Orange County Convention CenterOrlando, Florida | June 3-5, 2014

Leveraging the Big Data of pricing can help Salesboost margins by as much as 3% with SAP Price andMargin Management by Vendavo and SAP HANA

Jack Nehmer, SAPChase Powell, Vendavo

An understanding of price management and thesubstantial value it can bring to your organization Insight into how SAP HANA is being leveraged for

Pricing Analytics as part of a holistic solution An overview of how SAP Price and Margin

Management can fit into your solution landscape

LEARNING POINTS

Some of the key challenges facing sales organizations

Growing earnings in ancompetitive market Across-the-board price increases

no longer work Unclear where price increases

will stick Unsure where volume is at risk

without price reduction

Sales teams inadequatelyarmed for negotiations Growing sophistication of

procurement departments Insufficient deal-specific

negotiation guidance to sales No visibility to margin impact of

non-price gives in negotiations

No shared version ofprofitability across teams High level reporting obscures

pockets of opportunity Incomplete profitability data,

missing off-invoice items Silos of information, no

enterprise view of deal margins

Unprecedented commodity &energy cost volatility

Increasingly aggressive andnimble competitors

Price administrationinfrastructure cant keep up

Increasing cost volatility, morefrequent market price changes

What is Price Management?

PRICE MANAGEMENT &OPTIMIZATION is

the ability to understand theIMPACT OF PRICING on revenue &margin and MANAGE ITSTRATEGICALLY over time toensure fair prices for the valueyour company creates.

A systematic approach to price management is a best practice leading companiesuse to turn pricing from an administrative cost center to a strategic profit center

Pricing as a Profit Lever

Profit Levers

7%

3%

2%

10%

Fixed Costs

Volume

Variable Cost

Realized Price

Source: McKinsey

A 1% improvement in each lever increasesa companys operating profits by . . .

Which of these levers would you want to pull?

10%

Improvement Percentage

List Price

You start outwith this.

Market Price

Regional, country, channel, pricecontrol and segment adjustments

Invoice Price

Distributor discounts, end-customer discounts, etc.

Pocket Price

Cash discount,volume rebate, etc.

Pocket Margin

COGS,Cost to serve

You end up with this.

Exposing one version of pricing truth through a waterfall

Hidden Cost-to-Serve expenses that can cost you yourprofitability, without your knowledge

Case Study: Fortune 100CPG Company

Findings: ~28% oftransactions fell belowbreak-even

ProfitableTransactions

UnprofitableTransactions

Invoiced Price

Margin

%

Source: Vendavo Sample Case Study

Pricing Variability Often a sign that there is room forimprovement in pricing practices

Money-losing business

Unjustifiedvariability

The ROI from pricing projects is so significant, it canfund adjacent IT investments

0.0%

1.0%

2.0%

3.0%

4.0%

Ret

urn

onS

ales

Source: Information based oncustomer experiencesInitial Typical Transformational

Transformational

Typical

Initial

Over 3% of return onsales and as much as30% more profit

Average 1-3% returnon sales and ~10%additional profit

Average 0.5 -1.5%return on sales

5.0%A 3% return on sales equatesto $30M added annual profitper $1B in revenue

Consistent customer results of 10 30+% additional profit yearly.

In order to solve the price management challenge,a few key pieces are needed:

PricingInsight onBig Data

Price andPolicy

Management

Pricing Guidanceat the

Point of Sale

For SAP Customers we recommend SAP Price and MarginManagement as a best practice to improve profitable pricing

Pricing Analytics*

Price Management

Deal Management

*Pricing Analytics available powered by SAP HANA

SAP Priceand Margin

Managementby Vendavo

SAP Business Suite

Pricing Analyticsin SAP Price and Margin Management

Helps you toquickly unlockprofit opportunitiesin your businessby pinpointing the rootcause of unprofitablepricing practices

z Identify business problem areasand tell tale trends

zCompare between differentbusiness segments

zDiagnose low marginsymptoms and find root cause

z Perform data analysis from anystage in deal lifecycle

z Save, export, and share analysis

Pricing Analyticsprovides a broad array of sophisticated analytics

Identify

Diagnose

Monitor

Where does HANA fit in?

Social

In-memory

Cloud

Mobile

Real-TimeEmpowerment

Consumerizationof IT

Big DataSensing andResponding

SentimentIntelligence

Predictive Analytics

Personalized Insights

New Signals

Real-TimeAnalysis

Pricing Analytics on SAP HANA

Real-time Analytics9 Your pricing waterfall brought to life

with immediate insights9 Improved agility on big transactional

data sets9 Evaluate more possibilities in far less

time

Performance & Scalability9 High performance through parallel processing9 Simplified integration/ETL on one platform9 New possibilities with HANA platform

