how to help your sales team execute price changes … · 2015-02-26 · how to help your sales team...

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

© INSIGHT2PROFIT | Content Proprietary & Confidential. 1

Featured Speaker: RYAN WHITE

ABOUT THE SPEAKER

• Founder and Managing Partner, INSIGHT2PROFIT

© INSIGHT2PROFIT | Content Proprietary & Confidential. 2

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

© INSIGHT2PROFIT | Content Proprietary & Confidential. 3

OUR CLIENTS

Who do we help? • B2B industrial

manufacturing and distribution companies

© INSIGHT2PROFIT | Content Proprietary & Confidential. 4

THE POWER OF PRICING FOR DISTRIBUTORS

Real Client Example: Small Changes, Big Results

© INSIGHT2PROFIT | Content Proprietary & Confidential. 5

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

© INSIGHT2PROFIT | Content Proprietary & Confidential. 6

How to Help Your Sales Team Execute Price Changes Successfully:

THE 4 PHASES

EDUCATE ENGAGE TRAIN MEASURE

© INSIGHT2PROFIT | Content Proprietary & Confidential. 7

EDUCATE Get Sales Reps the Right Information

© INSIGHT2PROFIT | Content Proprietary & Confidential. 8

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%

© INSIGHT2PROFIT | Content Proprietary & Confidential. 9

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 %

© INSIGHT2PROFIT | Content Proprietary & Confidential. 10

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

© INSIGHT2PROFIT | Content Proprietary & Confidential. 10

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

© INSIGHT2PROFIT | Content Proprietary & Confidential. 11

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

© INSIGHT2PROFIT | Content Proprietary & Confidential. 12

Pocket Price • Ask Sales Team

Where Opportunities May Exist

EDUCATE

LIST PRICE

Discount

INVOICE PRICE

POCKET PRICE

Freight Terms

Rebate Advertising

© INSIGHT2PROFIT | Content Proprietary & Confidential. 13

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

© INSIGHT2PROFIT | Content Proprietary & Confidential. 14

EDUCATE

© INSIGHT2PROFIT | Content Proprietary & Confidential. 15

ENGAGE Empower reps to make decisions.

INSIGHT2PROFIT | Content Proprietary & Confidential. 16

Share Methodology and Evaluate Decisions Together

ENGAGE

• Be upfront with reps • Get them past the fear

of losing business

© INSIGHT2PROFIT | Content Proprietary & Confidential. 17

Build Confidence by Involving Sales Teams

ENGAGE

PRODUCT

CUSTOMER

COMPETITION

Value Drivers Analytics

Price sensitivity Competitive assessment Price Floors and Caps Product Strategy

© INSIGHT2PROFIT | Content Proprietary & Confidential. 18

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

© INSIGHT2PROFIT | Content Proprietary & Confidential. 19

Sales Teams Find Comfort in Variation

ENGAGE

2015 Price Impact Histogram

Improve price realization by empowering—and monitoring—sales to manage differentiated price changes

© INSIGHT2PROFIT | Content Proprietary & Confidential. 20

ENGAGE

Products for ABC Chemicals (ABC100054), for John Smiths

© INSIGHT2PROFIT | Content Proprietary & Confidential. 21

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%

© INSIGHT2PROFIT | Content Proprietary & Confidential. 22

TRAIN Role play to communicate value.

© INSIGHT2PROFIT | Content Proprietary & Confidential. 23

TRAIN

Invest in Sales’ Training as Much as Procurement

© INSIGHT2PROFIT | Content Proprietary & Confidential. 24

Practicing Communications: • Single Largest Opportunity • Round Table Discussions with

Procurement • Team and Individual Role Playing • Peer Assessments and Best

Practice Sharing

TRAIN

© INSIGHT2PROFIT | Content Proprietary & Confidential. 25

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

© INSIGHT2PROFIT | Content Proprietary & Confidential. 26

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.

© INSIGHT2PROFIT | Content Proprietary & Confidential. 27

Jointly Create Written Communication Tools:

TRAIN

• Call Script • Customer letter • Frequent Asked Questions • Market / Industry Materials

© INSIGHT2PROFIT | Content Proprietary & Confidential. 28

Provide Value Communication Tools:

TRAIN

• Value calculators

© INSIGHT2PROFIT | Content Proprietary & Confidential. 29

MEASURE Keep reps accountable post-implementation.

© INSIGHT2PROFIT | Content Proprietary & Confidential. 30

MEASURE

© INSIGHT2PROFIT | Content Proprietary & Confidential. 31

For Each Rep, Keep Momentum with Monthly Dashboards

MEASURE

© INSIGHT2PROFIT | Content Proprietary & Confidential. 32

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.”

© INSIGHT2PROFIT | Content Proprietary & Confidential. 33

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: