www.simon-kucher.com
How to smartly increase profits?
Strategic Pricing Innovation
Amsterdam, February 12, 2015
Onno OldemanJuriaan Deumer
Amsterdam office
Barbara Strozzilaan 380
1083 HN Amsterdam
The Netherlands
Tel. +31 20 75312 53
Presentation Summary
World leader in giving
advice to companies on how
to price their products
Pricing strategy
specialists
The world’s leading
pricing consultancy
In pricing you offer
something nobody else
does
Source: manager magazine and brands ein thema , 2007-2013/IMB, survey among German top managers
Simon-Kucher & Partners:
Worldwide marketing, pricing and sales experts
BusinessWeek The Economist
Professor Peter DruckerThe Wall Street Journal
AmsterdamBonn
BrusselsCologne
CopenhagenFrankfurtIstanbulLondon
Luxembourg
Madrid MilanMunichParisWarsawViennaZurich
TorontoBoston
New YorkSan Francisco
São Paulo
Santiago de Chile
Dubai
Beijing
Tokyo
Singapore
Sydney
29 offices worldwide, 760 employees Strategy
> 400
Sales
> 500
Marketing
> 500
Pricing
> 1,000
� Profitable growth strategies
� Product portfolio
(re-)design
� Pricing excellence
� Customer relationship and
customer value management
� Sales strategies and sales
channel optimization
World leader in pricing
Global presence >1,000 projects in the last 3 years
Simon-Kucher_Strategic Pricing Innovation_150212_Summary
1Simon-Kucher
& Partners
2 Boston Consulting Group
3 McKinsey & Company
Marketing and sales
Simon-Kucher
& Partners
Boston Consulting Group
McKinsey & Company
Marketing and pricing
Simon-Kucher
& Partners
Boston Consulting Group
McKinsey & Company
Sales and CRM
......
Source: manager magazin survey of top managers in Germany, August 2007 and 2011/IMB
Source: brand eins Thema/Statista survey of 1,426 partners and project leaders from consulting firms and 1,300 C-level managers from German companies, May 2014
Best consultancy in marketing and sales
2
Unrivalled expertise in marketing, pricing & sales
Consumer & RetailAutomotive
Audi
Continental
Daimler
Maserati
Mercedes-
Benz
Porsche
Renault
Toyota
Volvo
VW
Würth
Beiersdorf
Coca-Cola
Danone
Ferrero
Henkel
Nestlé
Nikon
Nutricia
Swarovski
Ph
oto
s:
ww
w.c
olo
urb
ox.d
e
Media & EntertainmentTransport, Logistics & Travel
AirFranceKLM
DB Schenker
DHL
EuroDisney
Germanwings
Lufthansa
Thomas Cook
TNT
TUI
Bertelsmann
Eur. Directories
Harcourt
Scholastic
The Economist Gr.
WMG
Pearson
Persgroep
Reed Elsevier
TelecommunicationIndustrial Goods & Services
Bosch
Carl Zeiss
Caterpillar
Demag
Geberit
Schaeffler
Siemens
Tetra-Pak
Thyssen Krupp
1&1
DTAG
KPN
Orange
Ooredoo
Skype
Swisscom
Telefónica
Vodafone
Software & TechnologyFinancial Services
Citrix
Intel
Microsoft
Novell
Panasonic
SAP
Semikron
SunGard
ABNAMRO
Allianz
Am -Express
DB
Generali
Western Union
AXA
Barclays
BNP Paribas
Pharma & Life SciencesChemicals & Ingredients
24 of the top 25 pharma companiesAkzo Nobel
BASF
Bayer
Simon-Kucher_Strategic Pricing Innovation_150212_Summary
CSM
Danisco
DSM
FrieslandCampina
Merck
Solvay
Source: Simon-Kucher & Partners project database
3
Profit driver Profit
Price
NewNew OldOld
€10 m €13 m€57€60
€10 m €12 m1.05 m1 m
€10 m €15 m€105€100
€10 m €11.5 m€28.5 m€30 m
Variable
unit cost
Sales
volume
Fixed
costs
* Assuming ceteris paribus
Source: Simon-Kucher & Partners
Price as the most effective profit lever
Simon-Kucher_Strategic Pricing Innovation_150212_Summary
A 5% improvement of … ... leads to a profit increase of …
+50%
+30%
+20%
+15%
4
Source: Simon-Kucher
Pricing power for capturing value
Pricing power is the ability
of a company to get the
price it deserves for the
value it delivers.
Simon-Kucher_Strategic Pricing Innovation_150212_Summary 5
1)The "Best" classification comprises 10% of all companies participating in the studySource: Simon-Kucher Global Pricing Study 2014
Simon-Kucher experience:
The "Best"1) (10%) show how it goes!