SAP HANA

https://vimeo.com/89146749

Quickly implement pricingstrategy with tailored tools

Leverage pre-built pricingcontrol processes

Perform historical andforward looking impactanalytics

Price Managementin SAP Price and Margin Management

$

zComprehensive insight-richpricing console for managingpricing strategy

z Tailorable workbooks andworksheets for setting andmanaging pricing policies

zConvenient hierarchical-basedmass maintenance capabilitiesfor simplicity

z Efficiently plan and generateprice lists across products,regions, channels

zWhat-if analysis supportenables full impact analysis ofproposed changes

Price Managementin SAP Price and Margin Management

Empower sales reps tonegotiate confidently

Understand your pricingpower

Accelerate negotiationcycles

Deal Managementin SAP Price and Margin Management

Sales Rep

Sales Manager

Head of Sales

Deal Managementin SAP Price and Margin Management

z Line item and deal scores with in-line analysis drive improved margins

z Specialized deal approval workflowprovides full upstream transparencyand accelerates deals

zOptimized pricing approvalthresholds streamline the sales cycle

zDeal collaboration features like dealsharing, approver changes, andnotifications ensure deal velocity

z Integration to SAP CRM, Cloud forCustomer, and other CRM offerings

Deal Guidance and Analytics

Specialized Deal ApprovalProcessing

Overview of SAP Price and Margin Management inthe SAP Business Suite

Pricing Strategy

Pricing Execution

Lead-to-Cash in the SAP Business Suite

Quote Order Fulfill

SAP Price and Margin Management

Lead Opportunity ContractContractContract InvoiceInvoiceInvoice

SAP CRM/Cloud for Customer SAP ERP SD

DealManagement

PriceManagement Pricing Analytics*

*Now on SAP HANA!

SAP BIPricing Data Master Data

PricingGuidance Transactional

History

How it extends your Quote-to-Cash solution

SAP CRM or C4CAccountsContacts

Opportunities

Quotes &Orders

SAP Price & MarginManagement SAP ERP

Orders &Contracts

Financials

PricingAnalytics

SegmentationPrice Setting

&Optimization

PriceAdministration

DealExecution

SAP Analytics

HistoricalData

EnterpriseData Mngt

TransactionData and DealHistory

Pricing

MasterData

QuoteDetails

Deal Guidance.

Integration Framework

ProfitabilityData

Driving better decision support at the point of sale withCRM integration

SAP CRM Sales

SAP PMM Deal Quoting / VSN

3rd Party orLegacy CRM

SAP Cloud for Sales

Pricing Guidance

Deal Approval

Where does SAP Price and Margin Management fitin the SAP Solution Portfolio?

LEV

EL

ofE

NG

AG

EM

EN

Tw

ith

SA

P

LEV

EL

ofIN

TE

GR

AT

ION

wit

hS

AP

LEV

EL

ofS

UP

PO

RT

from

SA

P Exclusive

100s

1000s

Sold and Supported by SAPExclusive RelationshipExecutive SponsorshipCollaborative Development,Integration, and Go-To-Market

Sold and Supported by PartnerOpen ProgramCertification to SAP Interfaces

Endorsed by SAPSold by Partner, Mixed SupportModelsCollaborative integration

EndorsedBusinessSolutions

Open Ecosystem(Partner Program

Certifications)

SolutionExtensions

Pricing Analytics Coinnovation in Action

InitialBusiness

Case

Prototype

Design

Build

Test

Release toMarket

Collaborative businesscase product & senior

management

Early training,collaborative

development, hardwaresupport

Training and ongoingmentorship, collaborative

design assigned SAPHANA experts

SAP HANA DevelopmentExperts, assigned SAPHANA performance

architect

Test and sizingenvironment, PremiumQualification validation

Collaborative Field &Partner Enablement, Co-Marketing, SAP Support

Model

Why do IT organizations like SAP Price & MarginManagement?

One of the quickest returns I had witnessed inmy career CIO & SVP, Manufacturing

4 straight quarters of reduced price erosion CFO, High Tech

Return on Sales averaging 3.9%- Industrial Products

SAP really picked the right partner with Vendavo.They really know B2B pricing better than anyone.

- Director of IT, Chemical

Low risk

High ROI

Sustainedvalue

P&L owners need to enable processes and generateinsights that help them: Set optimal prices to increase margins and enable profitable

revenue growth Prevent low margin deals while still enabling fast response to

customer price requests Identify less profitable areas of the business where should

corrective actions be focused? Maintain profitability in the face of volatile costs and

increasing competitive pressure These key areas can be addressed by using SAP PMM to

leverage and enhance existing SAP investment

Summary SAP Price and Margin Management

Pricing Management projects offer significant ROIto companies, improving profitability by 10-30% SAPs Price and Margin Management by Vendavo is

a recommended best practice approach forrealizing the benefits of Price Management The Pricing Analytics module has now been

improved to work with SAP HANA, offering greaterspeed and agility for big transactional data sets The value delivered by a pricing management

project is so substantial that it can be used to fundadjacent IT initiatives

KEY LEARNINGS

FOLLOW US

THANK YOU

THANK YOU FOR PARTICIPATING

Please provide feedback on this session by completinga short survey via the event mobile application.

SESSION CODE: 1202

For ongoing education on this area of focus,visit www.ASUG.com