Pricing.thru distributors.maniscalco.2012r2e

Developed/Presented by:Peter ManiscalcoSr. Pricing Consultant

May 18, 2012

© Peter Maniscalco. All rights reserved worldwide

AgendaIntroduction

Distributor “Behaviors”

Profit Levers & Price Waterfall

Pricing Tactics & Strategies

Summary© Peter Maniscalco. All rights reserved worldwide

Introduction

Pricing Factors

Working with Distributors

Company Sales Team


Pricing Factors

Price “accordingly” in order to motivate

Consider distributor’s end-user business

Adherence to your company’s objectives


Working with the DistributorsNegotiating tactics used

Are they concerned about value?

Does it matter if your product is a commodity or not?

Do value-added services matter?


Distributor “Behavior”

Imposing time pressures for pricing

Threatens to take business elsewhere

Price “fishing”

Threatens to escalate price negotiations


Distributor “Behavior”

Makes unreasonable demandsNeeds a cost vs. sell price – margin issue?Compensate in price for distributor’s poor

end-user serviceExpects continued low prices on all types of

end-user businessClaims your pricing lacks flexibility


Company Sales TeamPricing educated

Product educated

Clear understanding of corporate objectives

Experienced or ‘rookie’


Profit LeversMost effective way for a company to realize

its maximum profit: GET THE PRICING RIGHT!

‘Right price’ can boost profit quicker

Leverage & payoff of improved pricing is high


1% Improvement in… … Creates Operating Profit Improvement of

Note: Compustat, Deloitte analysis (2009); Impact estimate based on average Fortune 1000 company

2.6%

3.6%

6.7%

12.3%

Fixed Cost

Volume

Var. Cost

Price


Pricing WaterfallImportant factor in helping more effectively

manage discounts that are offered

Transaction Price Management -

Key aspect of basic pricing managementPoint where product “meets” customerInvoice vs. transaction price – difference can mean

significant reduction to bottom-line profit© Peter Maniscalco. All rights reserved worldwide

Pricing WaterfallConcept shows a company where its products’ prices erode

between invoice price and actual transaction price.

Dealer List

PriceInvoice Price

Pocket Price

$5.00

$4.75

$3.45

In the Price Waterfall, each Component Represents a Revenue Leak

0.15 Competitive Discount 0.10 Order

Size Discount

0.30 Payment Terms Disc

0.37 Annual Volume Bonus

0.35 Off Invoice Promo

0.20 Advertising 0.08

Freight

27.4% Off Invoice


Note: Concept developed by McKinsey & Co.

Pricing TacticsLeverage your company’s advantage

Discounting on incremental sales volume

Get something in return for price concessions

Value-added services – e.g. priority scheduling & delivery


Pricing Tactics

Miscellaneous discounts – make sure limited & controlled

‘Free’ product – in lieu of price discount.

‘Advertising’ allowance – ensure distributor’s promotion of your product is quantifiable


SummaryControl your price discounting

Obtain something in return for concessions

Leverage your company’s advantages e.g. incumbency, size, etc.

Offer value-added services


Contact Info

Peter Maniscalco, MBAContractor / Sr. Pricing [email protected]://www.linkedin.com/in/petermaniscalcoTwitter: @PeterPeterm09

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Pricing.thru distributors.maniscalco.2012r2e