how to help your sales team execute price changes … · 2015-02-26 · how to help your sales team...
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How to Help Your Sales Team Execute Price Changes Successfully
Featuring: Ryan White
February 26, 2015
Sponsored by:
• Introduction – Jenel Stelton-Holtmeier, Editor of Modern Distribution Management
• INSIGHT2PROFIT – Ryan White • Presentation – Ryan White • Q&A
Agenda
How to Help Your Sales Team Execute Price Changes Successfully
February 26, 2015
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Featured Speaker: RYAN WHITE
ABOUT THE SPEAKER
• Founder and Managing Partner, INSIGHT2PROFIT
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INSIGHT2PROFIT combines pricing expertise with technology to partner with you, providing customized solutions to unlock the value that already exists in your business.
ABOUT INSIGHT2PROFIT
PROFIT IMPROVEMENT
$
IMPLEMENTATION & CHANGE MANAGEMENT
$$$ PROFIT
IMPROVEMENT
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OUR CLIENTS
Who do we help? • B2B industrial
manufacturing and distribution companies
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THE POWER OF PRICING FOR DISTRIBUTORS
Real Client Example: Small Changes, Big Results
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The Challenge: Getting the price you’re targeting Solution: Engaging the sales team through four phases of involvement
PRICE EXECUTION WITH THE COMMERCIAL TEAM
-2%
0%
2%
4%
6%
8%
1 2 3 4 5 6 7
Red = Planned Increase Blue= Actual Increase
US: Prices increased +4.1% while targeting +8.3% MSRP
Oct ~4%
July 4.3%
Cumulative Price Change Fiscal Calendar
Historical Price Realization: US
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How to Help Your Sales Team Execute Price Changes Successfully:
THE 4 PHASES
EDUCATE ENGAGE TRAIN MEASURE
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EDUCATE Get Sales Reps the Right Information
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EDUCATE
Understand Competitor Positioning Key Purchasing Criteria Client Competitor A Competitor B Smaller Players
Customer Service 8.8 6.3 2.0 4.0
Quality 9.2 8.3 6.8 6.9
Brand 9.5 6.4 6.9 5.5
Availability 7.0 5.7 6.3 8.3
End-User Support/Training 9.7 4.4 5.3 3.0
Breadth of Product Line 9.1 5.8 6.4 5.3
Innovation 6.3 5.5 3.0 4.5
Implied Pricing Opportunity 18.1% 26.0% 32.5%
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EDUCATE
Leverage External Market Data to Break Pricing Paradigms
SOURCE: CLIENT PRICE AND COST DATA | UNITED STATES CONSUMER PRICE INDEX (FULL BASKET | ALL STATES | NON-ADJUSTED) | INDEX IS FY 2013 | MATCHED PRODUCTS ONLY (EXCLUDES MIX)
Price | CPI Change %
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Price Variation • Help sales
team uncover variation in pricing between customers
EDUCATE
LOW
R
elativ
e Pric
e Sco
re
HIG
H
LOW Revenue HIGH
Each dot represents an individual customer
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Price Variation • Help sales
team uncover variation in pricing between customers
EDUCATE
LOW
R
elativ
e Pric
e Sco
re
HIG
H
LOW Revenue HIGH
Each dot represents an individual customer
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EDUCATE Client Example: Broad Range of Products Utilize Price/Margin Index to Analyze Across Basket of Purchases
Revenue in Millions
130
120
110
100
90
80
70
60
50
40 0 1 2 3 4 5 6
Market Benchmark
Doesn’t discuss Price
Large Potential
Strong Competitor
Expecting Significant Growth
Long Term Customer
Trial
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Pocket Price • Ask Sales Team
Where Opportunities May Exist
EDUCATE
LIST PRICE
Discount
INVOICE PRICE
POCKET PRICE
Freight Terms
Rebate Advertising
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EDUCATE
Expose team to costs of decisions and compare across customers and industry
ACTUAL CLIENT EXAMPLE.
Pricing Customer Discounts Freight Rebates Payment Terms Returns & Samples Marketing Programs
Pricing Authority
List Price Setting
Custom Product Pricing
Pricing of Services
Rush Order Fees
Make and Hold Fee (Storage)
Minimum Order Size Surcharge
Channel Discount
Order Level Volume Discounts
Invoice Level Volume Discounts
Competitive Discounts – One Time
Contract Price Management
Freight Terms
Freight Invoicing
Expedite Carrier Fees
Air Shipments Selection of Shipment
Type
(LTL / FedEx / Pickup)
Below MOQ Surcharge
Shipping & Handling Fees
Fuel Surcharges
Override Authority
Rebate Structure
Rebate Ownership
Rebate Calculation
Rebate Controls
Rebate Payments (Credit or Cash)
Terms Audit
Terms Authority & Controls
Terms Clarity & Complexity
Grace Period Allowances
Unearned Discounts
Return Policy
Return Abuse
Return Validation
Return Credits
Restock Fees
Sample Policy
Sample Management
Programs Policy
Programs Authorization
Programs Payment
Promotional Calendar
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EDUCATE
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ENGAGE Empower reps to make decisions.
