B2B Profitability Blog

Visit Our New Blog!

Edward Gorenshteyn — Tue, 12 Mar 2013 18:21:00 GMT

Along with a brand new website, Vendavo is launching a new blog - Selling More Profitably!

www.vendavo.com/blog

Please visit this blog for new ideas on how you can empower your front-line salespeople to sell more profitably at the "Moment of Truth."

We will no longer be maintaining this blog going foward.

- Vendavo Team

Well Behaved Kids Discount - People Respond To Incentives

Christine Carragee — Mon, 25 Feb 2013 12:23:00 GMT

A mother in Washington state recently posted a receipt on Reddit displaying a $4 discount for having “Well Behaved Kids” at their local Italian restaurant. News coverage, both in the blogosphere and multiple print sources, has focused on the behavior of children in public spaces and what parents can do to keep kids under wraps when dining out. The focus of all these stories has been on parenting, but the first thing I thought of was how funny that would look as a waterfall adjustment.

Our dining experience is clearly impacted by those around us, including the drunk guy at the bar, the shrill woman on a first date, and those kids crawling on the floor and spreading Cherios like New Year’s confetti. In economic terms, the behavior of others is an externality imposed on us. In part, we go out to eat to experience postive externalities (ambiance, live music, decore, people watching) rather than just to eat food we aren’t able to cook at home. Restaurants can’t control all of the factors which influence your willingness to frequent their establishment, or the price you are willing to pay for your meal; but they do have control of pricing structure.

The food service industy is full of pricing incentives designed to manipulate customer behavior. There are happy hour drink specials to draw you in at low peak times, senior citizen’s discounts to target lower income patrons, and the classic kids-eat-free-on-Tuesdays-type deal. Almost all of the promotions I can think of are geared toward increasing overall demand, price discrimination for various customer segments, or increasing demand for certain ingredients before food spoils – here I’m thinking of Bourdain’s warning in Kitchen Confidential not to eat any Saturday morning seafood omelettes. By and large, people respond in rational ways to these incentives. We try the specials, we will check out a new resteraunt if we have a Groupon, and we will leave work early to get happy hour drink prices.

The novelty of the “Well Behaved Kids” discount is that it is aimed directly at driving customer behavior within the establishment, an acknowlegment that this behavior has been a previously uncontrolled externality in the dining out experience. I love this discount. It not only targets families who are likely to be more price conscious, but the right type of family. By which I mean the ones who aren’t going to drive your other higher margin patrons away.

What remains to be seen is if the discount which is targeted at the parents, whom we assume to be paying, can influence the behavior of the kids who aren’t directly benefitting from the price break. So we’ve come full circle back to the parenting techinques discussion that every other news source has already exhausted.

Caribou – Wallet Share, Bundle Discounts, Coefficient of Variation

Christine Carragee — Tue, 29 Jan 2013 12:16:00 GMT

$3.87 – That’s how much my coffee and oatmeal usually cost at Caribou. Sometimes though, it costs $4.23 or sometimes it’s as little as $3.47.

This price range represents revenue opportunity for the coffee company for a couple of reasons. The main reason is that forty odd cents is such a low percentage of my food budget that it has no impact on my buying behavior.

As much as having a hobbit-like second breakfast appeals to me, I’m not trying to get fat, just fed and caffeinated, so it will always only be one oatmeal and one coffee for me.

Why does my price vary you may ask? Looking back at my receipts for the past few months I’ve noticed that I’m getting different discount types on different days.

Some days a bundle discount for purchasing both items together of about $.50.
I’m also often receiving a $.50 discount for bringing my own mug, which is sometimes applied in addition to the bundle discount.
I also occasionally get an employee discount of 10% because the shop is located within a large corporate office.

This employee discount is one I’m probably not entitled to, as a contractor. It was probably designed as form of price segmentation to entice those who could cook at home to have breakfast at work anyway, maybe even on a regular basis. My impostor status notwithstanding, it is bad business to extend discounts to segments who don’t require them. As a contractor, on site for a project, I have fewer breakfast alternatives and am more likely to be willing to pay full price.

If I had this transaction data in Profit Analyzer, I could check out the Price Waterfall chart and quickly see the value of each of the discounts as negative adjustments. I could get a count of the instances when I was charged each price using my price band chart. If I were concerned that this price variation for the same product/customer combination was a broader problem across multiple products, I could also use a scatter chart, roll-up by Customer and band by Product and look at the measure for Coefficient of Variation of Invoice Price. Coefficient of Variation is defined as the Standard Deviation/Average Price, which gives me a normalized measure of variation for whichever pricepoint it is applied to – in this case Invoice Price. In my coffee/oatmeal case Coefficient of Variation of Invoice Price is roughly 10%, but if I looked at it across customers and store locations it would probably be higher.

The difference between the highest amount I pay $4.23 and the other prices a small windfall for me, but across millions of customers could be big bucks for Caribou. Presumably, there is an analytics group working on capturing some of this consumer surplus. I wonder if they have a pricing specific analytics program to help them identify and capture this opportunity because starting with paper invoices is painfully slow.

Running to Pricing Excellence in 2013

Nick Seagrave — Tue, 22 Jan 2013 12:04:00 GMT

I’m something of an avid runner and committedly log all my running activity. Looking back at 2012 it was a pretty successful year. I ran 100 miles in each and every month (my start of year target) and I ran PBs at 1500m, 5k, 5m, 10k, Half Marathon and Marathon. I have a training partner Rob who had the same target and achieved an almost identical set of PBs at the above distances.

What’s all this got to do with pricing? The answer: ensuring you’re looking at the right measures.

Almost all runners will tell you race performance is the most important measure of their performance. In pricing terms this would likely be some kind of measure of profit. Different businesses use different measures for measuring their profitability but here at Vendavo we like to use "pocket margin," which is the margin once various revenue reducers and costs are taken into account.

So what is the equivalent pricing measure for training mileage? Well I had a couple of thoughts, here are mine and Rob’s training mileages in 2012:

The importance of setting targets

If you look at my experience it could be said to resemble a "target price." This is the price at which a business positions its product or services for its sellers to achieve and is commonly a "stretch" goal, representing the upper percentile of prices realized for a given product in a particular customer segment.

Setting a target price and then using a measure such as target price yield (price achieved/target price) to measure their performance would push them to achieve that higher price even when it is hard, rather than mindlessly giving customers the floor price in an effort to maintain volumes or chase revenue.

For me the figure of 100 miles per month did exactly that, it was an achievable yet stretching target and having the target meant I structured my training to hit it, even when that meant dragging myself off the sofa into the rain.

