Pricing.thru distributors.maniscalco.2012r2e

Developed/Presented by:
Peter Maniscalco
Sr. Pricing Consultant

May 18, 2012

© Peter Maniscalco. All rights reserved worldwide

Agenda
 Introduction

 Distributor “Behaviors”

 Profit Levers & Price Waterfall

 Pricing Tactics & Strategies

 Summary

Introduction
 Pricing Factors

 Working with Distributors

 Company Sales Team


Pricing Factors
 Price “accordingly” in order to motivate

 Consider distributor’s end-user business

 Adherence to your company’s objectives


Working with the Distributors
 Negotiating tactics used

 Are they concerned about value?

 Does it matter if your product is a commodity
or not?

 Do value-added services matter?

Distributor “Behavior”
 Imposing time pressures for pricing

 Threatens to take business elsewhere

 Price “fishing”

 Threatens to escalate price negotiations


Distributor “Behavior”
 Makes unreasonable demands
 Needs a cost vs. sell price – margin issue?
 Compensate in price for distributor’s poor
end-user service
 Expects continued low prices on all types of
end-user business
 Claims your pricing lacks flexibility


Company Sales Team
 Pricing educated

 Product educated

 Clear understanding of corporate objectives

 Experienced or ‘rookie’


Profit Levers
 Most effective way for a company to realize its
maximum profit:
GET THE PRICING RIGHT!

 ‘Right price’ can boost profit quicker

 Leverage & payoff of improved pricing is high


1%
Improvement
in… … Creates Operating Profit Improvement of

Price 12.3%

Var. Cost 6.7%

Volume 3.6%

Fixed Cost 2.6%

Note: Compustat, Deloitte analysis (2009); Impact estimate based on average Fortune 1000 company


Pricing Waterfall
 Important factor in helping more effectively
manage discounts that are offered

 Transaction Price Management -

Key aspect of basic pricing management
Point where product “meets” customer
Invoice vs. transaction price – difference can mean
significant reduction to bottom-line profit

Pricing Waterfall
 Concept shows a company where its products’ prices
erode between invoice price and actual transaction price.
In the Price Waterfall, each Component Represents a Revenue Leak

$5.00
0.15
Competitive 27.4% Off
Discount 0.10 Order
$4.75
Invoice
Size 0.30
Discount Payment
Terms Disc
0.37
Annual 0.35
Volume Off 0.20
Bonus Invoice Advertising 0.08 $3.45
Promo Freight

Dealer
List Invoice Pocket
Price Price Price

Note: Concept developed by McKinsey & Co.

Pricing Tactics
 Leverage your company’s advantage

 Discounting on incremental sales volume

 Get something in return for price
concessions

 Value-added services – e.g. priority
scheduling & delivery

Pricing Tactics

 Miscellaneous discounts – make sure limited &
controlled

 ‘Free’ product – in lieu of price discount.

 ‘Advertising’ allowance – ensure distributor’s
promotion of your product is quantifiable


Summary
 Control your price discounting

 Obtain something in return for concessions

 Leverage your company’s advantages e.g.
incumbency, size, etc.

 Offer value-added services


Contact Info
Peter Maniscalco, MBA
Contractor / Sr. Pricing Consultant
484-947-6450
peterm09@yahoo.com
http://www.linkedin.com/in/petermaniscalco
Twitter: @PeterPeterm09

Pricing.thru distributors.maniscalco.2012r2e

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