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Share Methodology and Evaluate Decisions Together
ENGAGE
• Be upfront with reps • Get them past the fear
of losing business
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Build Confidence by Involving Sales Teams
ENGAGE
PRODUCT
CUSTOMER
COMPETITION
Value Drivers Analytics
Price sensitivity Competitive assessment Price Floors and Caps Product Strategy
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Price Sensitivity and Risk Management
ENGAGE
Accelerated (A Bucket)
Conservative (D Bucket)
Product Classification Engineered Consumable
Risk Factor Many customers, few units
Few customers, many units
Relative Price Point Low High
Trending High volume trend Low volume trend
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Sales Teams Find Comfort in Variation
ENGAGE
2015 Price Impact Histogram
Improve price realization by empowering—and monitoring—sales to manage differentiated price changes
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ENGAGE
Products for ABC Chemicals (ABC100054), for John Smiths
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Beyond Manufacturer Pricing • Don’t always target exactly what
your manufacturers are targeting
• Utilize market knowledge to design-in upside
ENGAGE
MANUFACTURER ANNOUNCED CHANGE
HISTORICAL REALIZATION
MODELED CHANGE
EXPECTED REALIZATION
Eaton 5% 3.8% 5.5% 4.9%
Parker 4% 2.8% 4% 3.5%
GE 3% 1.5% 4.5% 4.0%
Siemens 2% 1.2% 3.2% 2.7%
3M 3% 1.6% 3% 2.8%
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TRAIN Role play to communicate value.
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TRAIN
Invest in Sales’ Training as Much as Procurement
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Practicing Communications: • Single Largest Opportunity • Round Table Discussions with
Procurement • Team and Individual Role Playing • Peer Assessments and Best
Practice Sharing
TRAIN
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TRAIN
Recommended Negotiating Strategies Services / Other Value
Adds Possible Product
Substitutions Possible Specification
Modification
Trade Price Increase for Additional Volume
(new business)
Technical services
Product breadth
Engineering capabilities
What else does the customer value?
W&D vs Seamless? Does our margin
improve? Can we meet the
technical requirements?
Can we consolidate orders to get a better price? (existing business)
Can we reduce part complexity?
Can we loosen specs?
Agree to reduce or eliminate the price increase in exchange for additional volume from the customer
Request a firm order for volume
that warrants the lower price with fixed release schedule
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TRAIN
Proceed With Caution
Delay the Price Increase Date Add Value Spread Price Increase Evenly Across Customer’s Book of Business
Allow the customer to place
one last order at the existing (lower) price.
Considerations Limit the order size? Must take delivery in 2015?
Agree to offset price increase
in exchange for a value-add purchase.
Considerations Qualification lag (raise price first,
lower later)
Consider this approach if customer prefers
a “simple” price increase and doing so enables acceptance (consider for similar products.)
Considerations Use this with caution, as it ignores the
value determination that underlies the original price recommendations.
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Jointly Create Written Communication Tools:
TRAIN
• Call Script • Customer letter • Frequent Asked Questions • Market / Industry Materials
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Provide Value Communication Tools:
TRAIN
• Value calculators
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MEASURE Keep reps accountable post-implementation.
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MEASURE
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For Each Rep, Keep Momentum with Monthly Dashboards
MEASURE
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Rewards and Incentives
MEASURE
• Consider giving financial incentives based on price realization
• Have executive team discuss and highlight strong performers publicly
• Work closely with under-performers, comparing to peers
“I am confident that I can achieve the
price increase.” “I am confident
that I can achieve the price increase.”
“I am confident that I can achieve the
price increase.” “I am confident
that I can achieve the price increase.”
“I am confident that I can achieve the
price increase.”
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What is the most important takeaway?
WRAP UP
QUESTIONS?
THANK YOU!
To schedule a one-on-one with Ryan, visit insight2profit.com/contactryan
How to Help Your Sales Team Execute Price Changes Successfully
Questions?
February 26, 2015
Sponsored by: