5. "The Marketing – Finance Interface: Practical Examples" - Dr. Gerben P. Algra

1. The Marketing – Finance Interface: Practical Examples Gerben Algra VP Marketing

3. The Life Sciences and Materials Sciences Company contributing to quality of life

5. DSM from 2000 to 2005 : Focus and Value ………… . Second major transformation of DSM ………… Former LSP Petro LSP PM IC 2000 IC PM Divestment Petchem Acq. Roche V&FC Acq. NeoResins IC PM PM LSP Pharma IC Sales € 8.2 bn Sales € 5.6 bn Sales € 8 bn H2’02/H1’03 2005 DNP

6. DSM Vision 2010: Building on Strengths Value Creation Market-driven Growth and innovation Building on Strengths Increased Presence Emerging Economies Operational Excellence

11. Leader in Sustainability, Now & in the Future Internationalization & Diversity Climate & Environment Nutrition Improvement People, Planet, Profit DSM Values: “ We can’t be successful in a world that fails ”

14. DSM is everywhere

15. PROGRAM EXCELLERATE PRICING

16. … PRICING IS THE MOST POWERFUL LEVER FOR IMPROVING REVENUE AND PROFITABILITY 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 & Partners Source: McKinsey, Simon Kucher & Partners, BCG and Excellerate

17. MOVING TO WORLD CLASS PRICING IS A JOURNEY PROCESS MATURITY LEVELS MATURE PROCESS WORLD CLASS Pricing Solutions Ltd., 2003 © L E V E L Baseline Process is Ineffective 30% of companies 1 L E V E L 2 Internal Process In Place Gain Control 40% of companies L E V E L 4 Optimization Processes In Place Optimization Tools <10% of companies L E V E L 3 Value Processes In Place Price/Value Analysis 20% of companies L E V E L Excellence in Execution <1% of companies 5

18. PRICING MANAGEMENT : 2 ELEMENTS OPTIMIZATION AND EXCELLENCE 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 Based Pricing Price Consistency Processes Organization Tools & Systems People & Behavior Performance Monitoring

22. PROFITABILITY ANALYSIS PROVIDES INSIGHTS ….. Graph gives insight into profitability of customers

23. ARE YOU CONFIDENT THAT PRICE LEAKS ARE NOT ERODING YOUR PROFITABILITY? Opportunities to control undesirable price leaks in the organisation Price exceptions Net realised price % of sales List Price Returns Freight Selling <10% volume Incentives Terms Price Leaks By Product

24. MONITORING 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

26. Price 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 drivers Aims for consistency Provides Targets Sales Pitch vs. Next best Alternative

30. Product Launch

31. Innovation : Bigger, faster, cheaper, better Accumulated Losses Opportunity time Revenues € Source: Prof. JP Jeannet, AIM course Business Development Time & Cash Line(s)

32. Key Functional Involvement over the Launch Cycle Legal Manufacturing Marketing R&D Sales Finance IDEA GENERATION BUSINESS FEASIBILITY DEVELOPMENT SCALE-UP & VALIDATION TRANSFER TO RUNNING BUSINESS Screen? Review Launch? Scale-up? Develop?

33. Marketing and Sales Focus Price Place Promotion Product Customer Company Unlimited. DSM Context Price Place Promotion Product Customer Company Unlimited. DSM Context Value for customer Cost base Competition Fit to product positioning Geographic markets Sequential launch vs. big bang Sales channels Product positioning Communication channels Brand relevance Target product profile Time - to - market sensitivity Registration Needs and buying factors Segmentation Market assessment Launch plan Cross - functional teams Resource allocation Sr mgmt sponsor - ship/ involvement Sales force development Value chains Business models Adoption barriers Partnerships Capabilities and assets Value for customer Cost base Competition Fit to product positioning Geographic markets Sequential launch vs. big bang Sales channels Product positioning Communication channels Brand relevance Target product profile Time - to - market sensitivity Registration Needs and buying factors Segmentation Market assessment Launch plan Cross - functional teams Resource allocation Sr mgmt sponsor - ship/ involvement Sales force development Value chains Business models Adoption barriers Partnerships Capabilities and assets Project Management Process Business feasibility Business feasibility Develop - ment Develop - ment Scale - up & validation Scale - up & validation Idea generation Idea generation Launch Launch Price Place Promotion Product Customer Company Unlimited. DSM Context Value for customer Cost base Competition Fit to product positioning Geographic markets Sequential launch vs. big bang Sales channels Product positioning Communication channels Brand relevance Target product profile Time - to - market sensitivity Registration Needs and buying factors Segmentation Market assessment Launch plan Cross - functional teams Resource allocation Sr mgmt sponsor - ship/ involvement Sales force development Value chains Business models Adoption barriers Partnerships Capabilities and assets + Reference to “ Guide to Business Planning ” + Reference to “ Guide to Marketing Planning ” Business feasibility Develop - ment Scale - up & validation Idea generation Launch IN SYNC Project Management Process Price Place Promotion Product Customer Company Unlimited. DSM Context Value for customer Cost base Competition Fit to product positioning Geographic markets Sequential launch vs. big bang Sales channels Product positioning Communication channels Brand relevance Target product profile Time - to - market sensitivity Registration Needs and buying factors Segmentation Market assessment Launch plan Cross - functional teams Resource allocation Sr mgmt sponsor - ship/ involvement Sales force development Value chains Business models Adoption barriers Partnerships Capabilities and assets Business feasibility Develop - ment Scale - up & validation Idea generation Launch

34. Concept Development : POSITIONING Concept # 5 Concept # 4 Concept # 1 Concept # 2 ………… . Creative Part of the Process ……………. Concept # 3

40. This presentation was made possible by ………….