dsm marketing office 0 the marketing – finance interface: practical examples gerben algra vp...
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DSM Marketing Office
1The Marketing – Finance Interface: Practical Examples
Gerben Algra
VP Marketing
DSM Marketing Office
2Table of contents
• Introduction
• DSM : who we are and what we do
• Pricing
• Product Launch
• Conclusions
DSM Marketing Office
3
The Life Sciences and Materials Sciences Company contributing to quality of life
DSM Marketing Office
4
Evolution
Over a century of successful transformations
Life Science Products
Coal
Fertilizers
Petrochemicals
Performance Materials
Bioterials / Biologics
Chemical engineering
Polymer technology
Fine chemicals
Material science
Mechanical engineering
Biotechnology
Technological competences1902 1930 19701950 1990 2000 2010
DSM Marketing Office
5DSM from DSM from 2000 to 20052000 to 2005 : : Focus and ValueFocus and Value
Petro LSP
PMIC
2000
IC
PM
Divestment Petchem Acq. Roche V&FC Acq. NeoResins
IC
PMPM
LSP
Pharma
IC
Sales € 8.2 bn
Sales € 5.6 bn
Sales € 8 bn
H2’02/H1’032005
DNP
…………. Second major transformation of DSM …………
DSM Marketing Office
6DSM Vision 2010: DSM Vision 2010: Building on StrengthsBuilding on Strengths
Value Creation
Market-driven Growth and innovation
Building on Strengths
Increased PresenceEmerging Economies
OperationalExcellence
DSM Marketing Office
7Reshaping the Portfolio
Carve out and divest
• Melamine/urea/fertilizers
and Energy
• Elastomers
• Special Products
• Maleic anhydride
and derivatives
Carve out and partner
• Citric acid • Anti-Infectives
Reposition Fibre Intermediates Strong leadership provides backward
integration DEP
Focus on Life Sciences and Materials Sciences
4 core clusters:• Nutrition• Pharma• Performance Materials• Polymer Intermediates
+ 5th cluster:• Base Chemicals & Materials
DSM Marketing Office
8Accelerating Vision 2010
Nutrition Pharma Performance Materials
Sharedcompetencies
Markets Technologies Functional Excellence
Exploiting strong market positions and technology platforms
Climate and Energy
Health andWellness
Functionality andPerformance
EmergingEconomies
Life Sciences Materials Sciences
EBAs
DSM Marketing Office
9Portfolio Synergy Creates EBA Growth PlatformsPortfolio Synergy Creates EBA Growth Platforms
Pharma Performance MaterialsNutrition
Materials
SciencesChemicalSynthesis White Biotech
• First concepts patent-protected• Investments in
Jurilab, Integragen and Sciona
Personalized Nutrition
• First coating sales• Investments in
Harland, OPM, Xylos, MicroMuscle• Further growth
Dyneema Purity®
Biomedical Materials
• Investment in FQSI• Active
systems in development, first in food
Specialty Packaging
• Biofuels/ Bio-Based Chemicals Programs• Joined
€ 100 m French Biohub Program
White Biotech
DSM Marketing Office
10Key Figures Key Figures
(€ million) 2007 H1/08 %
Net sales 8,757 4814 + 11 %
EBITDA* 1,247 718 + 14 %
EBIT* 823 514 + 23 %
Net profit* 558 355 + 24 %
Net profit incl. exceptional items 429 355 + 203 %
Globally > 200 locations, ca. 23,500 employees
Leadership positions in ~75% of the business portfolio
R&D spend ca. € 350 million
Solid balance sheet
* Before exceptional items
NB : EBIT expectations 2008 first increased to 970 Mio Euro, recently further increased to 1025 – 1075 Mio Euro
DSM Marketing Office
11
Internationalization& Diversity
Climate &Environment
NutritionImprovement
Leader in Sustainability, Now & in the FutureLeader in Sustainability, Now & in the Future
People, Planet, Profit
DSM Values: “We can’t be successful in a world that fails”
DSM Marketing Office
12DSM Organizational ChartDSM Organizational Chart
DSM Innovation CenterDSM Innovation Center Corporate StaffCorporate Staff
Shared Competences & Business Support
Shared Competences & Business Support
DSM Nutritional Products
DSM Food Specialties
DSM Resins
DSM Engineering Plastics - DSM Dyneema
DSM Elastomers
DSM Agro
DSM Melamine
DSM Fibre IntermediatesDSM Special Products
DSM Pharmaceutical Products
DSM Anti-Infectives
DSM Energy
DSM Nutritional Products
• Human Nutrition and Health
• Animal Nutrition and Health
DSM Food Specialties
Nutrition
DSM Pharmaceutical Products
DSM Anti-Infectives
Pharma
DSM Engineering Plastics
DSM Dyneema
DSM Resins
Performance Materials
DSM Fibre Intermediates
PolymerIntermediates
DSM Agro
DSM Elastomers
DSM Melamine
DSM Energy
Base Chemicals & Materials
Corporate Staff
Shared Competences &
Business Support
DSM Managing Board
DSM Innovation Center
DSM Marketing Office
14DSM is everywhereDSM is everywhere
PROGRAM EXCELLERATE
PRICING
DSM Marketing Office
16… … PRICING IS THE MOST POWERFUL LEVER FOR IMPROVING PRICING IS THE MOST POWERFUL LEVER FOR IMPROVING REVENUE AND PROFITABILITYREVENUE AND PROFITABILITY
2.6
3.6
8.7
12.3
0 5 10 15
Fixed costs
Unit volume
VariableCosts
Price
THE DIRECT IMPACT PRICING HAS ON THE BOTTOM LINE, POSITIVELY AND NEGATIVELY, JUSTIFIES PRICING AS A TOP PRIORITY!
THE DIRECT IMPACT PRICING HAS ON THE BOTTOM LINE, POSITIVELY AND NEGATIVELY, JUSTIFIES PRICING AS A TOP PRIORITY!
Impact of 1% change in a category on company profit
Source: Customers of pricing consultant Simon Kucher & PartnersSource: McKinsey, Simon Kucher & Partners, BCG and Excellerate
DSM Marketing Office
17MOVING TO WORLD CLASS PRICING IS A JOURNEYMOVING TO WORLD CLASS PRICING IS A JOURNEY
PROCESSMATURITY
LEVELS
MATUREPROCESS
WORLDCLASS
LEVEL
BaselineProcess isIneffective
30% of companies1
LEVEL 2
InternalProcessIn Place
Gain Control 40% of companies
LEVEL 4
OptimizationProcessesIn Place
OptimizationTools <10% of companies
LEVEL 3
ValueProcessesIn Place
Price/ValueAnalysis 20% of companies
LEVEL
ExcellenceinExecution
<1% of companies5
Pricing Solutions Ltd., 2003©
DSM Marketing Office
18PRICING MANAGEMENT : 2 ELEMENTSPRICING MANAGEMENT : 2 ELEMENTSOPTIMIZATION AND EXCELLENCEOPTIMIZATION AND EXCELLENCE
ACHIEVING THE FULL PROFIT IMPROVEMENT POTENTIAL OF PRICING REQUIRES QUITE A JOURNEY, BUT ALSO SHORT AND FOCUSSED EFFORTS BRING LARGE GAINS
ACHIEVING THE FULL PROFIT IMPROVEMENT POTENTIAL OF PRICING REQUIRES QUITE A JOURNEY, BUT ALSO SHORT AND FOCUSSED EFFORTS BRING LARGE GAINS
Pricing Management
Pricing Optimization
Pricing Excellence
Price Structure
Price Level
Value BasedPricing
Price Consistency
Processes
Organization
Tools &Systems
People & Behavior
Performance Monitoring
DSM Marketing Office
19
Dedicated / Focused Project
Start up/ Kick Off
Analysis & diagnosis
Option development
Prepare for Execution
Implement & monitor
Quick scan
E.g. Analyze current prices
• Historic prices
• Prices competitors
• Value for customers
• Own costs
Define pricing strategy&Segmentation&Differentiation
Develop tools&Make choices& Set targets
Implement new customer plans&Monitor / Analyze&Recalibrate / Improve(Deming Cycle)
Define implementation program&Training sales force +other depts
Detailed Account Plans&Owners&Timelines
Key Improvement levers identified
In Depth analysis& diagnosis based upon outcome Quick Scan
Monitoring Tools&Roles /Responsibilities
Project Approach : Set up Project Approach : Set up
Your Organization Ready, Willing, Able ……………?
