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Profits Through Pricing Excellence

Written By onci on Friday, December 23, 2011 | 11:04 AM

  1. Maximizing Profits ThroughPricing Excellence ©2010 PROS Holdings, Inc. All rights reserved.
  2. ©2010 PROS Holdings, Inc. All rights reserved. 1
  3. Pricing is the most powerful profit lever B2B companies have at their disposal “1% improvement in price translates into an 11% improvement in operating profit.” McKinsey & Company©2010 PROS Holdings, Inc. All rights reserved. 2
  4. B2B pricing strategies are constrained by three critical problems Complexity Poor Visibility Antiquated Tools ©2010 PROS Holdings, Inc. All rights reserved. 3
  5. Companies often resort to outdated and destructive pricing practices  One-size-fits-all  Cost-plus  Match-the-competition ©2010 PROS Holdings, Inc. All rights reserved. 4
  6. The result is margin erosion©2010 PROS Holdings, Inc. All rights reserved. 5
  7. There is a better way…Pricing Excellence Use pricing to achieve strategic objectives Set the right price for the right product for the right customer… every time Efficiently manage , measure and enforce pricing across the entire company ©2010 PROS Holdings, Inc. All rights reserved. 6
  8. Pricing Excellence is a transformationthat makes the impossible…possible X Leverage pricing science to Complexity tackle complex pricing problems X Poor Measure true profit margin Visibility on every transaction X Antiquated science-based technology Use advanced Tools for analytics, optimization & execution ©2010 PROS Holdings, Inc. All rights reserved. 7
  9. Pricing Excellence drives massive revenue & profit lift Electronics Overnight Distributor Shipping Med Products Animal Health280 Basis Distributor Distributor Industrial Manufacturer $20 Million Points 134 Basis 187 Basis $108 Points Points Auto Parts Million Distributor Your Paper Company Manufacturer $12 Million $18 Million Industrial Med Products Supply Distributor 110 Basis $8 Million Points ©2010 PROS Holdings, Inc. All rights reserved. 8
  10. Many companies are on the journey to Pricing Excellence  75% have pricing initiatives underway  60% have or plan to deploy pricing software  “Price optimization and revenue management was mentioned as a top priority project by 25% of respondents...” ©2010 PROS Holdings, Inc. All rights reserved. 9
  11. Companies are motivated to improve pricing for four reasons 1. Defend and improve profitability 2. Defend and grow revenue 3. Improve consistency in pricing 4. Improve pricing agility ©2010 PROS Holdings, Inc. All rights reserved. 10
  12. The journey includes five key steps 1. Assess current state $ 2. Identify opportunities$ $ 3. Build business case $ 4. Implement in phases 5. Measure and improve ©2010 PROS Holdings, Inc. All rights reserved. 11
  13. Begin with a holistic approach to assessingcurrent state and identifying opportunities Pricing Pricing Strategy Organization Pricing Technology Pricing Pricing Execution Process ©2010 PROS Holdings, Inc. All rights reserved. 12
  14. Build a business case for pricingtransformation with five key questions 1.What are the expected benefits? 2.What are the success metrics? 3.What are the costs and risks? 4.What organizational changes needed? 5.What is right order and combination of process and technology? ©2010 PROS Holdings, Inc. All rights reserved. 13
  15. Profit and process improvements are most common benefits Improve overall profitabilityProfitability Recovering product costs (mfg, sourcing) Better deal with increased costs/price volatility Recovering service costs (freight/packaging) Reduce invoice errors Improve response times to key pricing triggersProcess Reduce quote cycle time/responsiveness Use pricing to shape demand ©2010 PROS Holdings, Inc. All rights reserved. 14
  16. Pricing software plays a critical role in Pricing Excellence "There is a growing recognition of the potential value such applications pose in helping companies defend margins and revenue, and realize efficiencies with pricing processes.”©2010 PROS Holdings, Inc. All rights reserved. 15
  17. PROS can help you on your journeywith science-based pricing software Identify Plan Execute Margin Pricing Optimized Opportunities Strategies Prices Sales Marketing Finance C-Suite Science Inside©2010 PROS Holdings, Inc. All rights reserved. 16
  18. How companies make money with PROS Better Pricing Better Processes Set the right price for Streamline processes to the right customer on manage, measure, & the right products… enforce pricing every time ©2010 PROS Holdings, Inc. All rights reserved. 17
  19. B2B companies are making money with PROS • F500 Electronics • F500 Chemical distributor Manufacturer • 280 basis point • $5M margin lift opportunity in less than 30 days Pricing Pricing Guidance Analytics • F500 Industrial • F500 Industrial Manufacturer Manufacturer • 40% faster time- • $108M margin to-price improvement over three years Pricing Pricing Management Optimization©2010 PROS Holdings, Inc. All rights reserved. 18
  20. Revenue and margin improvement are most common success metrics Use to measure Most useful Increase in revenue 73% 29% Margin improvement 60% 19% Market share improvements 45% 13% Improvement in volume 41% 10% Improvement in cost-to-serve 33% 10%Increased profitable business / reduced unprofitable 53% 9% Stop in margin leakage 37% 7% Decreased response times to pricing triggers 21% 3% ©2010 PROS Holdings, Inc. All rights reserved. 19
  21. Centralization, compensation, andexecutive influence are key changes Centralization of pricing organization across 55% business units, regions, product categories Change in structure of sales compensation to 54% reflect new pricing initiative goals Creation of a VP or Chief Pricing position who 47% reports to high level executive Communication of new pricing structure to 35% customers Independent pricing organization established 23% (outside of sales, marketing, finance) Instituting training of sales force for fact based 23% pricing and profitable deal negotiation©2010 PROS Holdings, Inc. All rights reserved. 20
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