Pricing as a Managed Service for Auto and Industrial Equipment MarketsManagement Consulting Podcast Series

Hello, I’m Bill Moller—your host for the Accenture Management Consulting podcast series. And today, I’m joined by Doug Derrick, he’s a managing director in Accenture’s Management Consulting practice, and Kurt Ranka, North American lead of the Accenture Parts Optimization practice. Thanks to both of you for joining us. Today we are going to be talking about pricing as a managed service—and specifically how it relates to the automotive and industrial equipment industries.

Well Kurt, I know you’ve recently co—authored this Accenture point of view on the topic of pricing as a managed service. Why don’t you just recap the key message in that piece?

Sure I’d be glad to, Bill. As you may know, Accenture is actively helping a number of automotive and industrial equipment clients to develop more sophisticated pricing strategies and capabilities. But a shortage of qualified pricing talent, tens or even hundreds of thousands of parts to manage, data content issues, limited throughput or capacity, and a restricted ability to track results can still make it difficult for these companies to fully operationalize their next—generation pricing function.

Taking this a step further, if you put your customer hat on, lack of consistency of pricing, and overpriced and/or underpriced parts creates confusion in the market and tends to result in dissatisfied customers. This may also impact channel partners like dealers, distributors or repair technicians by eroding confidence in pricing.

The point of view explores how and why companies are increasingly transitioning some components of pricing to a managed services provider, while at the same time retaining the strategic thinking that creates competitive advantage. This approach addresses the talent and capacity shortage in the short term and can deliver significant cost and profit benefits in the long term.

In addition, the point of view outlines a six-phased approach to pricing as a managed service-starting with transitioning day-to-day activities and working up to the more strategic areas. Companies can use these six phases as a litmus test when evaluating which pricing components to transfer and why.

Well it sounds like we’re on the cusp of an exciting trend in pricing. Doug, why would a company really want to trust this business-critical function to a third party?

Good question – I think it really all comes down to ROI (return on investment), Bill. A reputable and experienced pricing managed services provider can bring a fresh perspective, share pricing leading practices and also use advanced pricing technologies to optimize all the managed components—all at a lower cost.

Plus, if you think about it, managed services can also deliver significant results. Companies that transition aspects of pricing to a managed service model can realize the benefits of their new pricing capability much more quickly, which translates into increased revenues and bottom—line results. Going back to the customer/channel perspective, improved

pricing capabilities can result in more rationale, market—based pricing of parts, products and services, improve the customer satisfaction, and overall brand perception.

Over the years Accenture has helped literally thousands of companies address their business objectives with managed services for functions like finance, HR, application systems development, maintenance, testing, marketing and more. And now we’re starting to see companies make a similar decision for the pricing function.

Advancements in pricing solutions have made it even easier to go this route. Reputable and experienced providers, such as Accenture, now offer pricing analytics and optimization solutions in the popular ‘as-a-service’ model. Organizations can take advantage of up-to-date and highly efficient pricing models without purchasing a software license, or having to buy and own the solution, or hiring and training staff.

So Kurt, how does pricing as a managed service apply in the automotive or industrial equipment industries?

Sure Bill. Improving the internal pricing capability is particularly important in high fixed—cost industries like automotive and industrial equipment, where companies face intense pressure to improve operating performance.

In fact, some manufacturers have already successfully transferred aspects or segments of pricing to a third party. Now these same manufacturers are looking to do so more holistically.

Let me give you an example based on my experience and the six phases I referenced earlier. I have several manufacturing clients who are contracting out captive and semi—captive parts to skilled practitioners who can bring sophisticated industry—specific knowledge, tools, benchmarking and execution discipline to make sure prices are optimized across tens or even hundreds of thousands of parts.

Once segments like these are transitioned, manufacturers can shift their focus to more strategic segments where they typically have more feedback from channel partners and customers on pricing.

Tens to hundreds of thousands of spare parts… that’s a lot of prices to manage. Doug, are there specific ways that Accenture can help automobile and industrial equipment makers in this area?

You’re right, that is a lot of parts and very characteristic of this market place. Actually, we have a practice devoted specifically to spare parts pricing, given it’s so unique. Our Parts Optimization practice provides end-to-end parts and service optimization solutions to help those automotive and industrial clients improve their pricing capabilities and further enhance profitability for their operations. For our clients, this means drastically improved profits, some in the range of 10—20 percent, with minimal organization turmoil or IT investment required.

Well gentlemen, based on what you’ve told us, pricing as a managed service has several practical applications in both the automotive and industrial equipment industries. Doug and Kurt, thank you both for talking with us today. And if you would like more information related to what we were just talking about today in this podcast or to simply learn how Accenture can help you achieve high performance, you can visit us on the web at accenture.com/managementconsulting, and you can also send us an email to consultingpodcasts@accenture.com.

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