… 41% higher
pricing power
Average
realization rate
for price
increases
Price implementation
… 45% higher
share of
successful new
product launches
Share of new
products which
meet their profit
targets
New product success
15,9%
12,8%
Best
Rest
… 25% higher
EBITDA margin
EBITDA margin
over the last 3
years
EBITDA
51%
36%
Best
Rest
39%
27%
Best
Rest
+25%
+41%
+45%
Simon-Kucher_Strategic Pricing Innovation_150212_Summary 6
1) NPD = New Product DevelopmentSource: Simon-Kucher Global Pricing Study 2014
Four key success factors
separate the "Best" from the "Rest"
Leadership & strategy:
Clear directions, guidelines and owner-
ship from C-level executives in pricing
Organization:
Clear pricing roles/responsibilities
and dedicated pricing organization
Innovation process:
Early and permanent integration of
pricing/marketing in the NPD1) process
Technology/Know-how
Usage of customized tools, software
solutions and methods
68%
34%
42%
34%
39%
26%
33%
24%
Share of respondents
Best
Rest
1
2
3
4
+74%
+31%
+27%
+40%
Simon-Kucher_Strategic Pricing Innovation_150212_Summary 7
Overview of the session
Value pricing: How to gain pricing power?
Value strategy: How to prioritize?
Value selling: How to sell and defend value?
Implementation: How to make it stick?
1
2
3
4
Simon-Kucher_Strategic Pricing Innovation_150212_Summary 8
Value strategy: How to prioritize?1
Take-aways
� Commercial excellence is all
about obtaining pricing
power
� Power pricing requires
action on three disciplines:
value strategy, value pricing
and value selling
� Value strategy:
– Clear leadership
directions, ensure
ownership from C-level
executives
– Develop clear strategic
goals and a differentiated
approach per market
segment
– Identify value drivers per
customer segment
– Smartly bundle your
offering to maximize
willingness-to-pay
Simon-Kucher_Strategic Pricing Innovation_150212_Summary 9
Value pricing: How to gain pricing power?2
Take-aways
� A lack of pricing structure
results in unexplainable
price differences between
customers
� Use different pricing
methods in combination
� Increase margins on slow
movers and fix historically
grown inconsistencies
� Build a conditional
discounting framework
make discounts defendable
� Improve value selling
through Peer Pricing
� Create a tool-based
environment to support
pricing power
Simon-Kucher_Strategic Pricing Innovation_150212_Summary 10
Value selling: How to sell and defend value?3
Take-aways
� Prepare your deals: Regain
control in negotiations
through balancing power,
gain insight into value
drivers and your relative
position
� Use a structured process to
ensure deal success
� Make discounts conditional
and dare to give smaller
steps than usual
� Equip your salesforce:
Develop a practical sales
excellence playbook and
optimize sales processes
Simon-Kucher_Strategic Pricing Innovation_150212_Summary 11
Implementation: How to make it stick?4
Take-aways
� Provide clear leadership
directions, ensure
ownership from C-level
executives
� Speak the same language,
get the data right
� Define clear responsibilities
and governance, build a
dedicated pricing
organization
� Clarify processes and KPI's,
you get what you measure
� Enforce in systems and
tools, avoid manual
loopholes and exceptions
Simon-Kucher_Strategic Pricing Innovation_150212_Summary 12
Source: Simon-Kucher & Partners
Simon-Kucher expertise: World-class methods and tools
to ensure fast and proven results
Competition
Map
Price
Maps
Sales
Playbook
Peer
Pricing
Discount
Optimizer
Service
Monetizer
Balance of
Power
Market
Simulator
Segmentation
via ComStrat
Portfolio
Renovator
Price
recommen-
dation Tool
Tender
Manager
Value sellingValue pricing€
Value strategy
+ Simon-Kucher best practices of >2000 projects in the last 3 years
Simon-Kucher_Strategic Pricing Innovation_150212_Summary
… … …
13
Source: Simon-Kucher & Partners
Typical project approach
Phase III
Prepare
implementation
Phase II
Develop solutions
Phase I
Status quo
analysis
Value pricing awareness and capability development
Handover of sales & pricing methods, processes and tools
3-6 weeks TBD1-3 months
Prioritized & quantified
improvement
opportunities and
solution directions
Roadmap for solution
development and
implementation
Development of implementation-
ready solution measures, incl.
quick wins
Optimization of sales & pricing
strategy, processes and
organization
Redirection of commercial
organization, support market
launch and IT alignment
Business case and
implementation roadmap
Simon-Kucher_Strategic Pricing Innovation_150212_Summary 14
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