Johan Östlin, Syncron presentation at Spare Parts 2013
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The document discusses identifying and capturing hidden profit potential in spare part businesses through a detailed pricing analysis. It outlines a five-step method that includes evaluating list prices, assessing discounts, analyzing customer spending profiles, and reviewing costs to optimize pricing strategies. The emphasis is on understanding various value drivers and implementing data-driven decisions for improved profitability.
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COPYRIGHT © SYNCRON INTERNATIONAL AB 2012
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Johan Östlin, Syncron presentation at Spare Parts 2013
- 1. Finding the hidden profit potential in a spare part business Stockholm, 8 January, 2013 Johan Östlin – Pricing Consultancy Manager
- 2. Page 2 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Main Themes of the Presentation •Understand how to, from a large scope of part prices, identify uncaptured potential both on sales and in price. “The devil really is in the details”! •How to implement a simple 5 step method for capturing these hidden potentials
- 3. Page 3 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 5 Step Method to Find the Devil in the Details Optimized Prices 1. Find the devil in the details on your list price level 2. Market perspective on the market list price 3. Review discounts to customers on a customer net price level 4. Identify sales potential in customer spending profiles 5. Review cost for segments as a result of more refined pricing
- 4. Page 4 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Typical Aftermarket Pricing Categories General Items Captive Consumables Captive Items Commercial Unique Commercial Commodity Standard Items Kits Remanufactured Items Commercial Competitors Service 1
- 5. Page 5 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Building an Value Based Business Structure Filters Commercial Unique Items Air Filters Filter paper A+ Oil Filters Water Filters Filter paper A Filter paper B Product Segmentation Structure Volume Value Driver Volume Volume Price Volume Captive Items Feed Screw Product Range A Product Range B Material A Material B Material C Feed Capacity Feed Capacity Feed Capacity PC Boards Process Control Flow Control Product Reference Product Reference Generation 6 Generation 5 Product Reference List Price List Price Filters Commercial Items 1
- 6. Page 6 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Identifying Different Value Drivers •Numerical Value Drivers –Weight, Volume, Diameter, Area, Length –Power, Torque, Capacity, Pressure, Flow –List Prices, Net Prices, Cost •Discrete Value Drivers –Material, Coating, Pressure Class, –Product Group, Shape, Profile, Assembly Position, Technology –Features, Connectors –Branding, Suppliers –Process Operations, Surface Req., Manufacturing Complexity Typical Value Drivers 1
- 7. Page 7 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Example Using a Numerical Value Driver Sales Value Price Diameter Price Cost Sales 1
- 8. Page 8 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Example Using a Numerical Value Driver Price Diameter Price Cost Target Sales Sales Value 1
- 9. Page 9 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Example Using a Numerical Value Driver Product Relation 20 % of Product Price Price Diameter Sales Value Price Cost Target Sales 1
- 10. Page 10 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Example Using a Numerical Value Driver Price Diameter Sales Value Product Relation Price Cost Target Sales 1
- 11. Page 11 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Example Using a Numerical Value Driver Price Diameter Sales Value Product Relation Price Cost Target Sales 1
- 12. Page 12 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Identify Price Differences: Market Review List Price Market Price Invoice Price Pocket Price Regional, country, channel, price control and segment adjustments You start with this Pocket Margin You end up with this 2
- 13. Page 13 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Regional Price Management Price Diameter Price Cost Target Product Relation 2
- 14. Page 14 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Regional Price Management Price Diameter Price Cost Target Product Relation Underperforming markets 2
- 15. Page 15 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Regional Price Management Price Diameter Price Cost Target Product Relation 2
- 16. Page 16 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Review Discounts: Customer Net Price Analysis List Price Market Price Invoice Price Pocket Price Regional, country, channel, price control and segment adjustments You start with this Customer-specific discounts, Formula price adjustments, etc. Pocket Margin You end up with this 3
- 17. Page 17 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 0 2000000 4000000 6000000 8000000 10000000 12000000 Discount [%] Sales Volume Discount Management -60% -40% -20% 0% 20% 40% 60% 80% 100% 3
- 18. Page 18 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Discount Management 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 0 2000000 4000000 6000000 8000000 10000000 12000000 Discount [%] Sales Volume Gain Market Volume Review Discounts -60% -40% -20% 0% 20% 40% 60% 80% 100% 3
- 19. Page 19 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Driving Sales: Analyze Customer Spending Profiles Analyzing purchase patterns can give you new insights and support your sales team •Combine a detailed product segmentation with detailed customer information •Pinpoint witch customers we actually sell a specific type of part (price potential), •Pinpoint witch customer we don’t sell specific type of parts, where we actually could sell more (volume potential) •Example: Identify customer that don’t buy Bearings = Push sales on these customers Drill down in to Sales Data “Identify customers not buying Bearings” 4
- 20. Page 20 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Review Cost List Price Market Price Invoice Price Pocket Price Regional, country, channel, price control and segment adjustments You start with this Customer-specific discounts, Formula price adjustments, etc. Cash discount, volume rebate, etc. Pocket Margin COGS, Cost to serve You end up with this 5
- 21. Page 21 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Purchasing Management Price Diameter Cost Sales Sales 5
- 22. Page 22 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Purchasing Management Price Diameter Cost Sales Sales 5
- 23. Page 23 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 5 Step Method to Find the Devil in the Details Optimized Prices 1. Find the devil in the details on your list price level 2. Market perspective on the market list price 3. Review discounts to customers on a customer net price level 4. Identify sales potential in customer spending profiles 5. Review cost for segments as a result of more refined pricing
- 24. Page 24 COPYRIGHT © SYNCRON INTERNATIONAL AB 2012 Questions?
- 25. Finding the hidden profit potential in a spare part business Stockholm, 8 January, 2013 Johan Östlin – Pricing Consultancy Manager