For Rob though, the mileage target worked more like he was chasing revenue. Why? Well, what the numbers I have given you don’t show you is that in 35 miles came on the final two days of the month, 50 of his May miles on one day, and 40 of his August miles on one day. In addition since his mileage dropped there hasn’t been a discernible drop in his race performance.

Focusing on better deals

How might it be possible for a business to achieve the same as Rob, i.e. positively impact pocket margin (PBs) without increasing revenue? Well, one possibility would be that they decided to stop focussing just on revenue and start looking at measures that better evaluate the quality of the deals being done. For example, they could decide to stop doing business with, or raise prices of, customers that had negative or low pocket margin. It is possible that the effect of this might be that some of those customers leave and revenue falls but if they weren’t contributing to, or worse were negatively impacting, profitability what is the point in making the effort to service them?

So as we look forward to 2013, why not spend a few minutes considering whether the measures you use to evaluate your business performance are really helping you achieve your goals?

Time for a run.

New Year's Resolutions

Ben Blaney — Thu, 03 Jan 2013 12:03:00 GMT

If you’re like the vast majority of other people, you’ve probably got a few self-improvement ideas in your head – or "New Year’s Resolutions," as many people know them. I don’t like the term, because it’s too easy to drop when the year doesn’t feel terribly new; having the very personal connection to self-improvement makes it more sticky.

So what are your pricing resolutions for 2013?

Maybe your organization is at the beginning of your pricing journey, just dipping your toe in the water because of a feeling that there’s an imbalance of consumer surplus in your commercial relationships. You’re thinking about training, software, value proposition, pricing conferences, hiring, organizational structure.

All those things are important. As a pricing person, I want all organizations to be thinking deeply about pricing and taking action where they can.

Perhaps things are already developing nicely, and you could describe your organization as more than averagely sophisticated in pricing matters. Have you a new product introduction, which could benefit from more research than usually happens? Perhaps you’ve been meaning to look at customer volume commitments forever, suspecting that some promise volume that never materializes? Is there a new way you can segment your customers, to more accurately compare like with like?

So what are my resolutions? Well, outside of work, they’re pretty standard: more exercise, consume more improving reading, and calling friends more often. At work, it’s fairly modest, but sincere: I just want to engage – with prospects, clients, partners and colleagues – in healthy, vigorous conversations about pricing; to challenge and be challenged; to inspire and be inspired.

Happy New Year.

Why James Bond isn't a Profit Superhero

Nick Seagrave — Wed, 12 Dec 2012 12:31:00 GMT

A recent hot topic on my Facebook newsfeed and in the media in general was the release of the latest instalment of the Bond franchise Skyfall. Many of my friends went out of their way to make absolutely sure they were among the first to see it, some made an event of it and went out for a meal beforehand, one (now a candidate for my next friend cull) even dressed up in a tux for his viewing.

This got me thinking about how much I would pay for a cinema ticket to see a blockbuster on opening weekend and made me think that cinemas are potentially leaving profit on the table. In creating a blockbuster a film studio is creating a premium product that many people want, which has relatively poor substitutes (I could go and see another film but it wouldn’t be Bond), and they have a fairly high degree of control over the supply of the product (as well as there being a physical limit on number of screens, there may be scope to limit the number of showings).

So my question is this, why on the opening weekend of major film releases are prices not higher than the following weekends?

This strategy, known as price skimming, happens elsewhere. Take the price for a theatre ticket for a new show, initially the prices may be high, but when everybody who is prepared to pay the initial price has seen the show, the price is gradually reduced allowing people with a less cash to spend to see it. The theatre still makes a profit, just not as much as they made in the opening weeks. At the cinema, it is likely that this could only be sustained over one or two weekends as during the week emptier screens will make it harder to keep the price high, but for blockbusters that sell out cinemas it would appear an opportunity exists.

There would be some risks associated with this approach. There may be some people who, if they could not get a ticket on opening weekend, would not bother to see the film once the fuss had died down – but is that likely, and if so, what would the magnitude be? There may be protestations from loyal fans who see this approach as a form of price gouging and a kick in the teeth to them, this could be mitigated by offering some low cost inducements to make it more appealing: Red carpet treatment, encourage people to dress up and make an event of it, maybe give a free martini - "shaken not stirred" - for visitors of legal drinking age, or perhaps just bundle some food and drink into the higher price.

The film industry already uses this technique in the pricing of DVDs and on-demand movies through the cable box, which may indicate there is a reason why this does not happen today. If not, if I were a film distributor wanting to leverage more profit from my studio’s blockbusters this is the first place I would look.

Dave Brubeck and B2B Pricing

Ben Blaney — Thu, 06 Dec 2012 00:45:00 GMT

Dave Brubeck died today (5 December). It's a loss to the world of music. Before I explain why I think Brubeck is pertinent to the world of B2B pricing, let me reminisce.

I saw the quartet at the San Francisco Jazz Festival in 2001. The group came out in evening suits with their white hair glowing in the spotlights, and looked like a gaggle of retired bank managers, accountants and conveyancing solicitors. The moment they started to play, they lost 30 years of age each - swinging and swaying to the music, playing with such energy, enthusiasm, and pure joy. It was fabulous to watch. So, thanks, Dave, for the music and the memories.

Dave Brubeck - Unsquare Dance

Why do I think that Brubeck matters to excellence in pricing? Well, the reason is that he counted differently. He used a different measure to change the world. 7/4 as a time signature? Ground breaking.

Businesses all measure revenue (but I like to remember the old adage "revenue is vanity, profit is sanity"). There are a number of possibilities of how to measure profit at a product or customer level - gross margin, raw material margin, manufacturing margin. And finance folks calculate operating income, or net income; but only for some level of aggregation of the business.

I'd like to see more business adopt a "pocket margin" measure of profitability, incorporating allocations of certain types of off-invoice discounts, and costs-to-serve. This measure, used in a dynamic analysis tool, can be applied to any situation - a given deal, a group of customers, a sales territory, a week of the year - to gain insights into true profitability.

Customer Profitability Analysis 101

Ben Blaney — Tue, 27 Nov 2012 12:55:00 GMT

Speaking with a prospective customer recently, I was interested to hear that they didn’t actively manage their customers according to a simple four-box matrix of revenue and profit, such as the one shown below.

There are a couple of ways to think through the placement of the horizontal and vertical dividers. You could take the organizational average – either for the business as a whole, or the dataset under analysis. I can see the logic in that. You could make an arbitrary decision on where those lines could be – perhaps a future strategic goal for the organization, or what feels like the right limit. One thing I’d advise against is making the delineations based on the median.

This is a simple, but potentially effective method of analyzing, and subsequently managing different customers according to how well they perform.

The basic rule of thumb is:

“A” Customers – Maintain
“B” Customers – Grow
“C” Customers – Upgrade the Mix
“D” Customers – Improve or Exit

How should a commercial leader go about doing these things? Here are a few practical steps.

A Customers – Maintain

These customers are the most important. Customer intimacy is incredibly important; the organization should get early-warning of any discontent, to be able to take steps to address the situation. These customers can also provide important feedback into future product strategy, so their thoughts, wishes and desires should be actively considered. Lastly, they should have the best of the best – preferential terms and conditions that the other types of customers don’t get.

B Customers – Grow

These customers are highly profitable, so the key here is to enable and benefit from their growth. Can the organization help them penetrate additional markets? What is the total opportunity in the markets in which they are currently operating? Are there ways we can work with the customer to displace a competitor and increase our share of wallet?

C Customers – Upgrade the Mix

These customers are significant in terms of revenue, but are buying the low margin items. That could simply be a function of their size, and the concomitant discounting that may be occurring. There should be a correlation analysis conducted, so see whether the root cause is the customer buying the items that happen to be low margin, or if these customers’ buying behaviors make certain products low margin.

D Customers – Improve or Exit

We have to be brutally honest with these accounts. They are small in revenue, but they are hurting overall margins. The good news is that we can take bold actions, changing discount amounts, rebate schedules, freight recovery targets and payment terms – with little risk. In fact, it can be regarded as a win-win situation; if they change, the organization’s financials improve, and if they exit, the organization’s financials improve.

Your organization should have a system in place to continuously measure the specific, targeted activities taking place, measuring the changes on a per-customer basis, and measuring the macro benefit to the organization. You should repeat this analysis at regular intervals, because there will always be a new set of opportunities to go after.

Pundits vs. Big Data: Which are you relying on?

Ben Blaney — Wed, 07 Nov 2012 19:48:00 GMT

A man did something tremendous last night, here in the United States, and with worldwide implications. Groundbreaking and exciting as this event was, most media coverage today is about another event – the one about who gets an architecturally-unusual workplace for the next four years. The man I’m talking about is Nate Silver, author of the NY Times 538 blog (http://fivethirtyeight.blogs.nytimes.com/).

Nate Silver came out of sabermetrics, an area of baseball statistics that we’ve talked about previously in this blog (http://blog.vendavo.com/Blog/bid/76463/Moneyball-How-Data-Trumps-Expertise and http://blog.vendavo.com/Blog/bid/83147/What-s-the-Sales-Equivalent-of-On-Base-Percentage). In recent years, Nate has been working on political analysis. His experience at working with large data sets lends perfectly to a segue into political analysis – and specifically making sense of the myriad of opinion poll results, accounting for demographic information, and the pollsters’ historical accuracy. In the 2008 presidential election, he correctly predicted the winner of 49 of the 50 states. Last night, he got all 50. But the last seven days haven’t been easy; he predicted from a 75% chance of an Obama victory, up to 91% yesterday morning – while all the professional pundits were saying "too close to call."

What does this mean for those of us in pricing? I think it’s huge. It’s mainstream awareness of the power in hard data, and that robust analysis of big data will beat the prediction of the "expert" working on gut-feel and experience (and unable to isolate and remove their own bias and hope).

In B2B pricing, we have the equivalent of Nate Silver’s raw data - it's called Enterprise Big Data. And it’s the cold hard facts of every line item of every invoice ever produced by an organization – it tells us who buys what products and what prices, what correlation there is between the sales of one product and another, what happens to volume when the price changes, the extent to which different customers pay different prices for the same product. This serious information, unquestionable and firm will continue to gather momentum and strength against those who want to continue to rely on yesterday’s technique of instinct and preference.

The question that readers of this blog should be asking themselves is: "in my organization, do I have a Nate Silver with the systems and data to support him, or do I have pundits giving opinions which turn out to be wildly wrong?"

Top Reasons for Rebates in B2B Pricing

James Marland — Tue, 06 Nov 2012 12:45:00 GMT

My colleague Colin Carroll recently gave a very comprehensive discussion of Rebate Best Practices at his blog, colincarroll.vendavo.com. As pointed out in his article, rebates are a critical part of B2B pricing, but why use them at all? This was a question I got when shopping recently and I filled out a form to get a rebate from a manufacturer. My daughter asked why the shop just didn't deduct it from the price.

I tried to list the many reasons that rebates are used. This should be read as an introduction to Colin's article, which explains exactly how to use each of the types of rebates given below.

1. Intelligence from end user in a channel environment

Let's start with one of the reasons that a manufacturer would include a rebate to a consumer like me. When I buy my product from a local store, I might be a long way down channel via a wholesaler and retailer.

Generally, very little information about me, the consumer, is obtained from such a transaction. And what information is gained stays with the retailer. How can manufacturers get information on their end customers? Answer: End-user rebates, such as the one pictured above.

These low value Rebates are often used to gather intelligence about who is buying the product, from which channel and at what till price. This is very valuable information to the manufacturer, and they are, in effect, paying for valuable market research.

2. Price masking

This is a different kind of rebate, designed to drive product mix and volumes without creating downward pricing pressure. This is very common in car dealerships in the US where consumers are asking to see the "factory invoice" from the manufacturer. So the dealer can show an invoice which says that the A4 cost him $22,750 from Audi. "So I couldn't possibly sell it for less than that." Sounds reasonable until you find out that Audi will give him thousands of dollars of rebate when he sells the car.

This is also why your plumber gets a rebate from Home Depot, so he can come back from the store and show you the (higher) invoice as his "cost."

3. Channel support

Manufacturers want to be able to negotiate directly with their largest customers, but still have the customer serviced from a local distributor. In the building trade I might cut a deal with a large house-builder to provide bricks at £200 per pallet, instead of the distributor's usual fee of £250. The distributor doesn't want to mess about with multiple prices for the same item, so at the end of each quarter they send me a document listing how many pallets they sold to this house-builder, and I reimburse (via credit note) at £50 per pallet sold.

This is called "Ship and Debit" or "Proof-of-Sale" in the US.

It is really like "coupon clipping" for B2B. Same sticker price for all, but preferred customers end up paying less.

4. Encourage certain behaviour over time

Volume rebates fall into this category, a rebate which the customer can earn over time. This is better than offering a lower unit price up front on the hope that the customer will buy at the volume promised. This approach can also be used to train a customer to lower cost of sales, by earning a rebate for using an EDI Channel, or eliminating lots of small orders.

5. Making a transfer between departments at your customer site

I've seen this one where the supplier is using rebates to move funds from a branch to head office. Since the rebate credit is received by the centralised purchasing department, the head office is in fact grabbing some of the margin from the branch. For example, it the product cost a consumer 100, and the branch paid 60 then the branch makes margin of 40. If the supplier structures it so that the branch is charged 70, but the head office gets a rebate of 10, the total deal between the buying and selling organisations remains the same. But the supplier has moved 10 dollars from the branch to head office.

6. To prevent a public price war

Rebates hide the true price from my competition, so they appear higher than they really are. This can be a way of avoiding a price war.

For more, see Rebate Best Practices.

Profitability or Pricing: Why Choose?

Colin Carroll — Wed, 31 Oct 2012 11:04:00 GMT

Not either, but both.

Managing price points is necessary but not sufficient for maximizing profit. The most profitable companies support their profit objectives by aggressively managing both prices and margins, actively and intelligently, systematically balancing price and margin guidelines and objectives.

Invoice Price for Market Visibility

A seller must aggressively manage List and Invoice Prices, as these price points are your primary mechanism for providing market visibility.

List prices communicate relative value positioning, both with respect to other products in your own portfolio as well as relative to competitive products, and provide an important price increase mechanism. Invoice Price is the price your customers see on their invoices, and it is the price to which those customers generally refer in providing competitive situations. Invoice prices should be managed so as to protect product ladder rules, the predefined value differentials between related products reflected in your List Prices.

Margins are critical, of course, but the market has visibility into your prices, not your margins. Savvy sellers understand that some ostensibly margin-positive actions may be misinterpreted in a competitive marketplace. Managing margin without regard to pricing integrity can lead to self-inflicted downward pricing pressure, even foment price wars.

Pocket Price = Net Revenue

The seller must also manage net or Pocket Price, which reflects off-invoice discounts and concessions including rebates, payment terms, and all service costs including freight. Pocket Price is just as important as Invoice Price, as it represents net revenue. The Maverick Pricing Director needs to manage both the Invoice and Pocket Price points, certainly.

Margin Matters

But to Edward’s point, you cannot stop there. Margin matters. Your business has real fixed and variable costs, and margin is what matters as you go up the corporate ladder. Whether you use the term pocket margin or variable contribution margin, you need to protect that margin, generally with margin floors. Margin targets make sense on an aggregate level, helping to dictate product and customer mix / market decisions and price increase strategies. But margin targets at a customer / material level can lead to cost plus pricing.

Best Practices

The best practice is to balance segment specific Invoice and Pocket Price targets with product or asset specific margin floors, escalating deals / line items or customers which violate any of these important rules. Once defined, segment specific pricing targets, approval levels and floors, a pricing envelope for each customer material combination, must be enforced in real time during the negotiation discussion. Pricing targets and margin floors are designed to improve negotiation outcomes, to reduce negative price variation and resultant, self-inflicted downward pricing pressure, and to enforce delegation of authority, to leverage pricing as a means to improving profitability.

So profitability is the objective, pricing the means, prices and margins the levers and the outputs.

Return of the Moneyball: Use the Force

Gabe Smith — Mon, 29 Oct 2012 11:41:00 GMT

If the Oakland Athletics baseball team under Billy Beane were to be likened to the Star Wars trilogy, the season made famous by Moneyball would be the original Star Wars and the years immediately following would be The Empire Strikes Back. But 2012 would be The Return of the Jedi.

Let me explain.

In April at our Customer Summit, Billy Beane, the General Manager for the Oakland Athletics, and baseball Jedi Knight, spoke to our customers, prospects, partners and employees about Moneyball. He offered a facinating look at how the Oakland Athletics used statistical analysis to gain a competitive advantage, which ultimately helped them win an American League best 103 games with the 6th lowest payroll in baseball at $41M.

We asked Mr. Beane to speak because of the parallels this has with price and margin management techniques and the competitive advantage that our customers have enjoyed resulting in 1-3% or more return on sales in pure profit.

James Marland’s previous blog posts talk about this parallel and key pricing statistics.

If you watched the film or read the book, you know that the end was a bit of a downer. Despite making the playoffs every year from 2000-2003, the Athletics never won the World Series. After their success in the early 2000s, the word got out. The Empire Strikes Back: big market teams like Boston began using these techniques in addition to having much bigger payrolls. How was a small market band of rebels going to compete now that the market became more efficient and the price for players was more aligned with their actual value? That was the big question mark at the end of the movie and the book.

Fast forward to 2012, The Return of the Jedi, with a now league worst $49M payroll, the Athletics won the AL West with unknown players over the Texas Rangers who had a $121M payroll.

There are a few of lessons from this:

Applying statistical analysis and techniques helps small and mid market companies compete even when the large cap companies are using the same techniques. This of course applies to pricing as it does to baseball.
These techniques continue to deliver value year after year
Transformation can take longer than you think
The competition will copy you if you have success
Confidence and chemistry: Having the right system, people and processes in place allows the team to become greater than the sum of its parts and even less talented and experienced players to succeed. This young team came together in a system they believed in and played together as a team. They had confidence that built on itself.

Better price and margin management will help your company compete whether you are the market leader or not. Knowing the price your customers are willing to pay and understanding the profitability of every deal will give you an advantage over companies not using these techniques, and is a must have to compete with companies that are, especially relevant if “you don't have Brad Pitt’s good looks to fall back on.”

Use the (price and margin management) force.

Profit Velocity: Managing Margin & Yield in B2B. And Beer

Colin Carroll — Wed, 24 Oct 2012 07:07:00 GMT

Beer is a Profit Velocity industry

"Large selection of hand crafted Ales" says the sign in front of the pub. Who cares? Ever wonder why microbreweries have so many Ales on the menu? Is it to attract the punters? Well, not quite. Lagers, my own preference, dramatically outsell Ales in most of the world despite carrying a 25% price premium on the High Street. Why invest so much production in Ales? "Profit velocity" explains the decision.

In the world’s second oldest industry, or thereabout, whether for home brewers with a large pail in the basement, microbreweries with 3 large tanks or SAB Miller, profit velocity drives the Lager vs. Ale production mix decisions¹.

Profit Velocity 101

As a provider of price and margin management solutions, Vendavo spends a lot of time helping our customers to maximize price and margin. Every optimization project starts with an objective: what is the goal? In some cases, margin per unit metrics don’t tell the entire story. Let’s consider the simplified example of my basement brewing operation.

Figure 1: A Tale of 2 Brews

Profit Velocity is effectively a calculation of the cash flow generated by any asset, customer or product or segment over a given time period. The profit per minute, or profit per (machine) hour, or per month generated from a fixed asset, in this case a big bucket taking up space downstairs. Profit velocity is a well understood metric of particular interest to process industry manufacturers, including us beer guys.

Every home brewer is aware of yield: how many of my own concoctions can I drink each week? You don’t have to wait 12 years like a Scotch distillery, but minimizing the time spent waiting for the home brew is an optimization function understood by brewers large and small. Margin per case matters, of course, but producers are really seeking to optimize absolute margin $, in this case, margin $ per year. The yield on Ale is so much larger, and the cash contribution per month so much larger, that it might convince a beer guy to produce and drink Ale, independent of personal taste. And that is what happens. In this simple example, the profit velocity calculation makes the choice clear.

Profit velocity is not a metric that is useful in evaluating specific customer opportunities, or indeed a metric that can be considered in isolation. Profit Velocity metrics are generally used in a Balanced Scorecard, balanced with pocket margin % to evaluate and assess mix; to identify opportunities to upgrade product and customer mix. A typical process works like this:

Product managers use Vendavo Profit Analyzer to identify high profit velocity products and the customers and industries that consume those high contribution products.
Sales then targets customers who buy those high contribution products.
Product and pricing management adjust pricing targets and floors to help capture high profit velocity opportunities without creating downward pricing pressure. Ideally, sales targets customers who buy higher yield products off the same asset, thereby upgrading customer and product mix.
‘High’ contribution is only high in relation to price and margin. Outside of a basement brewing operation, misusing or misinterpreting profit velocity metrics can become a dangerous game: Discounting to capture volume at high margin per hour can lead to self-inflicted pricing pressure. The market doesn’t have visibility into your yield, just into your quoting behavior.
A Balanced Scorecard is essential. Pioneered by Kaplan, and probably at use in your organization, a balanced scorecard helps to make complementary metrics visible and actionable. Contribution margin % and cash contribution per hour should be considered together, as opposed to in isolation.

Figure 2: A Profit Velocity and Pocket Margin Bubble Chart

Figure 2: Chart Legend

X axis Pocket Margin %

Y axis Profit Velocity, $/hour

Z axis Revenue (Invoice Price $

Each bubble is a product/plant combination

Each color is a production asset/plant

Which product should you make more of?

Conclusion

Employed correctly, profit velocity metrics are a best practice in the process industries. Vendavo makes profit velocity metrics visual and actionable for informing pricing, production and mix decisions, indeed, Figure 2 is easy enough to be consumed by the home brewer.

For more on this topic click the link to ColinCarroll on B2B Pricing.

Dial 999 for Emergency Pricing

James Marland — Mon, 15 Oct 2012 11:52:00 GMT

We had an anniversary recently for the 999 Emergency number which was introduced in the UK 75 years ago (other countries such as the US were much later). In the UK, when the number is dialled, the operator always responds "Fire, Police, or Ambulance: Which do you require?"

A Pricing Department can often be seen as either Fire, Police or Ambulance. Let me explain.

Fire

This is a completely reactive Pricing Organisation which is just involved in putting out fires. This might tike the form of responding to an urgent call to put through a price rise mid-year to respond to a competitive threat or cost change (such as a fuel surcharge).

Putting out the fire is often just a case of grabbing the simplest algorithm, which may be as basic as multiplying columns in spreadsheets by fixed amounts. This approach is highly tactical, and often leads to contradictory prices between segments.

If you seem to be spending all your time putting out fires then its time to stop and consider your Pricing Strategy. Real world Fire Departments encourage the use of fire drills to get every ready so that mistakes can be corrected. For a pricing team, this means you should review systems for flexibility: just how long would it take to introduce a new surcharge into your current pricing environment, set up policies for it and track its effects? Have a fire drill and see.

Police

The Pricing Team is seen by the commercial team as merely policing their actions. It can be a case of telling sales teams why they can't sell at a certain price. Being the enforcement agency is no fun.

If you and your pricing teams that seem to be stuck policing deals there are a couple of things you can do:

Review your approval policies to see if you are spending your time on the deals that make a difference
Work with sales teams on other ways to improve profitability rather than just nailing them on price. For example, via improved the mix, recovery of services via surcharges, or improved payment terms.

In the UK, the Labour Party had a slogan, "tough on crime, tough on the causes of crime." For a pricing team, this could read, "tough on discounting, tough on the causes of discounting."

Ambulance

Just like the real world ambulance, pricers often get involved in scraping deals off the road, applying resuscitation techniques and setting them in the road to recovery. For a Pricing Team, or Deal Desk this is often "re-engineering" a deal to make it more profitable. However, as in the real world, Casualty (ER) Departments are much more expensive than primary care services.

In order to reduce the pricing teams cost of "health care" consider what would be the equivalent of setting up local health clinics to ease the strain on the ER. Perhaps pricing clinics could be run in the field to teach sales people about pricing and profit.

So, although it might be exciting to be a Pricing "First Responder", we could all do with fewer pricing emergencies.

Forget Pricing - Focus on Profit! (Part 2)

Edward Gorenshteyn — Wed, 10 Oct 2012 10:21:00 GMT

In the my last post, Forget Pricing - Focus on Profit! (Part 1), I talked about the evolution of pricing and its origins in the BI space. The result of this BI pedigree is there is an almost religious analytics first approach in pricing project. In other words, the focus is squarly on finding "holes" in your pricing data after the fact, rather than ensuring sales profitability on the front lines, at the "moment of truth."

See anything wrong with this picture?

Turing the Nail on its Head

Isn’t delivering pricing guidance to the field the most important part of this equation? Isn’t ensuring every deal is closed profitably a better approach than finding unprofitable deals in your data after the fact? Shouldn’t the focus be on empowering the front lines of your business to be more effective rather than giving your analysts another tool to manage?

So what if the first action of your pricing project was to stem the bleeding on the front lines by delivering profitability guidelines to salespeople at the moment of truth? And what if this guidance was delivered to salespeople in an extremely simple and intuitive way via their iPad? And what if this guidance enabled the "edge" of your business to be more effective during negotiation?

These are the question we asked ourselves at Vendavo when we built the Vendavo 8.1 Enterprise Profitability Suite. With this in mind, we complete reimagined what a pricing project should be about.

To start with, your pricing project shouldn’t be a pricing project at all. It should be a profitability project.

