Strategic Pricing Survey
Results and Insights
June 2014
© 2014 Blue Canyon Partners, Inc. All rights reserved.
Table of Contents
 Introduction
 Is Pricing a Challenge?
 What is Impacting Pricing and What
are Companies Doing About it?
 What are Top Performers Doing?
 Summary and Recommendations
 Survey Methodology
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
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12
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Introduction
About a year ago, serious conversations began to
emerge across the markets Blue Canyon serves
regarding pricing strategy. Although the topic itself
was not unusual or unfamiliar, the number of
companies wanting to discuss the issue was
increasing. Pricing strategy has become an important
topic for the business unit leader and the C-level
executive and across functions, such as business
development and marketing.
When the opportunity came to partner with MAPI on
this topic, we were eager to learn what drives and
impacts pricing strategy, how companies are
addressing these factors, and how confident they are
in their overall pricing approach.
With more than 80% of respondents stating that
they reassessed their pricing strategy 1 year ago
or less confirms that pricing is top of mind.
When was the last time
your company reassessed
its pricing strategy?
3 years
ago, 2%
2 years
ago, 7%
1 year ago,
19%
However, what does that say about the remaining
20% who have not recently reassessed their pricing
strategy?
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
More
than 3
years
ago,
11%
Less than 1
year ago, 62%
N=103
Is Pricing a Challenge?
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Is Pricing a Challenge?
Well-articulated, Formal Business Strategy
 Although more than 80% of
survey respondents indicated
that they reassessed their
pricing strategy 1 year ago or
less, nearly 60% specified
that their business did not
have a well-articulated,
formal pricing strategy.
N=102
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Reasons for Not Having a Well-articulated,
Formal Pricing Strategy
“Mostly based in culture/institutional
knowledge rather than well-articulated
strategy”
“A lot of randomness to our
strategy—needs tightening
up in a lot of areas”
“Prices have been managed
independently by business
entities. Global customer
behavior forcing changes
towards coordinated, global
price approach”
“Some of our operating units
have a well-articulated pricing
process, some do not. We are
attempting to have all units take
a value-based approach
whenever possible”
“Not
consistent
globally”
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Is Pricing a Challenge?
Pricing Effectively to Maximize Profitability and Ability to Win
 While those who indicated that their business has a well-articulated
pricing strategy are more likely to be confident that they price
effectively, only 24% are Very Confident
 Of those who indicate they do not have a well-articulated pricing
strategy a full 60% are Not Confident in how effectively they are pricing
N=42
N=60
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Is Pricing a Challenge?
Pricing Effectively to Maximize Profitability and Ability to Win
 Those at the top, President/C-Suite, are the most confident that they
are pricing effectively, with over 70% at least Somewhat Confident
 However the same level of confidence is not reflected at the Vice
President level, where only 50% are at least Somewhat Confident
and few are Very Confident
N=25
N=46
N=32
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Reasons for Not Being Confident
in Pricing Practices
“Since our general
pricing strategy is
cost-plus, we
don’t know what
we are leaving on
the table”
“Broad catalog and
several channels, the
system is too complex
and unwieldy to
effectively gauge”
“Cost-plus
not
optimal”
“Decentralized nature of our
pricing processes leaves a lot
of opportunity for different
behavior in different business
units and geographies”
“Not convinced that the value
proposition for the products we offer
is fully assessed for each opportunity”
“Lack of understanding
of value pricing”
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Is Pricing a Challenge?
Determining Where Pricing Decisions Should be Made
 Those who indicated that their business has a well articulated pricing strategy are more
likely to be confident that where pricing decisions are being made is appropriate
to drive success, with over 40% being Very Confident
 Of those who indicate they do not have a well articulated pricing strategy only 15%
are Very Confident that where pricing decisions are being made is appropriate to
drive success
N=42
N=60
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Reasons for Not Being Confident in Where
Pricing Decisions are Made
“There are times that
decisions are made in silos or
vacuums”
“We are in the
process of driving
pricing decisions
down to the local
level”
“We need to improve Marketing’s
role in pricing decisions”
“Not enough
market
knowledge
factored into
pricing”
“We are still building central
guidelines that will allow for
more local decisions within
these parameters. Today there
is not enough structure”
“Lack of a repeatable, proven
methodology”
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What is Impacting Pricing and What
are Companies Doing About it?
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What is Impacting Pricing?
Market Trends
Customers’ Perception of Value and Underlying Market Factors are
seen as the key drivers impacting pricing
Other factors:
N=102
Increased local/regional/global competition
Commoditization
New players in the value chain
Channel mix
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What is Impacting Pricing?
Customer Trends
Greater Visibility and Smart Customers make pricing strategy and
decisions even more important
N=102
N=102
“Customers are more global and are starting to compare
price levels in various regions of the world.”
“Customers are demanding more price/cost
transparency before making large investments.”
“The increasing presence of our products on the Internet
makes our pricing more transparent every year.”
“The channels we use that are growing heavily have
more sophisticated sourcing organizations.”
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What are Companies Doing About it?
Actions to Address Pricing Trends
To address pricing trends
companies are focusing more on
Process and Tools
Over 50% of companies are
undertaking multiple activities to
address pricing trends
N=103
N=103
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Specific Actions Being Taken
“Global Pricing Core Team in
process”
“More discipline process and
approval levels depending on deal
size and margins”
“Better aligning metrics for
pricing stakeholders. Make sure
that metrics for sales folks
involved in pricing go beyond
revenue maximization”
“Assessing rebates,
freight, and other
non-price factors in
the value equation”
“Moving quickly toward market
segmentation and subsegmentation so that we can
truly focus on areas of distinct
competitive advantage”
“Improved metrics and data structure to
facilitate pricing analytics and
performance management”
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What are Top Performers Doing?
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What are Top Performers Doing?
Defining Top Performers

