are pricing and sales processes leaving money on the table? › sellingpower-webinars › 2015 ›...

©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.

Are Pricing and Sales Processes Leaving Money on the Table?

Russ Chadinha, Director Product Marketing, PROS Sean Cassidy, Director Content Strategy, PROS

2 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.

Speakers

Russ Chadinha Director

Product Marketing, PROS

Sean Cassidy Director

Content Strategy, PROS

SiriusPerspective:

© 2014 SiriusDecisions. All Rights Reserved

3

B2B companies are feeling confident about growth − the question is whether they are aligned and prepared.

88% Expect positive growth in the industries they sell into

90%+ Expect to grow this year

The race for growth is on; are you ready?

77% Express optimism about the economic forecast


To capture growth, sales effectiveness is a top CSO objective

Source: CSO Insights - 2013 Sales Performance Optimization Study

65.3%

44.5%

42.8%

33.5%

21.4%

11.0%

7.5%

6.9%

31.2%

Increase sales effectiveness

Increase existing account penetration

Capture new accounts

Improve customer satisfaction

Optimize deal size

Reduce new rep ramp-up time

Reduce sell cycle time

Increase renewal rates

Improve margins/reduce discounting


But, CRM alone not able to deliver business impact

Streamlining Forecast Process

Improves Sales Rep/Manager Communications

Reduced Administrative Burden on Sales

Improved Order Processing Accuracy

Improved Best Practices Sharing

Improved Support of Channels

Reduced New Sales Rep Ramp-‐up Time

Shortened Sell Cycles

Increased Revenues

Improved Win Rates

Other

62.4%

57.4%

40.6%

30.7%

28.7%

19.8%

17.8%

15.8%

15.8%

13.9%

5.9%

Measurable improvements in performance as a result of implementing a CRM system

Source: CSO Insights - 2013 Sales Performance Optimization Study (over USD 1B revenue)

Fewer than 20% see Revenue,

Win Rate, or Cycle

Improvements

Almost no one sees margin

improvements


Traditional CPQ has a strong impact

“Companies using CPQ out-perform other companies.” -Aberdeen Group

Source: Aberdeen Group Research Brief: Configure-Price-Quote: Best-in-Class Deployments that Speed the Sale, July 2013

Average Sales Cycle

27% Interactions

to Close

7%

Sales Productivity

9%

Lead Conversion

Rate

17%

Quota Attainment

26%

Average Deal Size

2X


65.3%

44.5%

42.8%

33.5%

21.4%

11.0%

7.5%

6.9%

31.2%




Optimize deal size





But only directly addresses some of these objectives…



65.3%

44.5%

42.8%

33.5%

21.4%

11.0%

7.5%

6.9%

31.2%




Optimize deal size






…while largely missing this big one


Can pricing help?


Short answer: yes

The old pricing formula holds true: A 1% increase in prices can lead to a 10% increase in margins. If you are not selling the price customers are willing to pay, you are bleeding margin 10x.

Source: Aberdeen Group Report: Price Optimization: How Best-in-Class Performers Add to Both the Top and Bottom Lines. August 2014


Question: Are you currently driving some form of optimized price to the sales team?

●  Yes – prices based on algorithms shown by product by customer ●  Kind of – done per deal, based on business rules ●  No ●  Not sure


Prove the Value and Get Sales Adoption

●  Test methodology on subset of business –  Uncover sales objections –  Measure Performance and Profit Lift

●  Execute prices rationally –  Prices must make sense or don’t show –  Include business rules

●  Enterprise wide roll out after value has already been proven –  Experienced sales people who talk to its value

Pricing Execution

Data Analysis Segmentation

Pricing Guidance Sales Adoption

“The best prices in the world

won’t ma5er if nobody uses

them”


Increasing Sales Adoption

Rock Stars

Needs Coaching


Question: How receptive is the sales team to pricing guidance?

●  They love it! ●  Reluctantly working with it, trending in the right direction ●  Not sure, have not tried to provide it to them yet ●  Tried it, they refused to use it – regardless of the potential

benefit ●  Refuse to even talk about it


Pricing is complex

●  Setting Prices –  Impossible to look at thousands of prices

and assess their accuracy –  How many price books/plans/

catalogues/tiers should I have?

●  Negotiating Prices –  Quotes have to account for the large

variety of customers, products and environments

–  Gut feel, emotions and rules of thumb are the only tools available


Pricing, sales and marketing are complex

●  A Variety of Customers –  Customers come in all forms with varying

needs

●  A Variety of Offerings –  Products and service offerings require

more and more customization and differentiation

●  Revenue and Profit Levers –  Highly profitable prices that win –  Right offer at the right time –  Customer retention –  Improved leads and sales pipelines –  Increase customer product portfolio


“I’ve been selling food for 25 years. Now you’re forcing me to use a laptop computer, and telling me how to do my business?”

Case study: Bidvest 3663

●  Major UK food distributor ●  $3.3B revenue ●  19,000 SKUs ●  3 geographic regions ●  Decentralized pricing ●  150+ highly autonomous field

sales managers across the 3 regions

●  Historically encourage regions to operate independently

●  Will new pricing technology actually impact performance?


Goal

Accelerate adoption and measure impact of new centralized pricing strategies/technologies with a highly autonomous field sales force.


Step 1: Segment users

●  Tied user adoption to the financial performance of the individual sales managers

●  Monitored frequency of usage

●  Monitored type of content the sales managers were accessing.

●  A user proficiency score was developed through analysis of activity associated with each customer.

Based on observed behavior, sales managers were grouped as:

Adopters: Those who embraced and used the new technology most frequently

Users: Exhibiting much more limited use of the technology

Non-users: Minimal or no use of the technology solution.

Sales People Ranked by Proficiency with New Technology


Step 2: Evaluate performance difference

●  Adjusting for seasonality and other influences that distort the data, the performance of the different user types was compared 6 months after everyone was trained

“How do we know we wouldn’t have gotten these results anyway?”


The result

●  Adopters selling 400 more items per month than non-adopters

●  Sales management was able to better target its coaching

●  Able to identify and close gaps between actual sales performance and unrealized potential value.

●  Incremental revenue and margins

●  ~$3M in annual margin improvement

“This isn’t just a tender program. It’s a whole new way of working, which has increased my margin per item during the last six months.”


Stand back, we’re going to do science

Why science?

Science = Accuracy


A simple framework to get started

Pricing guidance

Cross-‐sell / up-‐sell

More Revenue from Existing Customers

Sell More Product

Increase Prices

Reduce Attrition

Win New Customers

Identify High Value

Prospects

Develop Offers that Win

Close Deals Faster

Opportunity analysis

Churn analysis

Pricing guidance Cross-‐sell / up-‐

sell

Opportunity analysis

Segmentation


Question: What type of customer segmentation are you using?

●  Customer size (i.e. number of employees, revenue, addressable spend)

●  Industry ●  Geographic ●  Volume of business they do with us


Examples of Attributes Used for Segmentation Analysis

Attribute examples

Customer Attributes −  Customer Type/Classification −  Customer Size

−  Annual Revenue −  Annual Volume −  Credit Limit

−  Customer Life Cycle −  Group Affiliation

−  Group Size −  Special Services/Loyalty Programs −  Geography −  Financial Terms

−  Risk Classification −  Days Sales Outstanding (DSO) −  Payment Terms

−  Market Share/Wallet Share −  Contract Centricity * −  Purchase Frequency * −  Customer Order Size * −  Vendor Managed Inventory

Product Attributes −  Product Hierarchy / Classification −  Product Type/Industry −  Product Life Cycle −  Product Cost −  Vendor Category/Size −  Branded/Private Label −  Commodity vs. Specialty −  Exclusively Produced −  Lead Time and Inventory Level −  Packaging and Freight −  Product Velocity/Turnover *

−  Total Sales/Purchase Frequency

Transaction Attributes −  Order Size/Total Line Item Cost −  Value Added Service Type

−  Order Priority/Rush −  Shipping/Handling

−  Channel −  Customer-‐Product Centricity * −  Contract Status −  Inventory Level

*Derived Attribute Some Attributes not included due to confidentiality

 The B2B world today – customers’ price sensi>vity varies §  Different customers receive very different pricing §  High-‐revenue customers oSen receive beUer pricing than lower

revenue customers

Why do I need segmentation?