Profitable Selling First

Our approach at Vendavo is to put the spotlight on profitability selling. This is precisely why we built Vendavo Sales Negotiator for iPad and Salesforce.com. Vendavo Sales Negotiator is the result of countless hours of usability research and Sales ride-alongs; it was built for Sales professional, not the deal desk.

This approach is a clear departure from the analytics first approach to pricing. Instead, our focus is on making each salesperson more effective during the negotiation to ensure they are able to consistently capture more value. We do this by enabling the rep to review sales history and target prices before meeting with the customer, negotiate confidently with deal metrics and recommendations, and close more deals by getting the right price in front of the customers faster than the competition.

Monitoring & Refining Execution

As a result, analytics is less about finding holes after the fact, and more about keeping pulse on the health of your business in real time, and being able to quickly adjust. We’ve added self-service dashboards and guided analytics to enable anyone on your profit team (made up of Sales, Marketing & Finance), to generate simple reports that provide real time, actionable information, and incrementally refine execution, which in aggregate amounts to significant profitability gains.

To learn more about how to deliver profitable selling on the front lines, register for the upcoming webinar Managing Profitability on the Front Lines, taking place on 10/18 at 10am.

Don't Ignore Noise in Your Pricing Data

James Marland — Mon, 08 Oct 2012 11:39:00 GMT

In a Ted Talk entitled Fractals and the art of roughness (one of his last talks before his death in 2010), Benoit Mandelbrot discusses "dealing with acts of God."

http://www.ted.com/talks/benoit_mandelbrot_fractals_the_art_of_roughness.html

(minute 12:00 if you are in a hurry)

"These two curves are averages: Standard & Poor, the blue one; and the red one is Standard & Poor's from which the five biggest discontinuities are taken out. Now discontinuities are a nuisance, so in many studies of prices, one puts them aside. "Well, acts of God. And you have the little nonsense which is left. Acts of God." In this picture, five acts of God are as important as everything else. In other words, it is not acts of God that we should put aside. That is the meat, the problem. If you master these, you master price, and if you don't master these, you can master the little noise as well"

In pricing, it is often the noise which is the critical signal. Suppose you are analyzing a segment on the traditional scatter plot, and you see a few dots way off the line. It is tempting to dismiss these as "noise," probably due to bad data. So you sigh, and develop a routine to omit the bad data as part of a "data cleansing" algorithm.

But as noted by Mandelbrot, these outliers may be the meat, not the problem. In this example, further research may be in order to understand the fundamental cause of this "noise." Here are some possibilities:

One customer does really pay significantly higher than the going rate for your product in certain situations. This may be because your sales team has uncovered extra value in this situation and was able to charge a premium for it. You need to research what this was, perhaps by studying the deal, or running a Value Analysis study.
The customer only appeared to pay a high price because the chart is only looking at Invoice Price, not Pocket price. In this case you should encourage analysis of Pocket Price, which might account for the difference. For example, if the customer had been participating in a distributor "ship-and-debit" program (also known as "price support"), the Invoice Price would be artificially high.
You are looking at Pocket Price, but there is some other Rebate or Credit which does not appear on the waterfall. Perhaps check with Account Receivable to see if a Credit memo has been issued: sometimes certain "special rebate" programs are under the radar.

So, rather than arbitrarily assuming that outliers are part of the problem, it is worth recognizing that they could be the true heralds of something new.

Forget Pricing - Focus on Profit! (Part 1)

Edward Gorenshteyn — Thu, 04 Oct 2012 15:45:00 GMT

This is the first post in a series about the evolution of pricing and the renewed focus on profitability.

If you take a step back and look at the evolution of the pricing space, it's easy to see it as an outgrowth of BI tools. In other words, pricing was simply a very specialized application of enterprise data mining. The idea is that an analyst mines your ERP master data in search of holes in your pricing based on past transactions.

So then the origins of pricing software were rooted in analytics. And many of today's vendors are still stuck there. But even for those that have expanded the scope of their solutions beyond analytics, this BI pedigree has shaped the approach to solving this problem. More on that in a bit...

But first, what indeed is the problem that these vendors are trying to solve?

The Problem with Pricing

Religious doctrine in the pricing space has long held that the problem pricing vendors are trying to solve is a pricing problem.

Makes sense right? And this is where things go wrong.

Pricing is never the problem. Poor pricing is a symptom of an unprofitable company. Companies must set prices in order to collect revenue for the value they deliver. But if a company could be profitable without ever worrying about price, it would gladly drop this word from its vocabulary. Listing fees aside, does eBay have to concern itself with pricing? No!

So the real problem that pricing vendors solve is profitability. How do you use price (and other means) to improve a company's profits, so you can grow, invest in R&D, and return value to your shareholders.

It’s Hard to Shake Your Past

Pricing’s origins in analytics has meant that every pricing vendor has approached the profitability problem with an analytics first motto. “First we need to get our hands on all your master data.”

The traditional pricing project has always started with ETL (Extract, Transfer, Load), not to mention transformation and normalization. Once this is done, the traditional project has looked like this:

Your pricing analyst begins parsing through the data in search of valuable opportunities. (Most pricing projects stop here.)
The pricing team works with product management to set better pricing policies and target price guidance. (A few companies make it here.)
Lastly, you deliver this guidance in the form of deal-specific analytics through a quoting solution. Unfortunately, user adoption tends to scrape bottom because this solution wasn’t built with Sales in mind; instead, reps call the Deal Desk after each meeting. (Very few companies make it this far.)

When you have a pricing hammer, everything looks like a nail.

Next week's post will look at how you can turn this current approach to pricing on it's head.

Driving Sales Profitability With Pricing Science

Vlad Gorlov — Tue, 02 Oct 2012 18:50:00 GMT

As scientific pricing continues to attract attention in B2B, a discussion whether pricing is art or science has been picking up pace. The "art" point of view emphasizes complex negotiations, issues of product and price perception, human emotions, ever changing dynamics and interactions. This is a very attractive argument, for all these factors are undeniably real.

B2B Pricing: Art or Science?

However, it misses one critical point. It describes an idealized situation, an environment that could better be called "P2P," or person-to-person. The reality of B2B is multiple sales people selling a large number of products to other companies with only limited time available for each deal. Some deals may not be important enough, and there are too many that are. Sales force rotates all the time, not everyone knows all products and customers sufficiently well. And, let's be honest, not all sales people are equally good. This is certainly not the high art of selling described at the beginning. And yet this is what companies face every day and they must make good of it.

Pricing Science for Sales Profitability

That's where Pricing Science comes in. Science cannot entirely take the place of your best salesperson's intuition. However, pricing science is enormously valuable as a decision support system. It does for sales reps what they don't have time to do on their own. By using most of the relevant information and guiding close to the right price, it helps capture a large share of what otherwise is left on the table. Top sales skills can refine that and capture even more but the value of the first step cannot be overstated. This way it raises the effectiveness of every salesperson.

A Final Thought

Pricing science, when embedded in your systems, becomes an enterprise capability. It belongs to the company and cannot be hired away as may happen to your best sales people. Growing and improving with the business, it will continue to deliver consistent value today and in the future.

To learn more, check out this post about our new sales profitability product, Vendavo Sales Negotiator for iPad.

Case Study: High Tech Company Gains $57M in Profit

Scott Strenger — Mon, 24 Sep 2012 11:09:00 GMT

As a multi-billion dollar global B2B collaboration and communications solutions provider, this high tech customer’s solutions are built to bring people together with the right information atthe right time, improving their customers’ efficiency and quickly solving critical business challenges.

Challenge

Prior to implementing a profitability solution, this company’s only avenue to price and margin reporting was through their IT team which used a legacy business intelligence tool to provide information. Report generation was slow and cumbersome. Often days would go by before an appropriate report was provided.

The complexity of this process frustrated managers and pricing personnel. With their implementation, this customer aimed to leverage improved analytical insights to accomplish two related goals: improve margins where possible and optimize the specific deal discounts offered to their customers.

Solution

After deploying Profit Analyzer and Deal Manager this company successfully transformed from an anecdotal approach to a data driven, fact based pricing organization

Utilizing the Vendavo Enterprise Profitability Suite, this high tech supplier was able to address the following sources of margin leakage:

Prices were discovered to be lower than expected on many products
Several products carried negative margins that were previously unknown to managers
Prices across related products (good, better, best) were inconsistent and un-optimized

Results

Managing deals more effectively has become much easier with the Vendavo solutiion. The Pricing Power and Risk approach to segmentation allowed managers to determine optimal discounting for each customer negotiation.

The net result of all of these initiatives was a 2.3% Return on Sales gain in year one.

Transfer Pricing: The Good, the Bad and the Ugly

James Marland — Wed, 19 Sep 2012 11:10:00 GMT

I had a discussion recently with the division of a company who wanted their waterfall to start with the Transfer Price. This is the price that their Business Unit was charged by the factory. I pointed out that this was not a true waterfall at all, but my pleadings fell on deaf ears, as the sales company was assessed on the mark-up they could get on the transfer price. This was their view of the world:

Meanwhile, back at the Factory, their view of the world was the following:

This breaking up of companies into independent Business Units was all the rage a few years ago, and in some ways the classic pricing waterfall was developed to counteract it. Without an Enterprise level waterfall, the factory had an incentive to load up the transfer price as high as possible in order to improve their factory margin.

As a Pricing Consultant, I am always nervous if I see a Transfer Price in a pricing calculation. My next question is “Who is responsible for the Profitability of this business?”, and then I should go and speak with him. His view of the world was the following:

No transfer price, and the Enterprise profit is not arbitrarily split between the Sales Companies and the Factory.

The Good

Transfer pricing should be used by accountants for revenue recognition and managing Country Sales organisational profitability. A good transfer price provides stability to sales and isolates them from variations in the supply chain (which they cannot influence anyway). In some jurisdictions, the "Arms-Length Principle" may require a transfer price.

The Bad

Really wrong decisions can be made, if no one can evaluate the business on an enterprise level

..and The Ugly

The most intense negotiations each year tend to be in the annual adjustment to transfer price. If it goes up then the manufacturing company could make more money, if it goes down, then the sales company will all go to Hawaii.

The Transfer Price is seen as the most fungible, all you have to do is to lean on a few accountants, and so more effort might be put in this direction than in reducing the discounts with the customers, or putting through a List Price Increase.

Finding Unprofitable Customers in Your Data

Tom Cowen — Tue, 18 Sep 2012 11:38:00 GMT

As the father of a 9 year old House League hockey player, I am intrigued by the alphabet soup that has been created to classify players as young as 6 on the Travel Hockey scene. Entering our 4 rink hockey facility early Sunday morning I was immediately hit with a schedule screen that included: House league, B, A, AA minor and AAA major games.

Following a stiff cup of rink coffee, my mind drifted back to my iPad and work. In my sick mind I wondered, what were the similarities and differences between how a youth hockey player and a large corporate customer are classified?

Over the next 10 minutes I walked by the glass window in front of each rink and observed the difference between all the different levels. It was clear there was a difference, but what was it? The AAA Major players were clearly faster, stronger, more skilled, worked as a team and as Malcolm Gladwell suggested, probably born in January or February.

Best and Worst Customers

So how do we classify our best and worst customers? We know off hand that our best customers buy more and hopefully produce more profits for our company, but we must look deeper, here are our suggestions:

Classify Your Customers – Our first step at Vendavo is to classify your customers by revenue, volume and profits. You will be surprised, you’re A class revenue customers are not always you’re A class profit customers. Look at a whale chart to understand how concentrated revenues and profits are. Next answer this question: what would your profits go to if you lost all you’re A class customers or all your E class customers. You will quickly understand what’s at stake in your business.
Define Metrics – Next, discuss internally what defines a great customer and what defines a crappy customer. Depending on your industry, the great customers generally buy a lot, buy many products, buy new products, don’t ask for exorbitant discounts, place only large orders that don’t require rush shipping and engineer their own solutions. So how do we next capture those characteristics? Here are a few great measures to consider: New Product Adoption, # of SKUs purchased, % of orders rush shipped, average order size. Don’t just look at profitability and price, but understand what drives a great customer relationship.
Top 10 analysis – Next we recommend that you start with your Top 10 customers based on the metrics above and others in a dashboard. We have performed this analysis on some our projects and have been amazed at the difference within just the Top 10, there do exist some really great customers who are partners and others who are extremely tough to deal with.
Set a Strategic Plan – Next, create a strategic plan for your largest customers. How will you build on the great relationship and continue to grow your business? Next focus on your poorer customers, what are the service levels identified earlier that we can bring into line with our best customers, what is a 2 year plan to get prices and discounts in line with the level of service?
Dig Deeper – Finally, look further down your list. Look first at your E class customers and see who exhibit the worst scores on the metrics defined above. Evaluate what you can do to lose them or change them quickly.

If you're interested in learning more about this topic, register for this Thursday's webinar, Identifying & Managing Unprofitable Customers by clicking here.

Explaining the Bath Tub Curve

Colin Carroll — Mon, 10 Sep 2012 11:41:00 GMT

If you look at as many analytical frameworks as I do, you can get excited about an unusual distribution. It is a common maxim in semiconductor and High-Tech OEM settings that price, pricing power, and price realization, declines over the product lifecycle. Except when it doesn’t.