Line Responsibility
Define Team&Explain context&Clear Objectives
Alignment Results
DSM Marketing Office
20RANDOM EXAMPLE : PROFIT IMPROVEMENT POTENTIALRANDOM EXAMPLE : PROFIT IMPROVEMENT POTENTIALPCR
0 1 2 3 4 5 6 7 8 9 10
Volume Index
Pri
ce In
dex
• Any correlation ?• Any conscious differentiation ?• Right Price Level ?
DSM Marketing Office
21
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
0.0
Volume
Cu
sto
mer
pro
fit
as p
erc
en
tag
e o
f N
et
Sale
sPCR Global
RANDOM EXAMPLE : PROFIT IMPROVEMENT POTENTIALRANDOM EXAMPLE : PROFIT IMPROVEMENT POTENTIAL
• Cost allocation correct ?• Negative customer profits ?• Any conscious differentiation ?• Profitability Levels OK ?
DSM Marketing Office
22PROFITABILITY ANALYSIS PROVIDES INSIGHTS …..PROFITABILITY ANALYSIS PROVIDES INSIGHTS …..
Graph gives insight into profitability of customers
EBIT Contribution Sold-to Parties Tests
0,0
500,0
1000,0
1500,0
2000,0
2500,0
EB
IT E
UR
x 1
000
Unprofitablecustomers
Profitablecustomers
‘Bleeders’
DSM Marketing Office
23ARE YOU CONFIDENT THAT PRICE ARE YOU CONFIDENT THAT PRICE LEAKS ARE NOT ERODING YOUR PROFITABILITY?LEAKS ARE NOT ERODING YOUR PROFITABILITY?
Price exceptions
Net realised price
% of sales
List Price
ReturnsFreight
Selling
<10% volume
Incentives
Terms
Price Leaks By Product
Opportunities to control undesirable price leaks in the organisation
DSM Marketing Office
24MONITORING SALES FORCE PERFORMANCEMONITORING SALES FORCE PERFORMANCE
Average Price And Volume By Salesperson For Product A, Region A
Volume
Price
Median
5%
15%
‘Excellent’
EBIT Impact
Sales-person
1 2 3 4 5 6 7 8 9
DSM Marketing Office
25
Dedicated / Focused Project
Start up/ Kick Off
Analysis & diagnosis
Option development
Prepare for Execution
Implement & monitor
Quick scan
E.g. Analyze current prices
• Historic prices
• Prices competitors
• Value for customers
• Own costs
Define pricing strategy&Segmentation&Differentiation
Develop tools&Make choices& Set targets
Implement new customer plans&Monitor / Analyze&Recalibrate / Improve(Deming Cycle)
Define implementation program&Training sales force +other depts
Detailed Account Plans&Owners&Timelines
Key Improvement levers identified
In Depth analysis& diagnosis based upon outcome Quick Scan
Monitoring Tools&Roles /Responsibilities
Project Approach : Set up Project Approach : Set up
Your Organization Ready, Willing, Able ……………?
Line Responsibility
Define Team&Explain context&Clear Objectives
Alignment Results
DSM Marketing Office
26Price setting modelPrice setting model
Price setting based on inside-out and outside-in insights
Pricing : Financial model / Internal perspective
Customer / Competitor
Perspective :
Inside - Out Outside - In
Reflects Key driversAims for consistencyProvides Targets
Sales Pitch vs. Next best Alternative
DSM Marketing Office
27Account Plans : Key to actions and monitoringAccount Plans : Key to actions and monitoring
Account plan
Present account data
Sales argumentation
Price calculator
List prices
• Standard Format• Easy link to reporting Systems
• Every Account• Every Product
Value calculator ActionsNr Action Owner Due Date Status
123456789
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Nr Action Owner Due Date Status123456789
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Account Plans : • Written by Account Manager• Upfront agreed with Line (Up and Down)• Transparent Targets and Timelines• Basis for regular monitoring / review
DSM Marketing Office
28MONITORING : SPIDER IN THE WEB !!
Management & Organisation
Adjust roles & responsibilities (RASCI)
Steer organization towards price leadership
Performance Measurement
KPIs Monitoring
Infrastructure
Implement support structures:- Annual Account Plan writing &
Account Plan database- Monthly price instructions- Fast & user friendly tools
Processes
Implement new pricing process- Regular review /calibration- Price setting in line wit
business dynamics- Continuous competitor
intelligence (Value calculator)
Strengthen pricing capabilities- value based selling / pricing - Train (new) sales staff- Lead by example- Align incentives- Communicate successes
People & Culture
DSM Marketing Office
29Improvement Cycle and making results SUSTAINABLEImprovement Cycle and making results SUSTAINABLE
Account Plans
Review : External FactorsInternal Factors
RecalibratePricing Model :
Price AND Value calculator
Monitor Progress
• Formalize Process• Define frequency• Report and Collect : prerequisite for learning
Nr Action Owner Due Date Status123456789
1011121314151617181920
ServicesServices
CustomersCustomers
Value in Value in UseUse
CompetitionCompetition
SegmentationSegmentationLeadershipLeadership
Raw Raw MaterialsMaterials
Global vs. Global vs. RegionalRegional
ServicesServices
CustomersCustomers
Value in Value in UseUse
CompetitionCompetition
SegmentationSegmentationLeadershipLeadership
Raw Raw MaterialsMaterials
Global vs. Global vs. RegionalRegional
DSM Marketing Office
30
Product LaunchProduct Launch
DSM Marketing Office
31Innovation : Bigger, faster, cheaper, betterInnovation : Bigger, faster, cheaper, better
Accumulated Losses
Opportunity
time
Revenues
€
Source: Prof. JP Jeannet, AIM course
Business Development Time & Cash Line(s)
DSM Marketing Office
32Key Functional Involvement over the Launch CycleKey Functional Involvement over the Launch Cycle
Screen? ReviewLaunch?Scale-up?Develop?
Legal
Manufacturing
Marketing
R&D
Sales
Finance
IDEAGENERATION
BUSINESS FEASIBILITY
DEVELOPMENT
SCALE-UP &
VALIDATION
TRANSFER TO
RUNNING BUSINESS
DSM Marketing Office
33Marketing and Sales Focus Marketing and Sales Focus
Price
Place
Promotion
Product
Customer
CompanyUnlimited. DSM
Context
Value for customer Cost base CompetitionFit to product positioning
Geographic marketsSequential launch vs. big bang Sales channels
Product positioningCommunication channels Brand relevance
Target product profile
Time-to-market sensitivity Registration
Needs and buying factors
Segmentation Market assessment
Launch planCross-functional teams Resource allocation
Sr mgmt sponsor -ship/ involvement
Sales force development
Value chains Business modelsAdoption barriers PartnershipsCapabilities and assets
+ Reference to “Guide to
Business Planning”
+ Reference to “Guide to Marketing Planning”
Business feasibility
Develop-ment
Scale-up & validation
Idea generation
LaunchIN SYNC
Project Management Process
Price
Place
Promotion
Product
Customer
CompanyUnlimited. DSM
Context
Value for customer Cost base CompetitionFit to product positioning
Geographic marketsSequential launch vs. big bang Sales channels
Product positioningCommunication channels Brand relevance
Target product profile
Time-to-market sensitivity Registration
Needs and buying factors
Segmentation Market assessment
Launch planCross-functional teams Resource allocation
Sr mgmt sponsor -ship/ involvement
Sales force development
Value chains Business modelsAdoption barriers PartnershipsCapabilities and assets
Price
Place
Promotion
Product
Customer
CompanyUnlimited. DSM
Context
Price
Place
Promotion
Product
Customer
CompanyUnlimited. DSM
Context
Value for customer Cost base CompetitionFit to product positioning
Geographic marketsSequential launch vs. big bang Sales channels
Product positioningCommunication channels Brand relevance
Target product profile
Time-to-market sensitivity Registration
Needs and buying factors
Segmentation Market assessment
Launch planCross-functional teams Resource allocation
Sr mgmt sponsor -ship/ involvement
Sales force development
Value chains Business modelsAdoption barriers PartnershipsCapabilities and assets
Value for customer Cost base CompetitionFit to product positioning
Geographic marketsSequential launch vs. big bang Sales channels
Product positioningCommunication channels Brand relevance
Target product profile
Time-to-market sensitivity Registration
Needs and buying factors
Segmentation Market assessment
Launch planCross-functional teams Resource allocation
Sr mgmt sponsor-ship/ involvement
Sales force development
Value chains Business modelsAdoption barriers PartnershipsCapabilities and assets
Project Management Process
Business feasibility
Develop-ment
Scale-up & validation
Idea generation
LaunchBusiness feasibilityBusiness feasibility
Develop-mentDevelop-ment
Scale-up & validationScale-up & validation
Idea generationIdea generation
LaunchLaunch
DSM Marketing Office
34Concept Development : POSITIONING
Concept # 5
Concept # 4
Concept # 1
Concept # 2
…………. Creative Part of the Process …………….
