The True Value of Pricing from Pricing Strategy to Sales Excellence the True Value of Pricing
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The True Value of Pricing From pricing strategy to sales excellence The True Value of Pricing The challenge of value in price management The world’s current political, economic and In this context, price management becomes In order to define a pricing strategy aligned social scenario poses major challenges, a powerful advantage to guide organizations with the organization’s goals, the Pricing including the political uncertainties brought throughout the changes, to boost their function must take into consideration not by the intensification of nationalist speeches performance and to maximize their earnings. only economic trends but also product and the increase of barriers to foreign With regard to strategic alignment, the differences and specificities in consumer trade. On the business side, the economic concept of Pricing is particularly relevant in habits in each region. This is the case of the recession has affected organizations which, the business world as it consolidates itself end-of-the-month discount policy, quite in order to continue to optimize earnings, as a charging practice intended to capture common in the Brazilian market, and that need to take into consideration drivers such the highest value from each customer by has a direct impact on the pricing and the as Gross Domestic Product unpredictability, addressing issues from strategy to sales margin of each product. high inflation, interest hikes and fiscal excellence, and aimed to maximizing adjustments, besides unemployment growth, profitability. Even though many organizations see Pricing and the customers’ higher indebtedness and as a back office function, there is a trend reduced income resulting from that. “The True Value of Pricing – From pricing in Brazil to boost its importance and its strategy to sales excellence” presents reach from a strategic point of view, while At the same time, the integration of the data about how companies from different differencing customer segments. In other digital world into the business environment areas manage and position their prices in words, this approach goes beyond the contributes to producing a new consumer the current economic scenario. The study traditional cost and competition analyses. profile: more connected, mature and also shares an analysis based on Deloitte’s informed about their own habits. These experience to strengthen the importance of changes create new opportunities for the pricing strategy and help companies to meet companies to develop a more agile and market demands with more efficiency. customized communication with their clients. The concept of Pricing is particularly relevant in the business world as it consolidates itself as a charging practice intended to capture the highest value from each customer by addressing issues from strategy to sales excellence, and aimed to maximizing profitability. 2 The True Value of Pricing Among the main strategies, pricing based In this sense, by taking into consideration on the customer perceived value for a customer’s value perception and offering Table of contents a product or a service is gaining more a product or service that contemplates attention from global organizations’ the needs of each profile, good Pricing executives in recent years. However, our practices open the door for the right price What is Pricing? 4 analysis shows that this trade isn’t largely to the right customer strategy. On the Organization’s structure 6 disseminated in the Brazilian market yet. other hand, this reality requires a more Most of the organizations operating in customized approach from organizations, The costumer perceived value 6 Brazil set their prices based on their fixed which, in order to keep up with the business The right price for the right 7 costs, their margin and the competition’s transformations and grow sustainably at the customer price. While intuitive and easy to apply, this same time, must look into what customers practice does not take into consideration want and adjust their segmentations to Price segmentation 7 that the same product or service brings expand their profits. Pricing practices and experiences 8 different benefits for each type of customer. Sales force compensation 8 The economic and monetary stability Pricing policies documentation 9 that Brazil has acquired over the past two decades not only created opportunities Price management in the digital 9 for more strategic pricing policies in world corporations – as it was no longer necessary Pricing trends 10 to adjust prices according to the fast growing inflation rate each month – but it Contacts 11 also contributed to the development of a new consumer. Survey sample The analyses presented herein different sizes and segments. were prepared based on the market The organizations participated via experience of Deloitte’s Pricing an electronic questionnaire that was practice professionals and quantitative available from November 2016 to interviews with 58 organizations February 2017. operating in Brazil from the most 3 The True Value of Pricing What is Pricing? The concept of Pricing, which is still rather Pricing Price shy in the Brazilian market, is becoming Strategy execution more relevant in the business world as it An efficient strategy reflects an integrated The processes based on which a consolidates itself as a price execution and pricing structure that supports business company sets and charges its prices and charging practice intended to capture the goals by capturing the value of an offer discounts. A correct execution ensures highest possible value from each customer compared to the competition and to the consistency of Pricing actions thus segment. customer demands, and by targeting collaborating to the dissemination of clear the organizations’ internal drive and its price communication, execution, analysis Six key pillars structure this function, communication to the market. and adjustment policies. comprising from strategy to sales excellence, in order to seek the highest Advanced analyses Corporate governance profitability: and pricing and alignment Performing advanced analyses allows Well-structured governance, integrated organizations to revisit past transactions with all company functions and aligned to understand and optimize the prices with the organization’s strategic goals, charged, thus improving profitability. ensures a more effective and continual price management. Technology and Tax and regulatory data management effectiveness Technology contributes to analysis Tax laws can influence the way an automation and prices performance organization conducts its business in execution and optimization. Organizations different ways, including how information are increasingly seeking ways to integrate is captured in an invoice, where goods’ these tools into their technologic ownership is transferred to customers infrastructure to ensure that the upgrades and how contracts are negotiated and implemented by the management are performed. sustainable in the long run. 4 The True Value of Pricing Pricing operation models Understanding the market dynamics, Price management provides a structure to based on the analysis of customer profiles, An integrated support business goals by capturing the product nature and distribution strategies, value of an offer compared to competitive is the key to designing a framework for the approach to alternatives and customer demands. Pricing function that can be organized into supporting good several levels, from a fully centralized model to a fully decentralized model. Pricing practices The interaction between the Pricing pillars contributes to a higher Centralized Operation Implications Maturity ability of the function to create The Pricing function Fewer resources; and capture sustainable results, sets the prices for all products, as More executive and leadership strengthening the competitive well as the policies support; advantage in an increasingly that the sales and Centralization of resources for all dynamic market. business functions business units; must apply – in alignment with the Unified methods, language, and whole company. revenue management in the entire company; Less autonomy for sales and Pricing Corporate business functions. strategy governance and alignment The Pricing function Access to resources established makes analyses and by the core Pricing functions (e.g.: Advanced Technology analyses and data recommendations, statistics); and pricing management supporting the sales and business Unified language and revenue areas, which remain management throughout the responsible for company; setting the final price Need for additional resources; based on each unit’s reality Potential for non-unified methods. There is no Pricing Total autonomy for the sales and function; the sales business functions; and business areas have their own Need for more resources; representatives to Less alignment between the sales manage pricing and function and the business function to develop sales policies Methods, language and revenue management are not unified. Decision-making Decentralized 5 The True Value of Pricing Organizations’ structure The challenge In Brazil, due to the market’s maturity level Good Pricing practices and the organizations’ lean structure, the company’s Pricing functions are commonly linked to the sales, finance and marketing An efficient pricing strategy suggests as sales, finance and marketing, and areas. This could contribute to corporations more control and more agility in aligned with the company’s strategic aiming a sales increase