Let me explain the bath tub curve.

Figure 1 depicts the traditional correlation between price / pricing power and the product lifecycle. The well-worn story goes like this….

Introduction: A product is new and differentiated, but low volume (Gray line), upon entry.
Growth: As the product is adopted, volume grows but competitors respond and price pressure grows (declining Red line).
Maturity: High volume production, a mainstream product, but more competitors and more substitute products.
Decline. Price power bottoms out.

Figure 1: Price and Volume over the Product Lifecycle

But not all products follow this traditional path of one way price erosion. Some parts actually start to increase in pricing power late in the lifecycle. Think about original parts for a 57 Chevy. No one makes them anymore, as the volumes don’t justify it. Demand is low, but those few customers are motivated. The few customers who remain need the part and will pay for it. The seller, having sat on this inventory for 50 years, wants to get paid. Enter the bathtub curve.

In Figure 2, the blue line depicts the upward trend of pricing power in the late stage of the lifecycle that creates a bathtub curve that holds water.

A B2B example can be found in semiconductors. A selected a processor might be designed in to a specific device, a telco switch station. Years later, that processor is no longer cutting edge, and there are no new customers, but expansion within the installed base creates steady demand for the processor. With barriers to customer switching and a reduction in competitive suppliers, pricing power returns.

It takes the right analytical tools and processes to help you identify inflections in the price curve, to find the edge of the tub if you will.

Figure 2: The Bath Tub Curve in Semiconductors

While the bath tub curve is also used in reliability engineering, one of the most interesting applications of the bath tub curve is in baseball, to chart the home run production of sluggers over their careers. The Y axis becomes number of At Bats per Home run, and the X axis is the number of years in the big leagues.

It takes a while for even the best hitters to get used to big league pitching, but when they do, they start to produce Home Runs with regularity (Mark McGwire 10.61) in their prime. Then, as a player ages, bat speed slows down and the number of at bats required to produce a home run begins to creep up. All power hitters follow some variation on this curve. In fact, this curve was used to support accusations of doping by Barry Bonds. Mr. Bonds’ bath tub had 2 bottoms, one before, and one after the inferred intervention. Correlation isn’t proof, but it makes for good reading.

Any Bath Tub curves in your industry?

Figure 3: The Bath Tub Curve in Home Run Production

Hunting for Camels in Your Pricing Data

James Marland — Wed, 05 Sep 2012 11:43:00 GMT

I spend a lot of time looking at pricing data. One of the fundamental techniques is "outlier analysis." The idea is to look for a dimension of data across which there are higher and lower prices, and to then consider the lower prices as a target for improvement.

For example you may group your motors into high, medium and low performance. You then plot that against different customer industries. Perhaps you discover that Engineering companies pay higher prices for high speed motors than Utilities companies do. All pretty standard stuff.

But what happens if you see clusters in your data which do not correspond to one of these dimensions?

This is often shown as a "bi-modal" distribution:all that means is that it has two "modes," or humps. I call these "camelbacks," "Golden Gates" or "Cisco Logos." (For those pedants out there, I am referring to the two-humped camel (Camelus bactrianus) not the one-humped Dromedary (Camelus dromedarius)).

What it means

A camelback is very interesting as it tells you that there is a hidden segment in your data. And if it is hidden, you probably have a chance to exploit it. Here's a real example.

In this distribution we have already segmented on Product Family (mercury vapour lamps), the country (Italy) but we still see two clusters of data. This means that there are two types of market in play here, two overlapping distributions.

We can attempt to tease the overlapping segments apart by using our existing dimensions (and there are statistical techniques you can use to automate this). So we look perhaps at sales team, customer type, seasonality. In this example it was none of these. However when we looked at the actual transactions involved, they fell into two types Public Sector Tenders (on the left), and regular commercial contracts (on the right). This turned out to be the missing dimension, so we had to go back to the source systems to retrieve it.

As an aside, with this type of distribution you can see the flaw of using what seems to be a segment average. The Average price of €1.88 is evidently too low for the commercial business at the right, giving up unneeded margin; and two high for the Public Sector tenders on the left, meaning that our tender price will be too high and we will not win the business.

Now armed with this, we can give the correct guidance to sales reps, and also make sure that we ask this question in our deal data, so that we can segment on this attribute in the future.

In ancient times, the camel opened up the ancient world for trading and led to the prosperity of many ancient cities. In your pricing data, the camel can also lead to additional profits.

Revised Sep 13th

It took me a bit of time to figure out what Colin refers to in his comment below, but he is talking about the children's classic, The Little Prince. In it, he uses these drawings to assess whether the viewer has the intuition of a child or not:

When shown the top drawing, an adult will merely say "a hat", but a child will say "a snake that swallowed an elephant".

The Little Prince claims that we often miss what is really important.

Vendavo Sales Negotiator for iPad on the App Store!

Edward Gorenshteyn — Tue, 04 Sep 2012 10:24:00 GMT

We are very excited to announce that Vendavo's first iPad app officially launched today! Vendavo Sales Negotiator (VSN) for iPad is now available for download at the Apple App Store.

You can get it here: http://itunes.apple.com/app/vendavo-sales-negotiator/id540601636?ign-mpt=uo%3D6&mt=8

We designed Vendavo Sales Negotiator for iPad to give B2B sales peope the power of pricing insight at their fingertips to win more deals, increase deal size and achieve higher margins. The app requires Vendavo 8.1 and allows your pricing team to deliver guidance to the field.

Follow this link to download a free demo version of the app and let us know what you think!

Distributor Pricing Strategy by Account Type

Kim Long — Wed, 29 Aug 2012 21:20:00 GMT

Following up on my post from last week, I've been thinking a bit more deeply about the strategy component. A distributor can develop pricing strategy by account type. Here are some examples:

Large customers

For customers able to negotiate the largest number of stock keeping units (SKUs) use customer lifecycle pricing to maximize customer margins over time, as opposed to on each product.

Small to medium customers

Remember, small improvements over thousands of transactions add up to significant improvements so don’t neglect strategy for small and medium-sized customers. They are the customers where strategic changes in pricing can be applied and executed within a shorter time frame.

Guidelines

You might find the following guidelines helpful when developing pricing strategy for each segment:

What customer segment are you targeting?
What is your objective for the customer segment?
What strategy will achieve your objective?
What playbooks are required for you to execute the strategy?
How will you measure the effectiveness of the strategy?

Any other ideas?