Concept # 3
DSM Marketing Office
35Example Claryl® : Speaking the customer’s language
Benefits
• “is there any glass there?”• “you don’t have to be up close to see what you’re
looking at”• “you can just concentrate on the picture”• “(it gives you) freedom to hang the picture where
you like”• “you can view your painting uninterrupted, all day
long”• “it’s like wearing sun glasses…it’s better”• “if you buy a picture you want to be able to see it”• “sharper and brighter”• “looks closer”• “the color looks better”• “would look great on tapestry”• “…it really is impressive…”
Description of technical features
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36……also in picturesalso in pictures
Appealing to your mind Appealing to your imagination
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37SOLUTIONS DESIGN & ACTION PLANSOLUTIONS DESIGN & ACTION PLANThe Fruition …The Fruition …
Generate :- Business concept- Artifact- Solution concept- Prototype- Benefits- Etc.
Artifact
Solutionconcept
Preliminary Business concept
Shared Output and Alignment between participants, departments and stakeholders.
MAKE FINAL CHOICES !!
DSM Marketing Office
38Product Launch
Iterative processIterative process
Launch Plan Speed & Expansion
Market research BrandCommunication
& Product Launch
• Build Product Launch plan Optimiseexisting Product Launch plan
SPEED:• Review timelines and remove barriers where possible
EXPANSI ON:• Review target markets• Possibilities to expand market introduction (new segments, new target customers)
• Review existing data and market information• Design new market research • Review market research results• Write brand & communications briefs
•Brand / trademark needed ?• Write brief • Write brand introduction plan
• Write brief for communications agencies• Write Launch plan and implement
Launch Plan Speed & Expansion
Market research BrandCommunication
& Product Launch
• Build Product Launch plan Optimiseexisting Product Launch plan
SPEED:• Review timelines and remove barriers where possible
EXPANSI ON:• Review target markets• Possibilities to expand market introduction (new segments, new target customers)
• Review existing data and market information• Design new market research • Review market research results• Write brand & communications briefs
•Brand / trademark needed ?• Write brief • Write brand introduction plan
• Write brief for communications agencies• Write Launch plan and implement
Financials :• Volumes, Price, Mix, Market Share• COGS• Costs R&D, M&S, Manuf. Etc• Result calculation (NPV, ROI etc)
DSM Marketing Office
39Conclusion :Conclusion :Commercialization is as much of a craft as it is an art Commercialization is as much of a craft as it is an art
• Establish minimal DSM standards for mandatory launch and marketing plans
• Develop set of tools, frameworks and templates supporting plans
• Establish disciplined process with clear roles and responsibilities
• Ensure implementation (KPIs, incentives, performance dialog)
• Foster creativity and breaking of orthodoxies –go beyond the obvious
• Challenge and enrich plans by bringing in "street-smart", experienced managers
• Build commercial judgment in organization, especially through role-modeling
+
DSM Marketing Office
40This presentation was made possible by ………….