great thanks dave good morning everyone welcome from my side as well i will take

21:38
you to the rest of the material but before i do that let's take a quick pause
21:44
we have been talking about the business impact of kovaid and all the other
disruptions um over last year or so i also want to
21:51
acknowledge the human impact of of this of this
21:56
events uh first i want to wish you and your family uh being safe and healthy
22:03
and also want to acknowledge that there are significant part of the world as dave
said where kowaid is actually in its worst state
22:10
right now so again i want to send them good vibes and hope that the better days are
coming
22:17
very soon for all of us now back to the scheduled programming so as they said
22:22
there is a clear difference in short-term tactical actions between the winners and
winners and the legends
22:27

and we found there are five tactical actions that b2b companies can do to have a
control on the margin erosion, and i would like to bucket them into two areas one is
patching the price leakage immediately, and the other one is proactive engagement.
so when you talk about patching the price legacy the most, important thing is to have
control over your front line discounting and operational leakage, what do i mean by
that we all know about on invoice discounts, right the discounts that you can see,
you can argue, maybe you can control that with the right policies, you can control
that with the right processes, however there are ton of off invoice discounts and
operational cost for every customers, that a lot of times you don't see. think of all the
added costs that you are incurring in form of service levels, which maybe you are
providing too much service level that customers are not willing to pay for, all of those
things needs to be looked at.
the second one is enforcing the contracting terms, every contract has some sort of
compliance or commitment from customers, whether it's in form of buying certain
volumes, buying certain order quantity having some sort of lead times so on and so
forth. Downturn is a good time for you to make sure that customers are holding on to
their side of the bargain, other part of the contracts terms would be escalation
clause, so first of all make sure you have escalation clause in your contract allowing
you to price higher, but also making sure that you are enforcing this clauses and
passing on the price increase.
okay the third one is eliminating the unproductive promotions, promotions and
discounts and programs are part of growth partnership with the customer, but not all
programs are made equal, you have to look at the return on investment of these
programs or roi of these programs, and make sure that you are taking the money out
of the non-performing program and putting the money in to the programs which are
working well for you, same thing is true for customers, not all customers are getting
the right roi from the program you're offering, so make sure you shuffle the
customers as well,

that brings us to the second bucket which is proactive engagement, as dave

mentioned leaders do pretty good job in implementing a customer engagement plan
and i may argue that this is not necessary, only for the turbulent time but also any
time, you need to have a very clear plan or i call portfolio of your customers, strategy
customers and transactional customers, but in time of downturn, it's even more very,
you need to be very selective and treating your good customers differentially better
and manage your transactional customer with minimal cost and transaction and
interactions, and make sure you have communication with the customers about that
we understand.
the last but not least is around passing through your input cost, we see this time
leaders do pretty good job with that, and there is ton of value left on table by some of
the legos, and what leaders do better three things, 1. one they have good control
and visibility over where the cost is coming from or costs are coming from, this is not
just input costs, it's your labor, it's your distribution cost, everything right; and 2.
second thing they are pretty good in shortening the time leg between the cost rising
and their ability to pass on the price increase; 3. and the third thing they do pretty
good is they make sure that if they set out to do five percent price increase, the
realization is close to that target, so they have good discipline to do that.
all right let's go to the next slide please jeff
28:08
so i will share you share very quick yesterday
so we worked with a global specialty material leader, who was serving in diverse set
of end markets and uh highly customized solution, they were losing ebitda and they
are struggling with the margin and what we found is they never had price increase
and so basically their customers were trained not to expect an increase and by the
way, that's uh even inflationary fly up situation, they were not passing on the
increase, also they had very very limited visibility into their cost to store elements. so
we set out to first bring the visibility.
what we did is we created so-called profit pool. we started allocating their true cost at
customer product family and sales rep level, try to understand how differentially each
customers is costing after you account for all the value-added services and
transactions that you are doing, what we clearly found a ton of unjustified variability,
there are some customers which were getting so many different services, which they
don't deserve and having programs which are not working, so the margins were all
over the place, so we brought sales team together and committed through them to
take actions, either reducing those contra of those discounts, increasing the price,
stopping the programs and also most importantly reducing the service levels
customer is willing to pay for it. so there are 400 actions were taken across all their
customer bases and then we set out to do the price increase, very surgical price
increase, which resulted in six percent increase on the invoice price for all the future
quotes that, we are offering overall 30 improvement ebitda. very successful story

Bottom line is you need to be intentional about plugging the leakage before you do
that, you need to start measuring that and once you plug this leakage also make
sure that all the unjustified variabilities are being closed and force your contract
terms, make sure your right clauses and then you enforce this closes, make sure you
pass on the price increase and be efficient and effective about it, and last but not
least, stop all the programs which are not working and shuffle the money, we are not
saying stop investment, so let's be very clear careful to do invest in the time of
turbulence, but invest in right programs, invest with right customers is the key.
All right, let's go to the next slide please okay so short term tactical actions
30:55
great yeah they are absolutely necessary it will help you prevent control or at least
uh help you control
31:02
margin leakage but what we found is that sustainable performers
31:08
do invest significantly in building the pricing muscles or pricing capabilities and it's a
31:16
purposeful intentional investment which over times take them sort of an improved
curve over
31:23
their competition and i may argue that once you do that it will once you build the
long-term
31:28
capabilities it will help you execute the short term tactical actions better as well

so let's take deep dive into this capability building in next section i will walk you
through what those capabilities are and take you deep dive into a couple of them all
right, so let's first zoom out at bain. we have a comprehensive approach for pricing,
we have 16 elements which we believe fundamentally drives the pricing maturity for
the organization which achieves price excellence and we bucket them into four
categories.
The very first is strategy and architecture, so if you don't know where you're going all
paths will do right surprising, strategy is super critical, it's actually defining your
economic linkage between your company strategy, your business unit strategy,
as well as your customer interactions, what are the values your company is offering,
how do you communicate those values, how do you get paid for it, which includes
making sure you know your pricing position, are you leader? are you follower? are
you a premium player in certain market? in certain market you are driving value and
volume. what should be the pricing model you should charge with? should you stick
with the traditional dollar per unit or there are different ways to charge to get the
differential value out of certain segment of the customers? how should i bundle my
prices and services? how should i bundle my certain portfolio of the product? how do
engineering my discount framework? do i have the right discounting setup upfront for
volume, for quantity, for certain types of portfolio purchase? and whatever that is
right providing that guidance upfront is.

All part of the strategy in the second column you get into price setting, which is
making sure that you price right for the new products, as well as you continuously
evaluate how your existing portfolio is doing, because your market condition is
changing, your value perception is changing, so you have to continuously evolve and
reset the price. there are multiple tactics, value pricing, dynamic pricing, lifecycle
pricing, all falls into that second bucket.

now third bucket is about price getting you set up, you set out to get one dollar for
price, how many cents you ended up getting, that's your basically execution of price
through your commercial channel, so that's providing the guidance to your sales
people, creating and enforcing the right contracts, redesigning channel incentives,
you are going through direct distributors, e-commerce, what is your strategy? and
then finally controlling the operational leakage that we talked about quite a bit in
previous slide.

the last column is about enablers and i may argue that you can have best of
everything upfront, but if you are not preparing your sales people, you are not
training them, you don't have right processes, if you don't have right operating
model, all of those things will not achieve you the full potential. so again upgrade
your training, communication, drive the right incentives for sales people and
deploying the right tool, all falls in here bottom line. achieving the pricing excellence
is a comprehensive strategy,
let's go to the next slide please then you might be wondering nimitz okay

34:43
should i really need to focus on all and are there any any capabilities that matter the
most and
34:49
the answer is yes don't take my words for it uh at bain we did a pretty pretty detailed
uh detailed study
34:58
benchmarking study where where we look at all the industries but also chemicals
and we found there are five distinct capabilities
35:05
which are high impact for chemical players right what are those first one is that
35:11
those top performers in chemical space they use value pricing nine times more
35:17
often than the average right nine times more often the second one is that they are
two and
35:23
a half times more likely to price dynamically using the market factors and they have
data to
35:29
support that the third one is that they do provide very detailed data-driven guidance
to
35:35
their sales people and that allows them to make sure that sales people capture the
value and error don't erode
35:42
the margin so we'll take a deep dive into all three of this capability i will give you
35:47
introduction of this capabilities so you get idea about what you're talking about it
might be using all of this thing or some
35:53
of this already so there is fourth and fifth which which we didn't mention here one
35:59
is that they also do pretty good job with incentivizing their sales people
36:04
and the last is that the top-down leadership uh priority of pricing right so their
36:11
leadership do care about pricing and then have their accountability for pricing all right
let's go to the next one please
so first deep dive into value pricing, so what is value pricing, i mean it's conceptually,
it's pretty straightforward, it's basically understanding the value that your solution
delivers and effectively pricing for it, and the value comes from products, but also it
comes from services, it comes from the quality brand, it comes from the risk
avoidance that you are offering, and there are a ton of other things. so let's address
the myth of value pricing.
first i have a pretty commodity business, should i think about value pricing? I heard
that quite a bit, you know value pricing is all about increasing the price, the answer is
not value pricing is not about increasing the price, it is about right pricing, it's
understanding the price and making sure that you are understanding the value and
making sure that you are pricing for that value in the market. talking about
commodity business, i have seen many commodity business struggle with that
concept, that i do not have anything to differentiate on. And that's not true, you
should really think about when you compare yourself against competitors, what are
the factors that sets you apart, and if you cannot value your own solution and can't
articulate the value that your solution delivers it, you will have hard time in
negotiation,
so very quickly one of the sales reps was talking to me about when he was
negotiating with customer procurement person, took out two piece of paper, one was
his price and one was the competitor’s price, and he said why should i pay you eight
percent more compared to the competition, we did the test in the lab and your
products are exactly the same, why should i pay eight percent more, or essentially
he was asking for is justify the value that you are charging me. for cut the story short,
we get back to the exercise, try to figure it out the technical services that we were
providing value of local supply, the lead time, all this thing, we came back and said
look we are delivering way more value than eight percent, feel free to go to the
competition but you will lose out on all these value drivers that we are giving.
here how do you go about implementing this, at main we have six steps approach for
value pricing and we'll not get into the detail i have done a 45 minutes webinar on
this i'll be happy to send you the link on this topic, but basically first three steps are
all about understanding the value. and the last three steps about pricing for the
value, making sure that you have your right strategy for the product portfolio, make
sure you are looking for customer segmentation based on the value that
segmentation derives right, these are not your supply chain segmentation, these are
the segmentation which has distinct value for your offer.

the third thing is around understanding and quantifying the value drivers. and let me
take a pause here, the value as i said comes from a lot of different things besides
product, and at bain we have really good framework, all element of value what it
argues or asserts is like a pyramid, at the bottom you have table stakes variables
which you have to deliver about that, you have more of your functional and
economics value drivers, above that you have experiential value drivers which is
about ease of doing business, productivity access, the risk, the quality, all those
things, and above that you have aspirational and more for personal value travelers,
each of these value drivers do matter, when customer decides whether to use your
product and what to pay for it, so when you think about that think about more than
just the product;
last three steps, i will not go too much into the detail but again it's about making sure
that once you know your value, what portion of that you should charge, which form
you should charge, there are a lot of innovative pricing models which are coming
from subscription industry, from healthcare industry into the chemical space, well
people are looking to say hey can i think about performance shares? can I think
about value share besides just dollar per unit price point? so use that provide better
discount guidance, so make sure that you use pricing is not a single turn point, it's
going from list price to net price and there are ton of elements in between, which is
what should be my price by different region, what should be my price for different
channels, what should i price by different segment? what kind of discounts should i
offer strategically? if you build everything up front, you will have much better time
advising your sales people later.

last but not least, value selling, i cannot emphasize enough this is where 90 of the
efforts fail or succeed, you need to bring your sales people with you from day one, as
you are designing any of the value pricing effort, they are the one who will be driving
this to the success or not, make sure you train them, make sure you provide them
proof points, and all those good things. so again this is a comprehensive approach
and as i said, happy to share with you more if you reach out, i will send you the link
to the webinar let's go to the next
slide please okay awesome
so now we are going from value pricing to something else, because you may argue
that, look Nimitz, it's valid fighting, is good, i would love to understand value of my
business, but my input changes a lot, my market is dynamic, my competitors are on
my neck every day, how do i price in this case? right and my answer to that is, think
about dynamic pricing in that situation, what is dynamic pricing is essentially the
capability that systematically and dynamically sets price based on the external
factors of the market. yeah so what are the external factors, we are talking about the
competitive dynamics within your space, we are talking about input cost variation, we
are talking about supply capacity change, we are talking about demand shift, or it
can be inventory level within the industry, or within your own company, so when you
combine all this input, and then you need a data driven algorithm by the way, this is
heavy data, heavy capability, so when you combine that and you can come up with
what should be my pricing recommendation on a dynamic basis.

yeah this is not new concept, this came from hospitality and airlines industries being
heavily used in cpg, we are just learning in chemicals to use this more often, recent
example we worked with a company fuel company, which had thousands of retail
distribution all over the us, and what we did with them is they were struggling with
the ebitda by the way, so we looked at their input cost variation, their locality which is
how many retail centers they have, who are they competing with? how competitions
pricing is during that time? also we looked at the grade of their product, we look at
overall the distribution costs and also the seasonality, and using all this dynamic
parameter with advanced analytics and machine learning algorithm, we came up
with a model, optimization model which spits out the price on a daily basis, so they
were able to guide the retail outlet with the daily price points and we saw significant
14 improvement on this very tightly controlled margin environment.

Here so end with this end with saying that, this is not just the capability for sort of
retail distribution fuel kind of company, if you find yourself in an environment where
inputs are changing frequently, market factors are changing frequently and you want
to dynamically address that this capability might be for you

all right let's go to the next one jeff

so this is the last capability of three, so we talked about value pricing, we talked
about dynamic pricing, but i may argue that the most relevant price is context,
specific what do i mean by context, when your sales rep is creating a deal or when
they're responding to a bid or rfp or creating a code, it's a context of that code or a
bid or rfp which matters a lot. for example what is the size of the bid? what are the
commitments of the bid? who are you competing with? what are you offering in that
bid? all of those things including customer segmentation, product segmentation, all
those things drive the behavior that you want, or the other input that drives the
pricing for that particular deal, so for that we have a data driven guidance that we
always build for sales people, and the companies that do that pretty well, really drive
significant improvement in their margin, we have a product called dynamic deal
guidance at bain, which does exactly the same and it has the four steps approach.

first it's an advanced analytics machine learning module, what it does is it looks for
all the historical data, it looks for any external data and try to come up with like
cohort, yeah it drives you, what should be the target price for that, like for like cohort
what should be the stretch? what should be the floor? very clear guidance, then you
apply business rules on top of it, so it does not become black box, it's very open and
transparent, then we also build working with our partner pricefx, as a very best-in-
class ui, or user interface which displays or deploys this guidance, and it drives the
sales people's behavior, so we have designed the fields which drives us behavior to
use this guidance and take profitable decisions by the way, it's you can use that ui
with anything, you can do that in excel as well, so it's not an approach specific to a
particular tool.
the third thing we do is then we design sort of a scoring algorithm by which you will
rate a deal to be, is it a good deal? or bad deal? or okay and then set up an approval
criteria, so that it goes to the right approval authority.

and the last but not least is about change management, how do you incentivize your
sales people to use what you have built and truly use that in the field, which requires
you to again use cells to bring sales people from day one, make them part of the
decision, make them part of the building of this process, and then change their
incentives, make sure your ease of use is think about from their eyes, as you are
building these tools, but again companies that do that we find a significant margin
advantage compared to the ones who do not provide guidance to the sales people.
all right so let's go to the next one

47:08
please so in summary, short term actions are great as dave talked about it, clearly
differentiates leader from laggard, there are five specific actions, we talked about in
short term that you should always think about taking but build the long term
capabilities, invest in building the long term capabilities either in form of tools or
approaches people training everything and it's not an overnight solution, it's a
journey, it requires investment but we have seen multiple times, this investment
paying off and we have helped our clients taking this through anywhere between 200
to 400 basis point improvement, we have a ton of tools and approaches to support
you with that, so with that i will end saying

let's go to the next slide please if you want to learn more about it please go to
bain.com and search for pricing and you will find ton of insights ton of free papers
and also on right side you have email address from dave and me feel free to reach
out any questions you might have always love a good pricing discussions okay thank
you thanks thank you thanks steve yeah that is that's really good stuff really exciting
um we have about 10 minutes left in our session today and there's a number of
questions that have come in um i'd like to divert into it if you guys are okay with that
?1
the first question we have is in regards to data and this always seems to be kind of a
hot topic especially these days, what if an organization doesn't have enough data,
the question is my organization does not have all the data we need, can i still use
dynamic pricing or value pricing? so if I don't have the data can i still implement this.

if you don't mind let me take this, so great question. first of all, so data limitations are
real and most of the companies we work with, none of them have the perfect data
because perfect data does not exist, my advice in that case is start with identifying
the use case for which you want to build the data.
for example is it you want to understand the better economics of your customers, so
that you can do value price better, that's one use case. you want to have a better
competitive advantage, competitive intelligence, that's the second use case. i want to
understand the market data better, so i can price dynamically, third use case so on
and so forth.

So first defined what is the priority of the use case for which you want to have data,
then also there are ton of internal data that you might already be sitting on, and you
might not be synthesizing, so bring that up sells call reports, all right any anything
that you are collecting externally from your sales team or customer service team,
bring them all together. and then create the roadmap in terms of what you have,
where you want to go and what is missing, and then invest with the priority of those
p's which are missing, so be purposeful about it, otherwise you will always be talking
about data and never be advancing your maturity in data. hope that helps

50:24
yeah thanks nimit uh the next question is around discounts now you touched upon
50:30
it in the content um so the question is in short-term tactics you recommended
50:36
increasing discipline around discounts and operational costs but during the downturn
my customers are
50:42
always asking for more discounts more services how do i manage these conflicting
objectives
50:48
i can take uh i can take that one yes so it's a it's a good question
50:55
there's no there's no one-size-fits-all approach i maybe would say three things i
would
51:01
i would start by just bringing it back to any sort of strategic segmentation so
51:06
just to to keep it real there's some customers that are more strategically important
than others so make sure that
51:12
you're starting there to decide where you are going to be more or less flexible with
what you're
51:17
willing to do with your margin um second and this i think gets at a few things that
nimitz talked about
51:25
um the messaging matters a lot and get make sure you're getting back to value
messaging throughout so
51:31
this is when all you know every time you do good value messaging it's a balance
sheet investment
51:36
this is when all that value selling should pay off because you've earned the right to
not talk
51:41
about price nearly as much as you're talking about value if you do have to give them
give out
51:47
some discounts just i'd be careful about what you call them be clear i think you
always want to be
51:52
clear that it's an investment and you want to be extremely clear about the temporary
nature of any of these
51:57
discounts that are happening in a high volatility situation time bound them as well
52:02
any way that you can and how you present them and then last just you know make
sure you pick the right discounts sometimes
52:09
there's discounts you can give that your customer values a lot but may not have as
much associated cost for you
52:15
um and so you know where their surcharges you can drop they don't actually add
incremental cost or really cut into your margin as much
52:21
just think about that you know cost to you versus value to your customer and
balance that appropriately
52:30
what yeah um there's another one coming in about uh

?2
getting the sales team on board, which i know is always a tricky to do, the question is
in my experience with value pricing, one of the biggest hurdles is the preparedness
of my sales organization to adopt value selling, how do you increase sales adoption,

that's a great one, let me take that. look i always believe that sales people want to do
the right thing, they need to be brought in ahead of time, they need to be made
partner, and don't left to the end for being like, so i always say do these initiatives
with them and not do them, which matters a lot. so every place where i had success,
we brought our sales influencers, not everyone influencers, from the very beginning
of the journey, and that's true for dynamic pricing, that's true for value pricing, that's
true for any initiatives, which requires operation in the field, which you can argue all
of them also invest in upskilling the sales capabilities, because you want to make
sure that you provide them enough guidance you need to put, also you need to
provide them with the training and the capability, we used to do mock interviews with
them to make sure they are ready to do customer value discussion and then provide
them with enough proof points, don't just leave them hanging to say trust me, there is
ton of value, no, give them the tangible data that they can produce to their
customers, and overall money is not everything but it’s the second best, right so
incentives do matter,

so i have a lot of time seen companies that do this very well, align the incentives with
the strategic purpose that they have with the pricing, and for that matter any other
topic, so these are the things. i would say that leaders do pretty well in making sure
that sales people are fully prepared and trained and ready and bought in to do the
changes that you want them to drive. i would agree aligning incentives is critical in
that sales person adoption.

?3
absolutely the next question that has come in is in regard to covid and the impact of
digitalization, so the question is how does covid impact the digitalization of go to
market and sales in our industry? what is the impact of any on pricing?

great question, i think there's a lot of ways. i'll give two that come to mind, first just
virtual sales, i think in general other sectors have been way ahead of chemicals and
just broadly industrials on this, it was believed I think in many of the industrial sectors
that you needed to be in person to be effective, and you needed to shake hands and
you had to be there for every part of the sales cycle, and i think covet changed
everybody's perspective because most sales forces went to, you know in many
cases 100 virtual overnight, so i think we're seeing a lot of companies now working
on figuring out what is the right mix of field versus virtual sales in the future and if
you're going to move some amount of your team to virtual selling model or hybrid,
even you do need new tools and new skill sets, which is actually fundamentally
changing how people think about the talent in their commercial teams.

the other big one that popped in mind is just sales enablement, you know some
companies did indeed have to find cost even in the sales teams during the last year
or so, there's been a big shift therefore and how do we use technology for digital
investments to make the sales teams we do have a lot more productive, so you have
enablement platforms, like hi spot that people are investing in, to get you the right
collateral at the right time, people are investing in adoption of crm tools, so you can
efficiently manage and deploy sales and marketing plays you get and then you know
the pricing was called on the question I think there's also just a lot of organizations
pulling up and say let's actually make sure we're hardening our pricing tools both, so
we can speed up but also increase the accuracy and effectiveness of our quotes,
let's get the right thing, you know really good quotes to the front lines faster, so we
can speed up the speed to bid, i think the list goes on but those are two of the big
ones that i see.
yeah no doubt, i've heard virtual selling take a tremendous amount of interest in
recent months, we do have another i think it's a good question and it's i'll call it in
regarding the speeding or being priced too high the question is, what is a strategy we
can take with customers that are priced too high and thus putting the business at
risk, a reduction back to market rate will raise trust concerns and cause the customer
to shop, are there any strategies you might recommend?

that's a really good question, yeah it's a great question, it's a great question for a lot
of different reasons. Right, so one is, i always when i talk about what is the good
pricing, look like one of the you will find most of the answers are pretty obvious, but
one of the things always surprise people is the fairness perception, and in good
pricing always live out of fairness, always take care of the fairness perception, so just
because you can charge someone pretty high, doesn't mean that you should charge
pretty high, right, so it is up to you to regularly, as you are looking for all your sort of
low pricing, low margin customers and trying to fix them up, you should also look for
the ones which are disproportionately high and think about how do you right price
them. now the great question is you cannot go back and say hey you know what look
we have been milking you so far, we are putting you down this is the enjoy this
discount, one of the way to do that is to offer something in in return, right to say look,
you have been enjoying this price point, now if you can sign up for two years contract
for example or if you can guarantee certain volume, we would like to reduce your
price by x percent, so be proactive about it and ask for something in return by doing
that, maybe you're not changing anything in the transactions, but you are off telling
them that you are offering that in return of something, so it sounds fair but also when
you offer that percentage lower than that price point, you are bringing them down to
the where their price point should be, and when you manage your good customers
actively like that they appreciate that and you will have higher loyalty from them, but
do it tactically, do it with something in return and do it on a purposeful way

?
we'll conclude how frequently should you look at pricing and if you're gonna do some
price Movements, how frequently should you do it? should you do a handful of
smaller ones or maybe wait and do one big one timing that look?

i will give you this consultant answer, which is it depends, but it truly depends on the
context of the business, so let's talk about what does it depend on. so if i think about
external factors, it depends on where you are in the value chain? how often the
expectation from the value chain, which includes your customers, your competition,
everybody's that you're not going new this expectations are already set up in the
industry, i work with industry where you have contracts, which prevents you from
doing anything more than one, once a year type of price increase, there is also a
time, like that there are contracts which says you have to inform me 90 days ahead
of time, and that is a 90 days window before you know new prices get in effect, right

so bottom line is it really depends where you are in the industry, what your contract
structure is, and what is expectation from your customers that you can influence. but
you are not the only one who is influencing that, also are you the leader or the
follower in that value chain, makes a huge difference, so the leader has, i can argue
that more sort of right to go and charge for price increase, which follower needs to
follow.

but there are also internal factors, for example how much is the cost for you to do
price increase internally, it's not free there's an administrative cost, there is a sales
people's times cost, and there are a ton of other currency that you are exchanging
with your customers, as you are talking about price increase, so going more often
might prevent you from building that good rapport, or having the value-driven
discussion that you might want to have with customers, instead of just the price
discussion and especially if you are being very surgical about price increase, you
want to make sure that you are going after certain customers on a regular basis, as
long as you are lifting them out of the low margin zone, but if you are doing broad
brush price increase, think about all the costs that you have internally. hope that
helps.

price is the strongest profit driver you have, i've taken a very simplistic made up, here we sell 100
units a one euro a piece, we have a 70 cent variable cost, 10 fixed costs, so we have an operating
income of 20 euros or EBIDA. Now theoretically, think through the simple mathematics of this, if we
for instance could improve any one of those levers by five percent, what difference of EBIDA.

If take 5 out of fixed cost, it improve EBIDA by 3%; if increase volume up by 5, we get a 8%
improvement because of course increasing the variable cost; if reduce that 70 variable cost down,
we can improve EBIDA by 18%; if we put five on top of the price, it flows all the way through this
profit & loss straight down onto operating income, so the 18 goes to 25% increase in profitability.

So when managing revenue or profit, keep those basic economics in mind, because of course this
thing also works in reverse, think about how many times do we say yes to a five percent discount
without even giving it a second thought.

Price is a very strong profit driver, but it's also a very dangerous profit killer if we don't understand
this properly, so I think if we can look after the one two three four five percent of money that we
just let flow out the door every deal every day, this could have the biggest single impact on your
bottom line

How to improve our net price? this is an industrial goods business typically, if we had a say a net
price of 92 versus the list price of a 100, and there is 8% discounting and when we asked on what
basis, it's actually purely discretion at sales person, it’s just average, some client or product even
have more discount than that. of course, there is the approval process, but there is very little
guidance or structure here, of course discounting makes sense, but we should have a rationale for
why we discount, because a more volume? Give a discount because you have a good product mix,
some of the high margin mix,

put some of it out of discount into rebates, trying to link discounts to real custom behaviors, to
reward the behaviors you would like and use this as a steering mechanism for our customers, to say
listen if you want more discount, these are the things you have to do. If we play with this so that the
overall discount level is slightly lower one percentage points here.

A clear framework is helpful to execute and take advantage of this. normally three steps to achieve
this, which is step one is working out where the issues are and important to bring some priority, it
could be strategy, it could be price setting on the value side, it could be discounting, it could
be incentives, it could be controlling. we need to know where the pain points are, where the
opportunity sits, so build the pricing logic, build the discounting system, build a new incentive
scheme, what does that look like make the blueprint and then it's about rolling this out, from project
to standard, so that all sales people. all marketing people, all finance people work from the same
sheet, that typical process could take longer or shorter depending on the number of opportunities,
the complexity of the business.

@pricing excellence project


 Tasks:
- Responsible of Sales prices and customer profitability
analysis in EMEIA
- Pricing Excellence Project (12.2019 – 09.2020)
o Conduct analyses and simulations to support new
pricing model roll out across EMEIA
o Support in project workshops for EMEIA pricing model
roll-outs
o Provide pricing expertise and country coaching
- Engaging and aligning pricing drivers with key internal
stakeholders (Country Managers, Product Owners,
Business Control)
- Support price monitoring, management reporting:
derive steering metrics and KPI
- Support in price decision making for large international
accounts through analysis
- Organization and conducting of monthly meetings with
Country/ Area Sales Managers
- Participate in developing, maintaining and testing the
price structure elements in internal systems
- Yearly pricing drivers follow ups (pricing governance
and strategy) with EMEIA Sales Teams
- Day-to-day support for Sales Teams in EMEIA and
Americas: customer pricing system logic correctness,
pricing strategies
- Pricing project roll-out support in Americas and APAC
- working with systems: Salesforce, OBIEE (Oracle Business
Inteligence), Internal Pricing/ costing program, SAP (RP1,
UP6)

Why enablers?
Hi my name is Sudipto Banerjee.
I'm a principal with the Boston Consulting Group. I bring more than 17 years of pricing experience both
as a practitioner as well as in consulting. And I'm going to talk to you today about why knowledge is

not enough but enablement is. And why is it that we talk about enablement?

Well if you recall we talked about the three lenses of pricing that lead into the knowledge, the
knowledge brings in the results. But to keep the results sustainable it is imperative to the organizations
enable pricing in the DNA of their people and organization. We have seen typically that organizations
that are well enabled in pricing continue to bring anywhere from three to eight percentage points of
revenue to their bottom line.

And without enablement we have seen that companies generally have a tendency to fade that value.
That value fades over time. But I guess the question you might be asking me is what is
enablement? The way at BCG we think about enablement as really through three different core

pillars.

The first pillar is about the maturity assessment. The second is about the link capabilities, and the third
is about the platforms. Individually, each of these things I will explain shortly will lead to a very
successful enablement journey.

The maturity assessment gives an indication of how sophisticated or mature the pricing organization is
within a certain company. The capabilities that the organization brings to bear is really about how big
is the pricing organization, how are they designed? Who are they reporting to functionally
speaking? What are the different governance structures around the different pricing decisions they're
making? And so on and so forth.

And then finally here on the platform side it's really important to understand what are the different
tools and systems that the organization's using. A lot of company's nowadays are using big software
vendors in order to both implement their pricing strategies as well as execute them. But a lot of
companies are also building their own pricing software and tools both on the desktop and the laptop,
but also some really fascinating applications on the iPhone and Android devices that are leading
pricing decisions in the market place and in the field.

And then finally on the platform side, we also have pricing KPIs and metrics, that he would
continuously monitor in order to see the impact of the pricing. So in summary, while the results are
driven by the three lances of pricing and that is leading to the knowledge that is embedded in the
organization, without enablement, it is impossible to sustain the level of value that you can through
pricing.