Upload
others
View
7
Download
0
Embed Size (px)
Citation preview
©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Are Pricing and Sales Processes Leaving Money on the Table?
Russ Chadinha, Director Product Marketing, PROS Sean Cassidy, Director Content Strategy, PROS
2 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Speakers
Russ Chadinha Director
Product Marketing, PROS
Sean Cassidy Director
Content Strategy, PROS
SiriusPerspective:
© 2014 SiriusDecisions. All Rights Reserved
3
B2B companies are feeling confident about growth − the question is whether they are aligned and prepared.
88% Expect positive growth in the industries they sell into
90%+ Expect to grow this year
The race for growth is on; are you ready?
77% Express optimism about the economic forecast
4 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
To capture growth, sales effectiveness is a top CSO objective
Source: CSO Insights - 2013 Sales Performance Optimization Study
65.3%
44.5%
42.8%
33.5%
21.4%
11.0%
7.5%
6.9%
31.2%
Increase sales effectiveness
Increase existing account penetration
Capture new accounts
Improve customer satisfaction
Optimize deal size
Reduce new rep ramp-up time
Reduce sell cycle time
Increase renewal rates
Improve margins/reduce discounting
5 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
But, CRM alone not able to deliver business impact
Streamlining Forecast Process
Improves Sales Rep/Manager Communications
Reduced Administrative Burden on Sales
Improved Order Processing Accuracy
Improved Best Practices Sharing
Improved Support of Channels
Reduced New Sales Rep Ramp-‐up Time
Shortened Sell Cycles
Increased Revenues
Improved Win Rates
Other
62.4%
57.4%
40.6%
30.7%
28.7%
19.8%
17.8%
15.8%
15.8%
13.9%
5.9%
Measurable improvements in performance as a result of implementing a CRM system
Source: CSO Insights - 2013 Sales Performance Optimization Study (over USD 1B revenue)
Fewer than 20% see Revenue,
Win Rate, or Cycle
Improvements
Almost no one sees margin
improvements
6 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Traditional CPQ has a strong impact
“Companies using CPQ out-perform other companies.” -Aberdeen Group
Source: Aberdeen Group Research Brief: Configure-Price-Quote: Best-in-Class Deployments that Speed the Sale, July 2013
Average Sales Cycle
27% Interactions
to Close
7%
Sales Productivity
9%
Lead Conversion
Rate
17%
Quota Attainment
26%
Average Deal Size
2X
7 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
65.3%
44.5%
42.8%
33.5%
21.4%
11.0%
7.5%
6.9%
31.2%
Increase sales effectiveness
Capture new accounts
Improve customer satisfaction
Optimize deal size
Reduce new rep ramp-up time
Reduce sell cycle time
Increase renewal rates
Improve margins/reduce discounting
But only directly addresses some of these objectives…
Increase existing account penetration
8 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
65.3%
44.5%
42.8%
33.5%
21.4%
11.0%
7.5%
6.9%
31.2%
Increase sales effectiveness
Capture new accounts
Improve customer satisfaction
Optimize deal size
Reduce new rep ramp-up time
Reduce sell cycle time
Increase renewal rates
Improve margins/reduce discounting
Increase existing account penetration
…while largely missing this big one
9 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Can pricing help?
10 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Short answer: yes
The old pricing formula holds true: A 1% increase in prices can lead to a 10% increase in margins. If you are not selling the price customers are willing to pay, you are bleeding margin 10x.
Source: Aberdeen Group Report: Price Optimization: How Best-in-Class Performers Add to Both the Top and Bottom Lines. August 2014
11 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Question: Are you currently driving some form of optimized price to the sales team?
● Yes – prices based on algorithms shown by product by customer ● Kind of – done per deal, based on business rules ● No ● Not sure
12 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Prove the Value and Get Sales Adoption
● Test methodology on subset of business – Uncover sales objections – Measure Performance and Profit Lift
● Execute prices rationally – Prices must make sense or don’t show – Include business rules
● Enterprise wide roll out after value has already been proven – Experienced sales people who talk to its value
Pricing Execution
Data Analysis Segmentation
Pricing Guidance Sales Adoption
“The best prices in the world
won’t ma5er if nobody uses
them”
13 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Increasing Sales Adoption
Rock Stars
Needs Coaching
14 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Question: How receptive is the sales team to pricing guidance?
● They love it! ● Reluctantly working with it, trending in the right direction ● Not sure, have not tried to provide it to them yet ● Tried it, they refused to use it – regardless of the potential
benefit ● Refuse to even talk about it
15 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Pricing is complex
● Setting Prices – Impossible to look at thousands of prices
and assess their accuracy – How many price books/plans/
catalogues/tiers should I have?
● Negotiating Prices – Quotes have to account for the large
variety of customers, products and environments
– Gut feel, emotions and rules of thumb are the only tools available
16 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Pricing, sales and marketing are complex
● A Variety of Customers – Customers come in all forms with varying
needs
● A Variety of Offerings – Products and service offerings require
more and more customization and differentiation
● Revenue and Profit Levers – Highly profitable prices that win – Right offer at the right time – Customer retention – Improved leads and sales pipelines – Increase customer product portfolio
17 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
“I’ve been selling food for 25 years. Now you’re forcing me to use a laptop computer, and telling me how to do my business?”
Case study: Bidvest 3663
● Major UK food distributor ● $3.3B revenue ● 19,000 SKUs ● 3 geographic regions ● Decentralized pricing ● 150+ highly autonomous field
sales managers across the 3 regions
● Historically encourage regions to operate independently
● Will new pricing technology actually impact performance?
18 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Goal
Accelerate adoption and measure impact of new centralized pricing strategies/technologies with a highly autonomous field sales force.
19 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Step 1: Segment users
● Tied user adoption to the financial performance of the individual sales managers
● Monitored frequency of usage
● Monitored type of content the sales managers were accessing.
● A user proficiency score was developed through analysis of activity associated with each customer.
Based on observed behavior, sales managers were grouped as:
Adopters: Those who embraced and used the new technology most frequently
Users: Exhibiting much more limited use of the technology
Non-users: Minimal or no use of the technology solution.
Sales People Ranked by Proficiency with New Technology
20 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Step 2: Evaluate performance difference
● Adjusting for seasonality and other influences that distort the data, the performance of the different user types was compared 6 months after everyone was trained
“How do we know we wouldn’t have gotten these results anyway?”
21 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
The result
● Adopters selling 400 more items per month than non-adopters
● Sales management was able to better target its coaching
● Able to identify and close gaps between actual sales performance and unrealized potential value.
● Incremental revenue and margins
● ~$3M in annual margin improvement
“This isn’t just a tender program. It’s a whole new way of working, which has increased my margin per item during the last six months.”
22 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Stand back, we’re going to do science
Why science?
Science = Accuracy
24 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
A simple framework to get started
Pricing guidance
Cross-‐sell / up-‐sell
More Revenue from Existing Customers
Sell More Product
Increase Prices
Reduce Attrition
Win New Customers
Identify High Value
Prospects
Develop Offers that Win
Close Deals Faster
Opportunity analysis
Churn analysis
Pricing guidance Cross-‐sell / up-‐
sell
Opportunity analysis
Segmentation
25 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Question: What type of customer segmentation are you using?
● Customer size (i.e. number of employees, revenue, addressable spend)
● Industry ● Geographic ● Volume of business they do with us
26 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Examples of Attributes Used for Segmentation Analysis
Attribute examples
Customer Attributes − Customer Type/Classification − Customer Size
− Annual Revenue − Annual Volume − Credit Limit
− Customer Life Cycle − Group Affiliation
− Group Size − Special Services/Loyalty Programs − Geography − Financial Terms
− Risk Classification − Days Sales Outstanding (DSO) − Payment Terms
− Market Share/Wallet Share − Contract Centricity * − Purchase Frequency * − Customer Order Size * − Vendor Managed Inventory
Product Attributes − Product Hierarchy / Classification − Product Type/Industry − Product Life Cycle − Product Cost − Vendor Category/Size − Branded/Private Label − Commodity vs. Specialty − Exclusively Produced − Lead Time and Inventory Level − Packaging and Freight − Product Velocity/Turnover *
− Total Sales/Purchase Frequency
Transaction Attributes − Order Size/Total Line Item Cost − Value Added Service Type
− Order Priority/Rush − Shipping/Handling
− Channel − Customer-‐Product Centricity * − Contract Status − Inventory Level
*Derived Attribute Some Attributes not included due to confidentiality
The B2B world today – customers’ price sensi>vity varies § Different customers receive very different pricing § High-‐revenue customers oSen receive beUer pricing than lower
revenue customers
Why do I need segmentation?
27
Annual Sales Volume
Margin %
Smaller Volume Larger Volume
Medium High
Low
Segmenta>on provides a framework to correctly benchmark customers § High Volume customers should be compared to other High Volume customers § Geography may maUer – Northern customers vs. Southern customers § Many other aUributes…. Product Lifecycle, Contract Terms, Industry etc.
Segmenting your markets
North
South
Geography
28
Annual Sales Volume
Margin %
Smaller Volume Larger Volume
Margin %
High Volume / All Regions
Inside a micro-‐segment § Keep high performers at their Willingness-‐to-‐Pay § Move under performers in-‐line with peers
Segmentation drives margins
\ Margin %
High Volume / South Region
Inside a micro-‐segment § Keep high performers at their Willingness-‐to-‐Pay § Move under performers in-‐line with peers
Segmentation drives margins Margin %
High Volume / All Regions
Segmentation Provides Targeted Pricing to Drive Margins
\ Margin %
High Volume / South Region
Result: Increased Margins
31 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Segmenting your markets
► Four-‐step approach with a business review at the conclusion of each step
► Utilizes proven science together with customer insights
Attribute Discovery
Attribute Analysis
Attribute Significance Analysis
Create Segments
Determine the segmentation metric and use broader range of attribute variables to determine potential attributes
Examine attributes and data through business lens
Determine statistical significance
Incorporate statistics, business infrastructure and market dynamics to ensure a high value, adoptable segmentation
Segmentation Process
32 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Feeding price optimization into CPQ
CRM
Account, Contact,
Opportunity
Quotes
CPQ
Catalog & guided selling
Solution Configu-‐ration
Quoting &
Pricing
Approval workflow
Proposal &
Contract
Web service call
Embedded iframe
Synchronization
Performance Analytics
PROS Pricing Sales Analytics:
• Segmentation • Visibility to pricing
performance • Opportunity
identification • Sales performance
Asynchronous update
Real-time call
Mobile Web
Partner
Transactions and Orders
Customers & products
Market & competitive
data
Capacity & Supply Data
Data Input
Pricing management & optimization: • Price mangement • Execute pricing strategies • Incorporate willingness to pay
• Apply business rules Pricing delivery: floor, target, expert
33 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Easy to get started, take targeted steps as needed
Gain Visibility/Control
● Identify and address underperforming products, customers
● Uncover high probability opportunities Illuminate revenue and margin potential in existing customers
● Identify new business potential
● Optimize coverage model
● Enhanced efficiency through automated workflow
Objective
Stage
Opportunity
Take Targeted Action
● Empower sales reps to negotiate from informed position
● Invest valuable coverage resources on high-quality leads
● Align, refine customer portfolio across go-to-market channels
● Able to appropriately position offer in context of a dynamic market
Build Comprehensive Competitive Advantage
● Institutionalized ability to quickly take in and act upon new information to your advantage
● Dynamic criteria constantly evaluated for relevance
Starting point
Informed action driving business results Proven solution, ready to take the next,
targeted not transformational, step
Drive competitive advantage
Commitment to developing competitive advantage through pricing/ sales sophistication
Turn into core competency
34 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Summary
● Don’t stop at just CPQ - pricing has a very strong impact on sales effectiveness
● Formal change management important to drive adoption
● Data-driven feedback enhances coaching impact
● Science is helpful to sales, not scary
35 ©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.
Questions
Russ Chadinha Director
Product Marketing, PROS
Sean Cassidy Director
Content Strategy, PROS
Please feel free to reach out to Russ or Sean individually
PROS Germany GmbH Feringastrasse 6 85774 Unterfoehring Munich Tel.: +49 89 99216 270 Fax: +49 89 99216 200 Regional Office - Austin, TX 3600 Parmer Lane, Suite 205 Austin, Texas 78727 Regional Office - Cary, North Carolina 1000 Centre Green Way, #200 Cary, NC 27513 Phone:+1 919-228-6334
World Headquarters 3100 Main Street, Suite #900 Houston, TX 77002 Phone: +1 713-335-5151 Sales: +1 855-846-0641 Fax: +1 713-335-8144
European Headquarters - United Kingdom 4th Floor, East Wing Communication House South Street Staines-Upon-Thames TW18 4PR United Kingdom Phone: +44 (0) 1784 777 010
©2015 PROS, Inc. All rights reserved. Confiden>al and Proprietary.