13 Predictions on pricing in Europe from Pol Vanaerde

Wondering what will happen on the European pricing front over the next 12 months ? Pol Vanaerde, President of EPP shares some of his predictions with us.  

1. Dynamic pricing will be more actively used 

Online retailers, theaters, operas,  leisure parks, cinemas but also in industrial markets, dynamic pricing, based on improved insights in segmentation, will see increased implementation.

2. Consumers will gain increased access to online and real time prices

New digital apps, price comparison sites and governmental attention to price transparency,  will lead towards increased accurate price information for consumer-  and the need for increased multi-channel pricing control.

3. Pricing Maturity in European based organizations will get a boost

Organisations continue to invest in pricing know-how development, training and best practice sharing between EU pricing teams.  The need for pricing development programs will further increase.

4. There fight for pricing talent will accelerate

There will be more pricing vacancies than any previous year, resulting in a fight for talent.
Pricing managers operate more internationally (European) than ever before and experienced pricing managers are sought after to support the pricing maturity development.

5. Pricing Consultancy investments will further increase

Organisations developing their pricing maturity will search for experienced partners (see the EPP expert partner area) to guide them and help to avoid the classic pitfalls.

6. Investment in pricing software will further increase

As transactional control is the first step towards margin improvement projects, organizations will find increased benefit in trustworthy software partners (see the EPP Technology Expert area).

7. FMCG and Retail will increasingly focus on pricing effectiveness

Price pressure in retail and FMCG will force the players to invest in increased pricing technology and effectiveness analysis.

8. The words ‘margin improvement projects ‘ will be used more than ever before

Companies will risk increased price pressure, and be forced to install margin improvement projects to safeguard the PBIT.

9. Further EEC interventions in markets with dominant market players to install pricing fairness

The ECC will continue its monitoring in markets with dominant players (e.g. utilities, telecom, etc.) to safeguard pricing fairness principles.

10. Overcapacity in different industries will increase the threat of price wars

Different industries face structural overcapacity because of decreased governmental investments, economic hard times – and the accelerated investments in Asia in production capacity.  In these circumstances, avoiding price wars could be a priority setting in pricing goals.

11. New pricing/revenue models will be developed

New entrants and changing market rules will enforce organizations to find new pricing/revenue models : electric car industry, telecom, healthcare , etc. are examples where we can expect new pricing models next year.

12. From pricing products towards pricing solutions

More and more product companies will try to make the switch towards adding solutions. Organisations such as Philips and Samsung are ideal targets for adding solutions to their products. New technologies will make it easier to embed solutions and get ‘the keys to the customer’.  Pricing executives will have to go one step further and prepare to look at ways to price solutions to future customer needs (needs which the customer has not realised that he has yet, but that the organisation can anticipate on and sell based on their experience and foresight of their market).

13. Pricing will become more strategic than ever before !

We welcome your ideas and opinions, so feel free to share them with us.  You can do so by commenting on this post, or by dropping me an email at nicolene.barnard@pricingplatform.com

Wishing you a profitable New Year !
Pol, Nicolene, Britt & Jessie


Price Image (Guest Post: Florian Bauer, Vocatus AG)

People say of the market researcher's profession that it's terribly dry: ruled by analyses and statistics, fighting it out between levels of significance and correlation analyses. At Vocatus, Florian Bauer and his colleagues see it in a totally different way. Please enjoy his interesting blog post below about how price image can influence buying behaviour. 

Price Image: The hidden force of Pricing

Price image beyond value for money

One of the unspoken assumptions of marketing goes like this: Increase value-for-money, and your customers will thank you with improved price perception and increased willingness to buy. However, this "the more the merrier" rationale doesn't always prove to be true.

The German newspaper market is facing its most severe crisis for at least 60 years. Hundreds of jobs are threatened due to the closure of famous and prestigious national titles such as "Financial Times Deutschland" and the bankruptcy of the "Frankfurter Rundschau". This indicates major changes in terms of how people are consuming news and media, one of them being the sheer lack of time to read.

"The more the merrier" means that publishers whose goal is to stabilize revenues while advertising sales and circulation are in decline are trying to sugar the pill of price increases via noticeable increases in coverage. However, they are ignoring the main reason why people cancel a newspaper subscription: the "pain" of throwing away a paper that has hardly been read. Increased coverage only aggravates this problem.

This sheds light on an often neglected facet of price image: utilization. What is crucial for price perception is not the potential value-for-money provided, but the degree to which customers are able to utilize this value. It’s like buying a cookbook even though you know that only a minority of the recipes will suit your taste, and even fewer of them will ever be cooked.

