Presentation made with good friend and colleague Tom Monheim of Trane/Ingersol Rand, "B2B2C: Price & Value Management Through Tiered Channels"
Chapter 14 - Developing Pricing Strategies and Programs
Pps Presentation B2 B2 C Screen Versionv2
1. Business 2 Business 2 Consumer Price and Value Management Through Tiered Channels Presented by: Tom Monheim Brian Sharp
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8. Phase One in Action Build price waterfall Prioritize buckets; data rarely cooperates; avoid peanut butter spreading Price / Volume / Mix models Essential for measuring ‘pure price’ gains – no Pricer should be without Data Warehouse, Access, Excel integration (VBA) Great way to prototype decision support tools and build requirements for new core system Introduce Value Management concepts Always good to plant seeds, even if not ready to harvest yet Key Actions Important Lessons Field alignment on pricing strategy Especially important around major product transitions; can’t assume everyone ‘gets it’ Process definition for market price studies Important for setting and managing expectations, internally and externally Standardize quoting processes Improve distributors’ understanding of our decision guidelines; more efficient for all Price band analysis Wide ranges of sell prices has big implications on list price and discounting strategies
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11. What’s the value proposition? Value Drivers Heard at the water cooler: “ We have trouble moving our value proposition down the value chain” HVAC OEM (TRANE) Distributor Dealer or Contractor Homeowner Calculated Fair trade on activities performed by distributor in return for appropriate margin and inventory turnover Calculated Reliability, ease of servicing, & installation, training/support from distributor, fast availability of products Perceived Reliability, efficiency, ease of use, comfort, product and air quality, value
12. How do we determine value and set price? Two Schools of Thought “ Value is Relative” - - Perceived Value “ Value is Quantifiable” - - Calculated Value Value maps Price vs. performance Relative market position Waterfall charts Economic Value Analysis Return on investment Decision to use one or both depending on the unique situation Alignment of Price and Value Tools
13. Perceived Value The Value Map shows the position of each competitor in terms of the overall cost versus the overall benefit. Higher Cost Relative Price Lower Cost Inferior Superior Relative Perceived Value Worse Value Fair Value Line Better Value Economy Average Premium
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15. Measuring Economic Impact – Value Waterfall A Value Waterfall is used for estimating the economic value-in-use of solutions. This tool is most effective when your business has a clear economic advantage over a specific competitor or when you are weighing purchase decision (e.g. as a consumer) $ Variance Cost/Profit vs. Current Solution Current Solution Break Even Savings
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18. One Offer. Four Value Propositions. Calculated Total cost of ownership over an expanding time frame (2-5 years) Scope of enterprise Basic Materials Manufacturer Residential Insulation Manufacturer Insulation Installer Residential Home Builder Homeowner Calculated Fair trade on order fulfillment activity performed by distributor in return for appropriate margin and inventory turnover Calculated Application training and technical support augmented by cooperative marketing spend and effectiveness Calculated Return on investment for labor and material inputs during home construction process leading to maximum retail price capture Perceived Value : functional and emotional benefits of reliability “My home is ‘green” Value Drivers
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23. Distribution channel creates a value drain… Value Sophistication HVAC OEMs Creating a range of solutions which address emerging homeowner needs related to energy management, air quality, and climate control HOMEOWNERS Growing awareness related to energy management, air quality, and total cost of ownership as it relates to household budget and operations Value Drain Value Created Needs CHANNEL Moving product through a mature, 2 tier structure across a highly fragmented mix of regional and privately held businesses Channel-to-market compromising value capture
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27. Contact Information Tom Monheim [email_address] 903.253.6607 Brian Sharp [email_address] 919.428.4495 Thank you for attending today’s presentation!