epp training on spare parts and services pricing
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www.simon-kucher.com
EPP Training Preview Day 1
Spare Parts Pricing Excellence
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OPEN TRAINING ORGANISED BY
Britt Dejager
Tel. +32 51 32 03 72
Volker Handing
Tel. +49 221 36794 319
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Source: Simon-Kucher
All main areas of spare parts pricing will be covered in
the training
Pricing
strategy
1
General objectives
Strategic orientations
Pricing approach
Parts Pricing Excellence
Resources, process, tool, maintenance...
Price
setting
Price
implementation
Pricing
infrastructure
Global list pricing
International price steering
Discount structure
Price execution
Value communication
Change management
Monitoring and control
Organization
IT
2 3 4
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EPP_Spare_Parts_Pricing_Excellence_Preview.pptx 2
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Source: Simon-Kucher
Good parts pricing requires a clear definition of key
objectives as well as their proper implementation
Pricing goal
What is the goal of parts pricing?
E.g. to maximize aftersales profits or to improve customer satisfaction/loyalty to support whole goods sales?
Competition
How to position parts prices to OES and OEM competition?
How to react to competitor price changes?
Value pricing
How to utilize value drivers to structure parts prices?
What parts are priced on value and which require other logics (e.g. warranty parts)?
Brand coordination
How to coordinate retail prices as well as terms & conditions between brands?
How to position a 2nd line?
International pricing
How to differentiate prices internationally?
Who sets prices in the markets?
Dealer network steering
How to incentivize dealers to motivate beneficial behavior?
E.g. by what criteria to define discount, what to include in the bonus system?
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EPP_Spare_Parts_Pricing_Excellence_Preview.pptx 3
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Source: Simon-Kucher
List price Driver 5 Driver 6 Driver 7 Driver 8 Final price
List price calculation List-less calculation
Net
cost
Base Driver 1 Driver 2 Driver 3 Driver 4 List price
+x% price/
margin
-x% discount
Example drivers:
Parts characteristic
Global demand trend
Margin situation
Example drivers:
Geography
Customer size
Order size
List price setting as well as discounts and bonuses will
be discussed
EPP_Spare_Parts_Pricing_Excellence_Preview.pptx 4
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Source: Simon-Kucher
+x% +y% +z%
Competitive
pricing
Simple cost-plus Value-based pricingDifferentiated
marginsPrice
Cost
+x%
Apply a simple
mark-up on top of
the costs of each
part
Differentiated mark-
ups typically by
parts segment
E.g. +50% on filters
and +70% on
engine parts
Competitive parts:
consider OES
competition
Captive parts:
consider OEM
competition
Usually combined
with some form of
cost-plus
Pricing model that
uses price change
indicators (e.g.
difference to
competitors prices,
price elasticity) to
identify price
opportunities and
adjust prices
accordingly
Pricing logic
Least sophisticated Most sophisticated
De
sc
rip
tio
n
Spare parts pricing can be done in many ways - lets
find out what works best for your company!
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EPP_Spare_Parts_Pricing_Excellence_Preview.pptx 5
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www.simon-kucher.com
EPP Training Preview Day 2
Service Pricing Excellence
OPEN TRAINING ORGANISED BY
Ph
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ww
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Britt Dejager
Tel. +32 51 32 03 72
Volker Handing
Tel. +49 221 36794 319
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Source: Simon-Kucher
What you can expect from this training on Service
Pricing Excellence
Best practice in service pricing
Framework, tools and practical tips
Learning-by-doing with help of a case study
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EPP_Service_Pricing_Excellence_Preview.pptx 7
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Source: Simon-Kucher; Field service forum survey 2014, n=~300
How would you characterize the service of your firm?
According to a worldwide survey
targeted at manufacturers, as many
as 52% of the respondents classify
their service offerings as "reactive"
Lack of expertise and competence in
the support team was cited as the
biggest hurdle to overcome
Only 8% of manufacturers consider
their service to be "predictive"
How would you classify your service
offerings?
Reactive;
52%Proactive
40%
Predictive
8%
EPP_Service_Pricing_Excellence_Preview.pptx 8
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Source: Simon-Kucher
What we often see: Cost instead of value mindset
Current approach
Customer
"If needed, could you also
deliver on short notice the
next day?"
"No problem this is
covered in all of our service
contracts."
Cost mindset:
"This doesnt cost us more, so the
customer doesnt have to pay
more!"
and the right way!
"Of course, for only 30 we
can offer you our express
service."
Value mindset:
"Service is important to the
customer, so he should be willing
to pay for it."
EPP_Service_Pricing_Excellence_Preview.pptx 9
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Source: Simon-Kucher
Service pricing should play a strategic role in your firm
If priced right, service can contribute to
Generating immediate quick wins
Enhancing customer loyalty
Standing out from competition
A
B
C
Depending on assigned role, different service pricing strategies will be required
Service
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EPP_Service_Pricing_Excellence_Preview.pptx 10
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Source: Simon-Kucher
Simon-Kuchers framework for Service Pricing
Excellence
Analyze and
challenge the
existing customer
segmentation
Who is going to pay
for which service?
Collecting services
and related
information in order
to specify the
different services
Classify services into
different categories
How is the service
going to be priced:- Metric/model- Level
Service catalogue
with existing services
as well as prices
Develop
implementation plan
Review results and
adapt
Customer
segmentation
Service
classification
Setting price
metrics + levels
1 2 3
Implementation
and review
4
Service pricing strategy Clear objective statement of service pricing
Basis for systematic setup of service offerings
0
Framework
We will illustrate the
framework and discuss
detailed steps with help of a
case study during the
training
EPP_Service_Pricing_Excellence_Preview.pptx 11