Price image as a multi-dimensional concept

A leading provider of last-minute package tours recently introduced an online price comparison tool. For every search that a customer executes online, the tool reports not only this provider’s price, but also the best price of its competitors (via a real-time search on the respective competitors’ websites). This tool led to an overall increase in conversion as it addresses a least two price image related motives:

If the provider’s price is cheaper, one of the motives it addresses is transparency. People who want to book a tour online usually compare the prices of several providers and therefore seldom stick with the website they visited first. The price comparison tool makes those further searches unnecessary, creates transparency, and thus increases conversion.

But even if competitors’ prices are cheaper, a significant percentage of customers still book with this provider. The main reason for this is fairness. People who stick with a provider even if it is more expensive assume reciprocity: If they demonstrate fairness by not squeezing the margin, they expect fair treatment from the local agency rep if there are any issues at the destination.

Price image as a driver of purchase decisions

Price image is the hidden success factor in pricing in many sectors – especially in retail, wholesale, and generally in all B2B and B2C industries with a wide variety and/or huge complexity of products and prices. Think about retail: The decision for or against a certain retail chain is mainly based on the retailer's price image, not the prices of actual products. Hardly anyone is aware of actual prices, but the general price image is simply attributed to the prices of individual products. There, price optimization is not only about defining the price of a large number of specific products, but often more about how to optimize the price image as the first hurdle in the funnel or even as the crucial price aspect in the whole decision process.

If price image is reduced to value-for-money, the only way to improve price image is to either reduce prices or increase value. A multidimensional price image construct, including for example transparency, fairness, and other relevant dimensions, much better explains the levers which companies have in optimizing their pricing strategy, and allows for more innovative and profitable pricing approaches.

Guest Post: Florian Bauer, Vocatus  



Several times per year, Nicole Huyghe, founder and CEO of Solutions-2, teaches participants to our EPP Advanced Pricing Toolbox training all the ins and outs of pricing research techniques.  She enriches the training with real-life cases and examples from her 17 years of cross-industrial experience to illustrate the finer details of each method.

On Thursday 15 November 2012, Solutions-2 received the award for the most successful Belgian or Luxembourg SME exporting to the United Kingdom.

Michel Vanhoonacker, BLCC Chairman said: “It was immediately clear to the Jury that the enthusiasm and creativity of Nicole Huyghe, founder of solutions-2 is key to its commercial success in the UK and Belgium. After she lived and worked for several years in London, Nicole set up solutions-2 in Belgium but worked mainly for UK companies and became an immediate export success. With the recent establishment of a UK office in London, she has gone the full circle. The power of solutions-2 is the way in which they turn data into visual story telling.” 

Nicole Huyghe, founder and CEO: “We are participating in the Golden Bridge Awards because we are proud of the growth of our company, and more particularly the export to the UK. What started as a one person company with one client in the UK, has now grown to a very solid and much respected company with more than 50 clients and even our own office in the UK. We very much would like to celebrate this success, together with our team and clients as they have been the drivers of our growth. The Golden Bridge Award is the ideal opportunity for this.” 

The Golden Bridge Awards, organised by the Belgian-Luxembourg Chamber of Commerce, took place in Central London on Thursday 15 November 2012 at the Northumberland. 

For more information about the upcoming Advanced Pricing Toolbox trainings for 2013 have a look at our events agenda.


Price Intelligently (Guest post Erik Grueter)

We are pleased to welcome Erik Grueter today as guest blogger on the European Pricing Blog. Enjoy his post on the science of supercharging your profits by means of a well-crafted value based pricing strategy.  Have a look at their blog at http://blog.priceintelligently.com/ for some more excellent pricing content. 

Supercharge Profits with a Value Based Pricing Strategy

Great companies don't just stumble into the perfect price for their product. They know that there is a huge amount of science and strategy that goes into sales, marketing and product development. Simply guessing at how all of that effort should be priced would be downright wasteful. 

Instead, what the best companies do is price their products along a value metric. They do this by  determining the core value their product provides, then breaking that value down into its smallest unit. Finally they charge for that unit along a sliding scale. We will discuss how to apply this strategy to your business, and show you the enormous impact on growth value-pricing can have by reducing customer churn. 

Unlock revenue by determining your value metric

Pricing along a value metric is difficult. It requires you to do deep customer research through surveys and customer discussions. You’ll need to determine the value your product provides that is ultimately driving a customer to purchase. What is the core value you offer that the customer requires from your product? Once you have determined this, you’ll need to determine the smallest unit of that value. For example: If you are a farmer selling eggs, you are not likely to sell half of an egg. 

Pricing along a value metric makes the second step in this pricing process much easier. Once you have determined your value metric is eggs, you can price along a sliding scale for the number of eggs sold. A family might only need a dozen eggs, while a restaurant might need 1000. You can think of your pricing tiers as the three or four most likely places a customer would slide their value requirements along that scale. This makes your pricing much easier to understand and more transparent to customers. 

As your company grows, you can continue to add additional value metrics to grow revenue. David Skok's blog provides a great example of how one can accomplish this. Have a look at the below chart:

Skok’s chart demonstrates how to increase the number of dimensions in your business model. Let’s say that you have been charging only for the number of eggs your customer purchases. You could add an additional revenue stream by offering customers a home delivery service. Families could pay a subscription for monthly delivery service. Restaurants might need you to make deliveries each week.The survival of subscription based software companies depends heavily on its ability to scale pricing along a value metric, and upsell current customers into higher tiers, because all subscription based companies experience churn. 

See the below graph, also from Skok’s blog, comparing two companies with differing churn rates. Even a fairly low 2.5% churn rate can cause a significant difference in growth over time. Imagine how fast your company would grow if your customer churn was at zero. Imagine how much faster you would grow if customer churn actually went negative! Explosive growth of that nature is possible with the right pricing strategy.

Utilize your value metric to achieve negative churn

Negative Churn means you are making more from upsells to current customers than you are losing when customers quit your service. Have a look at that above chart again. It is clear the massive impact a reduction in churn can have on growth. If you price your product or service properly, it is possible to achieve negative churn in your business.

When you price along a value metric customers who require more units of value over time will continue to add more and more money to your bottom line. These hippos will happily eat more and more of your product as their company grows larger and more dependent on your value. Additional features aside, these big customers will have a clear understanding why they are paying more as they scale. 

Pricing along a value metric also lets you grab entry level customers in the early stages of their company’s growth. You can drive adoption to smaller enterprises without lowering your quality perception simply by providing fewer units of value. Even if the number of value units you provide is small, you can still be perceived as a top product if the quality of what you are providing is high. As long as the number of customers who require more value from your product over time increases, you can scoop up customers at every stage in the buying cycle 

Think back to the last legendary startup story you heard. Undoubtedly, blazing fast growth was a huge part of that story. By pricing along a value metric and employing multiple pricing dimensions, you ensure that your customer retention is high and that your customer churn is low: perhaps even negative !

Guest post : Erik Grueter, Price Intelligently


Proudly annoucing the Pricing Maturity Assessment

Maybe you've already read about it on our Twitter our LinkedIn Company Profile in the past few weeks: the first Pricing Maturity Assessment is coming!

In the days to come, you will get the opportunity to meet a total new way to optimize your pricing. The European Pricing Platform, in coorperation with Pros Pricing, has developed a tailored pricing training for each individual Pricing Expert.

You can already read about this on our EPP Portalsite , but that's ony the beginning... Keep an eye on our website, Twitter or LinkedIn... You will be swept away by so much pricing knowledge to come!


Model N launches International Reference Pricing Solution for Global Life Sciences Manufacturers

Solution Combats Price Erosion Stemming from National and Regional Price Control Programs

Redwood Shores, USA - London, UK - Hyderabad, India --- October 11, 2012

Model N, Inc., the leader in Revenue Management solutions, has announced the general availability of its International Reference Pricing (IRP) solution to pharmaceutical manufacturers operating globally.

Model N and the European Pricing Platform (EPP) are close partners since 2009, co-organizing the annual Price and Profit Optimization Forum and providing the Life Sciences industry with thought leadership in the areas of Commercial Strategies, Reference Price Management, Parallel Trade Management, Tender Management, Price Execution and Incentive Management. "The Model N International Reference Pricing platform was first presented at the 2012 Price and Profit Optimization Forum last May in Montreux, Switzerland", said Pol Vanaerde, President of EPP, "and its launch marks an important step in the Model N - EPP partnership".

Model N IRP addresses one of the massive Life Sciences global market challenges

To contain growing healthcare expenditures related to drug costs, a rising number of governments seek to control prices with international reference pricing programs. These programs officially set a drug¡¦s national or regional price based on price benchmarks in other countries. Failing to coordinate price setting at launch and subsequent price changes can result in missed opportunities amounting to tens of millions in revenues. In addition, more and more governments across the globe require that manufacturers proactively report reference prices. Failure to comply in an accurate and timely fashion often puts manufacturers in a weak negotiating position with governments.

Model N International Reference Pricing delivers significant business and operational benefits to pharmaceutical manufacturers by:

  • Supporting data-driven Pricing decisions from pre-launch to launch to growth to maturity, by providing Global and Local teams with full visibility into risks and opportunities associated with future price dynamics
  • Helping Government Affairs teams remain compliant in mandatory governmental price reporting while ensuring Ministries of Health are correctly applying reference rules
  • Connecting Market Access, Pricing and Government Affairs teams around the world in real time enabling efficient collaboration and effective decision-making
  • Increasing pricing data transparency across the entire organization, enabling more accurate financial planning 

Model N IRP has already proven to deliver significant gross margin benefits

"Top Pharmaceutical executives are clear that the new economic reality requires rapid decision-making with integrated collaboration and controls across regions to deal effectively with the needs of International Reference Pricing compliance. Departmental and Excel based solutions will not work. The solution has to be global, unified, real-time and highly collaborative." said Lawrence Whittle SVP Global Sales and Marketing, Model N Inc. "Over the past year, we have worked closely with our pharmaceutical partners to create a robust IRP solution that meets or exceeds these requirements and look forward to helping industry leaders overcome their reference pricing challenges and combat global price erosion."

About Model N International Reference Pricing

Model N International Reference Pricing helps global manufacturers mitigate reference pricing risk and profitability erosion through a powerful combination of data management, software applications, and best practices. Capabilities include:

  • Single Global Repository
  • Global Price Governance and Collaboration
  • End-to-end with data integration, configurations, workflows, analytics, reporting
  • Designed for rapid deployment and time to value of under three months
  • Web Based user interface designed for functional users
  • Subscription-based solution eliminates the need for complex capital acquisition processes or budgets 

Supporting Link


Pricing Social Media Links 

Follow Model N on LinkedIn European Life Sciences Price and Profit Optimization Forum 

About Model N 

Model N, the leader in Revenue Management Solutions, drives improved pricing, margin, and revenue performance through a powerful combination of best practices, highly configurable software applications, comprehensive services, and actionable analytics across the complete functional spectrum of pricing, contracting, rebating, sales, and marketing. Model N leverages its deep industry expertise to support the unique business needs of Life Sciences and High Tech manufacturers across more than 50 countries. Global Customers include: Allergan, Amgen, Atmel, Boston Scientific, Bristol-Myers Squibb, Dell, Hospira, Johnson & Johnson, Linear Technology, Merck, Marvell, Maxim, Micron, Nokia, Novartis, Novo Nordisk, ON Semiconductor, STMicroelectronics, and Watson Pharmaceuticals. Whether you are an emerging business or a global leader, Model N results in revenue.

Model N is a trademark of Model N, Inc. Any other company names mentioned are the property of their respective owners and are mentioned for identification purposes only.

About the European Pricing Platform

European Pricing Platform (EPP) is a not-for-profit organization and has become the leading knowledge sharing place focusing to support business management, pricing and profit optimization professionals and CxO-level executives in Europe over a variety of industries and sectors. The EPP mission is to be the on- and offline pricing media for international decision makers in a wide range of industries. The interactive collecting, sharing of best practices and development of pricing and profit optimization know-how are the key elements of the platform. EPP is dedicated to the professional development of the individuals and companies involved in the process of pricing and profit optimization. To learn more, visit the website at http://www.pricingplatform.eu


Are you part of the New Generation of Pricing Leaders?

- Bringing your pricing performance to a higher level - 

The European Pricing Platform unveiled their cutting-edge pricing accreditation program for the new generation of pricing leaders and specialists this week in Brussels. The Certified Pricing Manager (CPM®) Program offers experienced pricing practitioners the unique opportunity to learn how to achieve full value capturing and profit optimization in their companies.

Becoming a Certified Pricing Manager

“Pricing Power is one of the key value drivers on the stock exchange today. We hear more and more European companies express the need to equip their pricing managers with the latest tools, knowledge and capabilities, to bring their pricing performance to a higher level”, says Pol Vanaerde, Founder and President of the EPP. The CPM® immerses participants in a 3-day and 2-evenings blend of intensive knowledge transfer, interactive discussions, reflection and group work followed by a 6-month in-company profit optimization project, which needs to be successfully completed in order to achieve certification.

Two levels of certification

Two levels of certification, CPM®2 and CPM®3 are offered depending on where an organization finds itself on the path to pricing maturity and on how much experience the pricing practitioner in question has in the field. The modules of the CPM® Program are underpinned by skill cards covering the knowledge and capabilities required by pricing practitioners at each pricing maturity level.  

Higher pricing maturity leads to sustainable value capturing, which in turn results in profit optimization based on fair pricing and value sharing principles. For more information on the program visit

The EPP CPM® program is about meaningful learning and tangible professional development with impact.

The new generation of pricing leaders:

CPM® Level 2 :  Welcome Dinner on 1 July, Training 2-4 July, Brussels 

Pricing leaders on CPM® Level 2 are skilled in Taking Transactional Control.  They have mastered these key requirements needed for successfully completing a 30.000 Euro (minimum) margin improvement project in their companies in order to be certified as CPM2. 

1.  Pricing Maturity Management 
  • Alignment between profit optimization goals and organizational capabilities.    
  • What moving to the next Pricing Maturity level means.
  • Pricing maturity challenges for your organization.
2.  Pricing Analytics, taking control
  • How to gain transactional control.   
  • How to install the right price analytical reports
  • How to set-up a holistic view on profitability.
3.  Defining margin improvement projects

  • Pricing tools which help discover the margin leakages.
  • How to communicate that change is needed.
  • How to ensure that structural improvements are realized.
4.  Price Setting and Discount Structures

  • Different price and discount models.  
  • Price and product differentiation opportunities  to improve margins.
  • How to install floor prices and  price corridors.  
5.  Preparing price increases

  • How to effectively prepare  for and execute price increases.
  • How to monitor the effects of price increase projects.
6.  Pricing organization & Governance

  • The organizational impact of moving towards pricing maturity level 2.
  • The impact on governance, pricing roles, responsibilities  and skills.

CPM® Level 3 :  Welcome Dinner on 15 July, Training 16-18 July, Brussels

Pricing leaders on CPM® Level 3 have moved beyond transactional control and are now focussing on full value capturing.  The have mastered the change management and advanced pricing skills needed to bring their organisation to the next level.  The focus of key topics covered in this programme are:

1.  Pricing Maturity Management
  • How to cross the Pricing Chasm
  • What moving to the next Pricing Maturity level means
  • Pricing maturity challenges for your organization.
2.  Value Based Pricing Techniques
  • Segmentation based on value attributes.
  • Typical issues in setting up demand curves.
  • In-depth view of the research tools (conjoint techniques).
3.  Value Selling and Understanding Situational WTP
  • What it takes to move from selling products to selling on value.
  • What tools to set up to help your Sales Team sell on value.
4.  Calculating TVO
  • How to prove your value in hard economic terms.
  • How to develop and use the right tools for TVO calculations.
5.  Multi Channel Pricing and Discount Policy
  • Challenges of managing channel incentives.
  • Setting up a performance based discount policy, without putting pressure on margins or triggering channel conflicts.
6.  Price Negotiations
  • How to avoid focussing on price during negotiations.
  • How to deal with price issues during negotiations.
  • How to prepare your Sales Team to defend your prices.
7.  Pricing organization & Governance
  • The organizational impact of moving towards pricing maturity level 3.
  • The impact on the governance, pricing roles, responsibilities  and skills.
8.  The Pricing Dashboard
  • Which strategic and operational KPI’s to monitor.
  • How to set them up.


How mature is your pricing organization ?

Many European based organizations have only just begun to realize how significant the effect of pricing on shareholder value creation really is. Until now, the focus was mainly on innovation, sales and marketing – and justly so. But in today’s economic environment, value capturing (effective pricing) is increasingly being discussed at the boardroom table as one of the main shareholder value drivers.

The domain of ‘Pricing’ is in full development and many companies install Pricing teams who almost immediately realize successful margin improvement projects. These are the ‘quick wins’ in the discipline of pricing. But we need to go beyond the low-hanging fruit !

The next step proves to be more difficult : embedding pricing knowledge in the organization, thus moving away from pure project-driven pricing. European pricing professionals have come to recognise that a lasting change and full impact on profit optimization requires a comprehensive approach. Crossing this chasm is not an easy expedition.

As a result, many pricing practitioners, management teams and CEO’s are searching for a structured approach to guide their organizations towards higher pricing maturity, leading to profit optimization.
They asked the EPP : where do we start and what are the priorities? Who should we learn from? Apple? Bose? 3M? Bayer? Audi? Microsoft? Michelin? Hilti? The Rolling Stones? Is there a proven path to superior pricing ?

The answer is Yes ! There is a proven pricing maturity development path.

The maturity model concept, as a tool to enhance organizational capabilities, was popularised by the Carnegie Mellon University in the 90’s. Their first Capability Maturity Model (CMM) was developed for IT management, but in the meantime, nearly every management domain has maturity models to draw upon. A maturity model defines a set of structured levels that describe how well the behaviors, practices and processes of an organization can reliably and sustainably produce required outcomes[i].

At the EPP, we have gathered a treasure of time-tested best practices from the leaders in the field of pricing to come to a practical pricing maturity model to support pricing practitioners in Europe. It’s a hands-on, pragmatic instrument and it is our mission to share it with you.

The emphasis of this white paper is to help you identify where you are today in your pricing journey, which areas you need to prioritize and improve to lead your company to the next level of pricing maturity (and profit optimization) – and perhaps most important : how to cross the ‘Pricing Chasm’.

In addition to this, we are currently building the EPP Pricing Maturity Indicator together with PROS (to be launched in October 2012).  It takes the form of a free, in-depth, on-line survey.  The results of the survey present you with a solid indication of your pricing maturity.  For a customized, company-and-industry-specific assessment, we refer you to one of our expert partnersii.

The Pricing Maturity Approach

In the early stages of their pricing development, organizations often focus first on margin improvement projects. These pricing projects (the low-hanging fruits : see frame) bring the desired visibility at board level, but pricing professionals soon grasp that full value capturing is much more complex and challenging.

Improvements do not come from better price setting alone. You have to develop and align your capabilities in all pricing building blocks.

We visualise this by means of the EPP Pricing Framework. There are five core processes : Price strategy, Price Policy & Setting, Discount Policy, Execution and Monitoring – and two supporting building blocks : Organization & Governance and Tools & Systems.

When you have a pricing audit done, they always reveal weaknesses/improvement opportunities in all building blocks. This results in a long list of capability gaps and organizational challenges. As a result, we see top management often struggle to allocate the right priorities in this list.

How do we set priorities for Pricing ?

The EPP Pricing Maturity Model helps you determine which level you are operating on, how to prioritize your efforts, and how to cross the pricing chasm to realize profit optimization.

We consolidated real-life best practices and advice from Pricing leaders, experienced in pricing maturity development across all industries, into the EPP Pricing Maturity Model.

The model consists of 4 stages described in detail in our whitepaper:

Level 1: Price list maintenance

Level 2: Gaining transactional control
Level 3: Achieving full value capturing
Level 4: Deploying full profit optimization

Under optimal conditions, it will take you at least 3 to 4 years to bring your organization from level 1 to level 3. It is essential that you have the full cooperation and support of your most important stakeholders in realizing the change: top-management, marketing, sales, finance (and IT). Do the right things first and never walk alone; if you keep these two key things in mind, the likelihood of success in your pricing journey increases sevenfold!

 A selection of pricing maturity characteristics to help you determine where you are, and where you need to go :

Download the whitepaper for a full account - click here

1.  Price List Maintenance :

Driven by volume, you sell to (almost) everyone at (almost) any price (Discounts galore!).  Wide price bands likely to lead to pricing conflicts, which sees you spending most of your time managing price lists.  Mainly cost-plus pricing.

2.  Transactional Control :  
You realize that strategic importance of pricing needs to be made clear to the powers-that-be.  A number of successful quick win pricing projects lead you on the way to transactional control.  But the challenge here is to bring management to understand pricing is a continuous process, not just a once off project.  This is the Pricing Chasm that needs to be crossed to get to the next stage of pricing maturity. 

3.  Full Value Capturing :  

You have the full support of top management and they are prepared to make some serious changes.  The chasm is crossed or in the process of being crossed. There is alignment between Sales, Pricing, Marketing and Finance about where and how value is created and which market strategy you follow.  Wherever possible value-based pricing in place.  Pricing software is implemented.

4.  Full Profit Optimization :  

You have tailored value communication per end-user to help them identify optimal solutions.  You no longer sell on features, price or even on value components, you sell solutions ! Think of Michelin who bill their trucking or airline customers according to the nr of kilometers traveled, nr of tonnes transported etc using their well-serviced tires... Your centralized pricing team supports and influences  the whole business model, and reports directly to the CEO.

Take the time to download the full whitepaper here : a couple of seconds now, could result in a lasting impact on your bottom line !

i) For the history and evolution of the Capability Maturity Model by the Carnegie Mellon University, see http://www.sei.cmu.edu/cmmi/ . The description of a maturity model comes from http://en.wikipedia.org/wiki/Capability_Maturity_Model
ii) visit http://www.pricingplatform.eu/partnerzone/pricingexperts/pricingexpertdirectory.html for a list of the EPP expert pricing partners.


Meet the crunch bunch - The effectiveness of data


September 2012

Data can unlock your company's potential - but only if you know how to use it. Here are the people who do
By Stephen Pritchard
Despite being intangible, and often invisible, business data is increasingly referred to as 'the new oil'.
One of the first companies to appreciate its value was Tesco, which has been tracking the shopping habits of more than 15 million British families for almost two decades thanks to its innovative loyalty card scheme. Launched in 1995, the Clubcard helped Tesco catapult past Sainsbury's to become the UK's biggest supermarket chain and the third-largest retailer in the world.
Today there is hardly a businesses sector on the planet that does not mine data in the hope of unlocking new revenues. Facebook's valuation, when it listed, was largely down to the mass of data it collects from its users.
But simply gathering and storing endless information does little to help a business: in fact, it will just add to its IT costs. A US study by business software company Oracle found that managers felt they were being deluged by it. The average data volume they are handling has increased by 86% in just two years.
As well as facing rising costs from managing more data, businesses are also failing to make proper use of it. As Peter Sondergaard, head of research at analysts Gartner, puts it: "Information is the oil of the 21st century; analytics is the combustion engine."
In other words, the real value of business information comes not from collecting or storing it, but from the tools that enable businesses to examine their data and look for trends. They can then use this to come up with new ideas or develop new products.
But only a few companies are doing that today. Gartner, for example, says that 85% of business information is so- called unstructured data, including text, video and audio. Only one company in 10, however, has a formal role in the business for someone to manage that data and put it to work.
This comes with a cost. Again, according to Oracle's survey, private-sector companies believe they are losing 13% of potential revenues by failing to make the most of the information explosion. And this is in part because most things to do with data are still cloaked in geek-speak.
This, says Lora Cecere, CEO of industry researchers Supply Chain Insights, is a hurdle when it comes to turning data into profit. As a respondent to one of her surveys pointed out recently: "Most business people do not understand this, it is still IT-speak for now." But it is not a trend that companies can afford to ignore.
"What is driving change is the availability of a lot of data," says Andy Fano, who leads the data scientist team within the analytics practice at Accenture, the consulting firm. "There are technologies available that make processing those data possible. But what it is about is understanding the signals that are present in the data. And that is not just traditional data, coming from transactions, but information from sensors, from social media, or unstructured information such as text, images, audio and video."
Tesco doesn't just use its Clubcard to see who is buying a particular brand of toothpaste. It has used the data it collects to develop an entirely new raft of businesses, such as financial services.
There are many other examples of data being used to hone businesses. Virgin Atlantic has used data gathered from years of flying passengers to the US to change the timings of some of its less busy flights, making them more convenient for travellers with onward connections. This has transformed some of its less popular routes into some of its best revenue earners.
Other technology is even more advanced. Accenture, for instance, has used cameras in supermarkets to help retailers better understand where to place goods on the shelves. Yet the quest for information is hardly over. "In retail, if you look at transactions over the last 10 years, it feels like you have a lot of data," says Accenture's Fano. But when it comes to predicting what, say, an individual shopper might do, there is no such thing as too much data.
"If a customer visits a department store six times in 10 years, and visits the menswear department, all the information you might have could be that they bought an item at this price. If you're lucky, you would know it was a shirt." That information on its own says little about that customer, or his or her spending patterns or desires. "That is where the volume of data is deceptive," warns Fano.
All told, experts who can crunch the numbers, unlock the secrets of companies' vast databases and explain the data's meaning to senior managers are highly prized.
And helping managers make sense of data is a lucrative business. By no means all the companies mining and analysing data are new: some have done so, out of the limelight, for years. If data is indeed the new oil, here are some of the explorers.

Andres Reiner

New York-listed software company PROS specialises in price optimisation. It started in the airline business more than 30 years ago, but has since moved into areas such as hotels, business-to-business services and retailing: anywhere where goods or services are perishable or have a fixed shelf life. Andres Reiner, its CEO, says businesses often have plenty of data, but struggle to translate that into improved profitability.
"Companies have invested a lot in data and creating ERP (enterprise resource planning) and CRM (customer-relationship management) solutions to leverage that data," he says. "Technology allows them to use transactional data with other external sources to drive their strategy. But a lot of companies have lost their ability to understand how raw-material price changes or currency fluctuations impact their business. They need better tools to guide them on where and when to make changes."
Companies should be looking for patterns in the numbers: changes in the market that might affect pricing. But this means more than just looking at their own sales or reservations systems - they must look at competitor data too. And they need to do more to bring marketing and sales, and purchasing, together. "We're trying to bring them the data they need to make the right decisions," he says.
Sometimes, looking at the data produces startling results. One firm found that the difference between the highest and lowest prices paid for its products was 70%. And sales teams do not always tie pricing to profitability. "How do you ensure a customer who is driving more business for you pays a better price than one who drives less business?" asks Reiner. "When any sales rep can change a price, you may be setting a price that means you are losing money on that business - but you will never know. Businesses must leverage the technology they have to understand how the market is changing and how their costs are changing, so they can make real-time decisions on where you need to price to win business profitably."
Industrial customers, which have traditionally updated price lists once a year, if that, are being hit hard by more volatile raw-material pricing.
They could, Reiner suggests, learn from FMCG retailers or airlines and price more dynamically. "The consumer markets are much more advanced when it comes to using this data, because they've needed to be. Business-to-business companies may not always have seen the volatility we've seen over the last few years." Regular, small price increases might be better for both a business and its customers, as it is easier to absorb the costs. "Understanding how your profitability changes over time is very important," says Reiner. "And businesses need to be more surgical: you are not changing all of your price lists, but changing them where it matters."