27

Annual Sales Volume

Margin %

Smaller Volume Larger Volume

Medium High

Low

Segmenta>on provides a framework to correctly benchmark customers §  High Volume customers should be compared to other High Volume customers §  Geography may maUer – Northern customers vs. Southern customers §  Many other aUributes…. Product Lifecycle, Contract Terms, Industry etc.

Segmenting your markets

North

South

Geography

28

Annual Sales Volume

Margin %

Smaller Volume Larger Volume

Margin %

High Volume / All Regions

Inside a micro-‐segment §  Keep high performers at their Willingness-‐to-‐Pay §  Move under performers in-‐line with peers

Segmentation drives margins

\ Margin %

High Volume / South Region

Inside a micro-‐segment §  Keep high performers at their Willingness-‐to-‐Pay §  Move under performers in-‐line with peers

Segmentation drives margins Margin %

High Volume / All Regions

Segmentation Provides Targeted Pricing to Drive Margins

\ Margin %

High Volume / South Region

Result: Increased Margins


Segmenting your markets

►  Four-‐step approach with a business review at the conclusion of each step

►  Utilizes proven science together with customer insights

Attribute Discovery

Attribute Analysis

Attribute Significance Analysis

Create Segments

Determine the segmentation metric and use broader range of attribute variables to determine potential attributes

Examine attributes and data through business lens

Determine statistical significance

Incorporate statistics, business infrastructure and market dynamics to ensure a high value, adoptable segmentation

Segmentation Process


Feeding price optimization into CPQ

CRM

Account, Contact,

Opportunity

Quotes

CPQ

Catalog & guided selling

Solution Configu-‐ration

Quoting &

Pricing

Approval workflow

Proposal &

Contract

Web service call

Embedded iframe

Synchronization

Performance Analytics

PROS Pricing Sales Analytics:

•  Segmentation •  Visibility to pricing

performance •  Opportunity

identification •  Sales performance

Asynchronous update

Real-time call

Mobile Web

Partner

Transactions and Orders

Customers & products

Market & competitive

data

Capacity & Supply Data

Data Input

Pricing management & optimization: •  Price mangement •  Execute pricing strategies •  Incorporate willingness to pay

•  Apply business rules Pricing delivery: floor, target, expert


Easy to get started, take targeted steps as needed

Gain Visibility/Control

●  Identify and address underperforming products, customers

●  Uncover high probability opportunities Illuminate revenue and margin potential in existing customers

●  Identify new business potential

●  Optimize coverage model

●  Enhanced efficiency through automated workflow

Objective

Stage

Opportunity

Take Targeted Action

●  Empower sales reps to negotiate from informed position

●  Invest valuable coverage resources on high-quality leads

●  Align, refine customer portfolio across go-to-market channels

●  Able to appropriately position offer in context of a dynamic market

Build Comprehensive Competitive Advantage

●  Institutionalized ability to quickly take in and act upon new information to your advantage

●  Dynamic criteria constantly evaluated for relevance

Starting point

Informed action driving business results Proven solution, ready to take the next,

targeted not transformational, step

Drive competitive advantage

Commitment to developing competitive advantage through pricing/ sales sophistication

Turn into core competency


Summary

●  Don’t stop at just CPQ - pricing has a very strong impact on sales effectiveness

●  Formal change management important to drive adoption

●  Data-driven feedback enhances coaching impact

●  Science is helpful to sales, not scary


Questions

Russ Chadinha Director

Product Marketing, PROS

[email protected]

Sean Cassidy Director

Content Strategy, PROS

[email protected]

Please feel free to reach out to Russ or Sean individually

PROS Germany GmbH Feringastrasse 6 85774 Unterfoehring Munich Tel.: +49 89 99216 270 Fax: +49 89 99216 200 Regional Office - Austin, TX 3600 Parmer Lane, Suite 205 Austin, Texas 78727 Regional Office - Cary, North Carolina 1000 Centre Green Way, #200 Cary, NC 27513 Phone:+1 919-228-6334

World Headquarters 3100 Main Street, Suite #900 Houston, TX 77002 Phone: +1 713-335-5151 Sales: +1 855-846-0641 Fax: +1 713-335-8144

European Headquarters - United Kingdom 4th Floor, East Wing Communication House South Street Staines-Upon-Thames TW18 4PR United Kingdom Phone: +44 (0) 1784 777 010

©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.

are pricing and sales processes leaving money on the table? › sellingpower-webinars › 2015 ›...

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