GmbH 9
Bain & Company Example framework (2)
© een Consulting GmbH 10
Example Pricing Framework (3, top level)
Strategy
+ Goals
Pricing
Structure
Execute
Monitor
+ Rea...
© een Consulting GmbH 11
Example Pricing Framework: 2nd level elements (3, details)
• Offer Design
• Product & Customer Se...
12© een Consulting GmbH
• Start with company goals
(short- and long-term)
• Assess impact on core
processes:
• Portfolio P...
13© een Consulting GmbH
High-level pricing decision process flowProduct
Marketing
Customer
Marketing
Sales,Sales
Managment...
14© een Consulting GmbH
Design a price waterfall to help understand
and harmonize the business
• Can you get to one waterf...
15© een Consulting GmbH
Establish a core pricing segmentation scheme,
coordinated with sales and marketing segmentations
•...
16© een Consulting GmbH
A strong price guidance framework for negotiated sales is
based on the pricing power
Product&Servi...
© een Consulting GmbH 17
A Channel Partner Commercial Terms Library helps focus
CT effectiveness and clarity while enablin...
https://www.linkedin.com/in/iantidswellpricing
info@eenconsulting.com
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B2B Pricing Framework Elements

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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.

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B2B Pricing Framework Elements

  1. 1. B2B pricing framework elements February 2017
  2. 2. © 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: ian@eenconsulting.com
  3. 3. © een Consulting GmbH 3 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
  4. 4. 4© een Consulting GmbH 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
  5. 5. 5© een Consulting GmbH 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
  6. 6. 6© een Consulting GmbH 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
  7. 7. 7© een Consulting GmbH 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
  8. 8. © een Consulting GmbH 8 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
  9. 9. © een Consulting GmbH 9 Bain & Company Example framework (2)
  10. 10. © een Consulting GmbH 10 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
  11. 11. © een Consulting GmbH 11 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
  12. 12. 12© een Consulting GmbH • 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
  13. 13. 13© een Consulting GmbH 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)
  14. 14. 14© een Consulting GmbH 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
  15. 15. 15© een Consulting GmbH 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)
  16. 16. 16© een Consulting GmbH 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
  17. 17. © een Consulting GmbH 17 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
  18. 18. https://www.linkedin.com/in/iantidswellpricing info@eenconsulting.com
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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.

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