Jim Goodnight

SAS Institute
Dr Jim Goodnight co-founded data analytics firm SAS Institute in 1976.
Still privately held, the company ranks governments, global banks and big-name retailers among its customers.
For three decades, analytics remained a largely specialist branch of IT, used in areas such as banking or intelligence analysis. But that has changed. "Execs realise that analytics can be a key factor in improving their bottom line," says Goodnight.
"A bank needs to make decisions on who to lend money to. By building predictive models, we can compute the probability that someone will repay their loan. With that information, the bank can decide whether it is worth taking the risk or not. We score credit card usage, so when you use a credit card we are at the other end working out whether the card is being used fraudulently.
"We've been in the high-end analytical space for 35 years. But more and more companies are using analytics, and we are helping to create new solutions for companies that maybe don't have the analytical talent themselves - we will host the data and do the work." HSBC is one such customer: SAS Institute develops algorithms for the bank to use in its analytics.
The current trend for businesses to use 'big data' is not, though, a guarantee of improved profits. "Often the problem is not so much the analytics but getting it all together and getting the data cleaned up," he says. "There are always bugs in data: someone has put down an address incorrectly or misspelled a name. But with high-performance analytics, once the data is cleaned up, we can compute models in a matter of minutes and address huge problems we would not have been able to dream of solving just a few years ago."
Demands such as credit card processing have prompted SAS Institute to focus on performance: the smartest algorithms are of no use if a shop customer has to wait several minutes for approval. Those lessons, Goodnight says, are now being applied to other businesses.
"We have been successful at uncovering really fast ways to do things," he adds, explaining that this in turn allows the software to run on more modest equipment. As a result, a wider range of companies can use the service.
"Retail is one of the last spaces to turn to analytics in a big way," he says. "We are working with [US department-store chain] Macy's to forecast the shelf life of each item in their stores - if it looks like it will be on the shelf for more than a season, we will suggest markdowns. We do that for 270 million items each Monday morning."

Gordon Rugg

Search Visualizer
Academic Dr Gordon Rugg - a psychologist and computer-science lecturer at the UK's Keele University, set up Search Visualizer to help researchers and businesses make sense of large amounts of information. This might be results from a search engine, where the problem is sifting through thousands of hits, or looking for specific terms within a document. In layman's terms, it is helping to look for needles in a haystack of data.
"Most people tackle big data with one of two approaches. One is to make software replicate how humans operate - the 'semantic web' approach. The other is to do what humans are bad at: statistical cluster analysis," says Rugg.
"The problem with the semantic approach is that the hardware isn't yet up to it. Nor is the software. What we are doing is representing data in a way that plays to the strength of the human mind's ability to process it: making sense of huge amounts of natural language text but also quantitative information."
The technology works by turning data into a pattern of coloured dots. The company says it can search through an entire Shakespeare play, and put the results for just a single word on one page. But there is a more business-focused application.
"The companies we are talking to are drowning in data. They want to make sense of it. One customer is looking at patent searches, and searching for patents in languages they don't speak. The current technology is too slow. But we can identify which records are likely to be relevant and draw up a shortlist of documents to be translated."
Another application is monitoring social media for comments. "Say you want to know what's being said about a company. You don't need a lot of training to do that, and you can scroll through hundreds of records in a few minutes to get a general feeling for whether sentiment is positive or negative. Then you can drill down into what people are saying - the words that they are using - whilst you are at your desk. You just reframe the question with a greater degree of precision.
"When we show it to people their eyes widen. Within minutes they can be up and running and using it at a 'power user' level. There is a lot you can do with this that you can't do with conventional search technology: you can see a large amount of information at a glance. We see this being used by medium to large, nimble companies, that are small enough to react quickly and flexible enough to adopt new ideas."

Neil Thomson

Dr Neil Thomson carried out academic research on memory and reasoning at Cambridge before moving into information technology.
He founded his own company, developing business-rules software, which he sold to Microgen. There, he built the firm's Aptitude technology, which deals with large volumes of business data.
Businesses cannot derive insights from data if they cannot process it in a joined-up manner, he says. "In classical statistics, you are not just looking randomly for patterns. It is always going to be difficult to look through large amounts of data without an a-priori hypothesis."
The challenge is to design a system that is efficient, and fast enough to cope with huge volumes of data, but which is simple enough to be configured by business users, not IT people or specialist analysts.
"I can write something that goes fast in a low-level language, but that doesn't correspond to any business language," says Thomson. "We try to create something people can use that isn't opaque code."
The Aptitude software aims to help companies make more of their data by being as intuitive as possible but still powerful. The idea is that by making data analytics more accessible, companies can run more searches and queries, and make better use of the information they hold. After all, data, Thomson concedes, is worth little on its own.
"More data doesn't necessarily lead to better decisions," he says. "Ideas come from creativity; data lets you check those ideas. If you look at most standard business processes, 'big data' is simply more data." And ever-larger databases aren't the answer. "The issue is not having the data, it's having the questions. Business users need to be able to ask the right questions."