To identify best practices, we compared responses of “Top
Performers” and “Bottom Performers”


Top Performers are defined as those respondents
who…

Have a well-articulated, formal pricing strategy

Are somewhat or very confident that they are
pricing effectively

Are somewhat or very confident that where pricing
decisions are made is appropriate
Bottom Performers are defined as those respondents
who…

Do not have a well-articulated, formal pricing
strategy

Are neutral or unconfident that they are pricing
effectively

Are neutral or unconfident that where pricing
decisions are made is appropriate
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
N=103
What are Top Performers Doing?
Pricing Approach

Top Performers are much more likely to have a Value-based approach to pricing or a Combination
approach that includes Value-based pricing, while Bottom Performers are more likely to have a
Cost-plus based approach or a Combination that includes Cost-plus pricing
How would you currently characterize your organization's
primary pricing approach?
More likely to
indicate
Combination,
including Valuebased pricing
More likely to
indicate
Combination,
including Cost-plus
pricing
N=36
N=24
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What are Top Performers Doing?
Value-based Pricing Sidebar

Interestingly, respondents who do not primarily use a Value-based pricing approach are almost
just as likely as those who do primarily use a Value-based approach (or a combination, including
Value-based pricing) to specify that 1)Their customers understand the value of their offering and
2) Are willing to pay for that value

Given this perspective on their customers, one would expect more respondents to have
implemented Value-based pricing approaches. This is a strong indicator of the difficulty of
implementing Value-based pricing and moving away from traditional Cost-plus or Market-based
pricing approaches
N=31
N=31
N=71
N=71
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What are Top Performers Doing?
Pricing Decisions


Examining where and how pricing decisions are made did
not reveal any significant differences in how many
functions/groups are involved in pricing decisions or
where decisions are made, however, Top Performers are
more likely to have a Dedicated Pricing Function and
rely less on General Mangers for Pricing Decisions than
Bottom Performers.
N=36
N=24
Confidence in pricing is likely more driven by other
factors such as process, tools, and capabilities
N=36
N=24
N=36
N=24
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What are Top Performers Doing?
Pricing Actions
 Top Performers respond to market and pricing environment factors by focusing
on Developing/Improving Pricing Tools and Processes rather than
Restructuring their Organization or changing Pricing Authority
N=36
N=24
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What are Top Performers Doing?
Pricing Tools
Frequently mentioned
tools utilized by Top
Performers include…
 Strategic Pricing
Frameworks
 Pricing Matrixes
 Pricing Analytics
 Competitor Pricing
Databases/Analysis
 Primary Research/
Voice of Customer
“Competitive price analysis, internal
assessment of value proposition
strength and consequent premium
potential”
“Pricing analytics - pattern assessment, scatter plots
and statistical analysis. Strategic pricing frameworks
(defining value creation and dimensions of
differentiation - then testing pricing strategy, price
points, and actual prices achieved)”
“Various Strategic
structures: Voice of
the Customers
(VOCs); pricing
matrix”
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
What are Top Performers Doing?
Pricing Metrics
Frequently mentioned
metrics utilized by Top
Performers include…
 Price Impact on
Revenue/Profitability
 Win/Loss Ratio vs.
Price Levels
 Market Share Change
 Price Realization/Price
Leakage
 Customer Value
Indicators
“Price Realization and Price Quality Indicators.
Flexible and dynamic measurability at any level of
customer, product, and geography”
“Win/loss, price
development year
over year, % of
business asking for
‘special’ prices”
“Semi-annual customer survey that
addresses the overall value of our
business relationship”
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Summary and Recommendations
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Summary
 Pricing continues to be a challenge
▫
Many companies lack a well-articulated pricing strategy
▫
Even among those that have a strategy, many are still not confident that they are pricing effectively
 Market and customer trends will put greater emphasis on pricing going forward
▫
Changes in customer’s perception of value and underlying market factors combined with greater pricing
visibility and smart customers are making pricing decisions even more important
▫
Companies are responding by developing/improving pricing processes and tools
 Top Performers can provide valuable guidance
▫
The location of pricing decisions and functions involved are not as important as having the right processes,
tools, and capabilities
▫
Implementing value-based pricing and the right pricing tools and processes are linked to increased
confidence in pricing effectiveness
▫
Strategic pricing frameworks, pricing analytics, competitive pricing data, and voice of customer are key tools
for success
▫
Focus on metrics that clearly indicate pricing’s impact on the overall business – Price Impact on
Revenue/Profitability, Win/Loss Ratio vs. Price Levels, and Price Realization/Leakage
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Recommendations
 Best practices to become a “Top Performer”
▫ Segmentation
• Fundamental to developing pricing strategy. Need to know when, where, and to who
pricing should be different and why
▫ Framework before programs
• First, establish your overall pricing approach. The programs to execute on the approach
will follow
▫ Tools and processes
• To consistently and effectively implement pricing approach, especially in large, global
organizations
▫ Put pricing in its proper place
• Pricing needs to receive the right level of attention. Dedicated function or position at
senior level with clear decision rights is best practice
▫ Measure, measure, measure
• Clear metrics and processes for monitoring performance, with systems and reporting
purpose designed to support strategic and tactical pricing decisions
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Survey Methodology
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
Survey Methodology
 Blue Canyon and MAPI surveyed more than
1,000 CEOs, General Managers, Division
Leaders, and Heads of Marketing and
Strategic Planning
 103 valid responses were collected from
66 companies from a broad cross section
of industries
Please indicate if you are personally responsible
for any of the following
(check all that apply)
None of the above
Setting the pricing guidelines within my
organization
Making pricing decisions
Owning a P&L
Leading multiple businesses
Leading a business unit and/or region
 Over 2/3 of the survey respondents were
executive level who own a P&L and are
involved in making pricing decisions or
setting pricing guidelines within their
organizations
0
10
20
30
40
50
60
Which function/groups participates in
pricing decisions in your business
(check all that apply)
90
80
70
60
50
40
30
20
10
0
 Nearly half of the companies have a
dedicated pricing group
 Nearly 60 percent indicated that they use a
combination of pricing approaches, including
market-based, value-based, and cost-plus
83
61
85
70
48
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
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About Blue Canyon Partners
Who are we?
What makes us
different?
What do we do?
What is our
experience?
 Management
consulting firm
 Advise on growth
challenges/problems
 Foster win-win outcomes
along the customer chain
 Serve Global 1000
business-to-business
companies
 Identify growth
opportunities
 Centered on understanding
complex, external
environments [markets,
customers, channels,
competitors]
 Vehicles
 “Outside-in” market-driven
strategies
 Industrial Equipment
 Leverage proven
methodologies to develop
cutting-edge answers
 Healthcare
 Team of seasoned
consultants
 U.S. & global capabilities
with offices in Chicago and
Beijing
 Develop new business
models
 Evaluate fact-based
strategic options
 Recommend alternative
approaches
 Set detailed action plans
 Journey with clients to
make decisions and to take
action
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© 2014 Blue Canyon Partners, Inc. All rights reserved.
 Industries
 Agriculture
 Construction
 Distribution/Wholesaling
 Chemicals
 Oil & Gas
 IT & Telecommunication
 Tools & Equipment
 Utilities
 And more….
Axel J. Leichum, Principal
Current Responsibilities
Axel Leichum leads numerous business-to-business focused strategy projects that help Blue Canyon’s
clients improve their understanding of customer needs, identify and prioritize growth opportunities,
effectively segment and target markets, and enhance their major customer relationships.
Experience
Axel J. Leichum
With more than 12 years as a management consultant, Axel brings extensive experience in conducting
primary and secondary research and performing economic analysis, combined with the ability to translate
information into insight and actionable strategies for clients. Axel’s client engagements have spanned a
wide variety of industries and geographies. His work includes:
PRINCIPAL
 Developing a pricing strategy for a global supplier of healthcare equipment
T (847) 967-0253
E [email protected]
 Defining a go-to-market strategy for an IT infrastructure management software and hardware provider
 Developing a global growth strategy for a supplier of equipment to the telecommunications industry
 Defining the market opportunity for a new technology to be introduced into the utility industry
Prior to joining Blue Canyon, Axel served as a consultant with Booz  Allen & Hamilton’s management
consulting practice (now known as Strategy&) working primarily with clients in the financial services and
consumer products industries.
Education and Affiliations
Axel has a Bachelor of Arts in Economics from Northwestern University with departmental honors.
Thought Leadership
Axel has written and contributed to a number of articles and white papers on topics such as adjacencies
and pricing strategies. His two white papers on adjacencies --Discovering Your Next Growth Opportunity:
Adjacent Markets and Adjacent Markets: Choose Your Battles Wisely--explore how to identify and
prioritize adjacent market opportunities.
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© 2014 Blue Canyon Partners, Inc. All rights reserved.