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During this webinar, Tim Mohnke, Syncron's pricing expert will provide insight into the best practices for parts pricing. During this discussion, you will learn what customers compare, understand the power and limitations of data, develop segmentation and strategies, and execute systematically with processes supported by pricing technology.
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Best Practices in Parts PricingSeptember 9, 2014
Page 2 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
Syncron is the global leader in aftermarket service optimization
• Aftermarket Specialist– Inventory management
– Price Management
– Master Data Management
– Analytics
• Customers are
multinational companies – Active users in more than 100
countries
– R&D intensive, investing >20% of
revenue
Meet the Presenter:
• Price Management
Specialist
• 15+ years experience
driving business
development and price
management initiatives
Tim MohnkePricing Director, North America
Page 3 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
What Does Your PRICE Represent?
• Price is an indicator of customers’
perceived value
• Price doesn’t occur in a vacuum
• Price is the intersection of value
from all departments within your
organization– Product Quality
– Logistics
– Service
– Brand
– Etc.
Page 4 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
How Do Customers Compare Prices?
• List-Price Customers compare list
(published) prices between you and
your competitors
• Volume/Contract Customers compare
prices at a list-less-discount level
• Special-Price Customers typically
have buying power and negotiate
hard
• All Customers always qualitatively
compare:– Service Levels
– Quality: Specific Attributes
– Other utility factors
A B
Page 5 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
Pricing Maturity CurveB
usin
ess V
alu
e
High
Low
Pricing SophisticationLow High
Cost plus• Raw material• Supply driven
Competitor Pricing• Competitor Intelligence• Competitor Positioning• Feedback Process• Lost Sales Analysis
Price Differentiation• By Product• By Channel• By Geography
Customer Differentiation• Customer Marketing Segmentation (Tiers)• Discounts & Rebates Structures • Customer Over and Under Performers• Customer Margin Analysis
Optimized Strategic Pricing• Pricing-Specific Segmentation• Customer-Specific Research• Price Testing• Multiple Price Strategies
– Value-Based Pricing– Lifecycle Pricing– Supersessions – Step-pricing– Tiered Pricing– Etc.
Page 6 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
The Road to Optimized Strategic Pricing
Understand the Power and
Limitations of Data
Develop a Strategic Price
Segmentation and Price Strategies
Execute with Systematic,
Repeatable Processes supported by
Technology
3
2
1
Page 7 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
What About Competitive Price Data?
1. Knowing when NOT to use
competitive data is as important as
knowing when to use it. Other
available tools include:– Value-Based Pricing
– Lifecycle Pricing
– Product Tiered Pricing
– Etc.
2. Research Methodology: Preferred
method (best research quality) is
approach using parts interchanges
and surveys– Web-scraping companies can only provide
retail list price
– Self-reporting methodology has obvious
drawbacks
1
Page 8 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
What About Competitive Price Data?
3. Third Party Data Collection should
be a part of a larger
comprehensive process that
includes:– Customer Price Challenges / Price
Feedback
– Pricing Feedback Analysis
4. Differentiate Competitive Data
Based on compatibility of
information provided:– Equivalent – exact replacement
– Similar – different quality
– Referential – not replacement
1
Page 9 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
Price Feedback: A Powerful Tool
Price level health
• Manage ”complaints”
• Capture and analyze market intelligence
• Feedback case log and action management
• Pricing health analytics
• Direct communication of price corrections to market
Competitor a
nd
market intellig
ence
Price feedback
Global pricingSubsidiary/DistributorMissing price
for item 1001!
Competitors are selling at lower prices
Superseding item price is unjust
1
Page 10 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
Using Sales, Ops, and Product Data
Developing Pricing Logic
Price
Price
Cost
Price Curve
New Price Level
Sales
Sales V
alue
Low HighValue Driver(Customer Perception)
1. Identify value drivers– Product related
– Operations related
2. Statistically define price curve
3. Identify new price level– Relation to product value
Upper bound of curve
StandDev, Percent, Etc.
– Relation to market or specific competitor
– Relation to target margin
4. Reset price curve to new level
5. Adjust prices using governors– Supersession rules
– Stepwise pricing
– Etc.
1
Page 11 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
Develop a Strategic Price Segmentation
• Creates different
homogeneous groups of:– Parts with similar value
characteristics
– Customers that: • Self select based on part
preferences
• Are rewarded / punished based
on purchase behavior
• Allows for differentiated
pricing with price strategies
A Good Price Segmentation…
2
Page 12 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
Integrated Price Strategy Development
• Segmentation process is integrated with Value Driver Analysis, Cost Quality
Assessment, and Data Collection Evaluation
• Price Strategies are evaluated in conjunction with data availability
• The resulting output is a categorization of profit realization potential,
enabling the best results at the lowest risk
Accumulated Sales Value
100%
Segmentation Analysis
Main SegmentsSales
Value %Item
NumbersAverage
Sale/Item Value Driver
DefinitionValue Driver
Access Cost
Quality PotentialInverters 5,2 600 8 667 Good Good Good ExcellentFeed Screws 4,6 450 10 222 Good Good Good ExcellentHydraulic Motors 4,3 100 43 000 List prices Good Poor ExcellentImpellers 3,8 800 4 750 Good Good Good ExcellentBearings 3,6 2 000 1 800 List Prices Good Good GoodFilters 3,4 1 500 2 267 Complex Poor Poor MediumShafts 3,2 1 000 3 200 Good Drawing Good GoodPC Boards 3,1 4 000 775 Complex Poor Good DifficultSealing 3 1 500 2 000 Good Description Poor Good
Segment
Example
2
Page 13 COPYRIGHT © SYNCRON INTERNATIONAL AB 2014
Systematic Repeatable Processes Supported By Syncron Technology
3
Questions