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Pricing for Profitability with Oracle's Price Management Solutions
David TriceVP CRM Strategy
The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions.The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.
Safe Harbor Statement
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Session Agenda
• Pricing Today: The Perfect Storm• Oracle Price Management• Demonstrations
• Deal Management• Pricing Analytics and Price Segmentation• Price Planning and Optimization
Pricing Today: The Perfect Storm
Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.
NY Times, The World: New Global Trade Line-up Sept 2008
Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.
NY Times, The World: New Global Trade Line-up Sept 2008
GlobalGlobalCompetitionCompetition GlobalGlobal
ProfitProfitPoolPool
Evolving Evolving CustomerCustomerLoyaltiesLoyalties
Constrained Constrained ResourcesResources
Companies that maintain a ‘business as usual’ strategy or wait too long to act will find it extremely challenging to sustain momentum as the competitive environment transforms around them.
Steve D’Arcy, Global Industry Practice LeaderPricewaterhouseCoopers
Global Competition
Global Competition: The Seven Struggles
• Minding the Cost Gap• Growing People• Reaching Deep into Markets• Pinpointing• Thinking Big; Acting Fast; Going
Outside• Innovating with Ingenuity• Embracing Manyness
Minding the Cost Gap
Reaching Deep into Markets
Embracing Manyness
Growing People
Pricing Today: The Perfect Storm
Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.
NY Times, The World: New Global Trade Line-up Sept 2008
Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.
NY Times, The World: New Global Trade Line-up Sept 2008
GlobalGlobalCompetitionCompetition GlobalGlobal
ProfitProfitPoolPool
Evolving Evolving CustomerCustomerLoyaltiesLoyalties
Constrained Constrained ResourcesResources
The Generation Gap & Reaching Consumers
Social Media is the way younger generations Connect.
Gen Y80M
Gen X18M
Boomers78M
Where is Loyalty Rooted?
Generation V (Virtual) defies traditional demographics…the behavior, attitudes and interests of people from all walks of life are blending together online, cutting across generations and traditional demographics.
Gartner, June 2008
Individuals that create trends,
build loyalty and define value
Trends in Customer Loyalties
• Value is being defined by• Zealots
• Customer Vigilantes
• Product Advocates
• Environmental Advocates
• And it is happening online
Trends in Customer Loyalties
• Value is being defined by• Zealots
• Customer Vigilantes
• Product Advocates
• Environmental Advocates
• And it is happening online
Value
will be elusive and companies
will compete on price
as a result of social influences in
all market segments.
Pricing Today: The Perfect Storm
Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.
NY Times, The World: New Global Trade Line-up Sept 2008
Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.
NY Times, The World: New Global Trade Line-up Sept 2008
GlobalGlobalCompetitionCompetition GlobalGlobal
ProfitProfitPoolPool
Evolving Evolving CustomerCustomerLoyaltiesLoyalties
Constrained Constrained ResourcesResources
The Delusional Past
ResourceDemand
ResourceSupply
Resource Abundance Drives Low Cost Manufacturing & Economies of Scale
Supply Chain Optimization, Lean Manufacturing, Six Sigma, Green initiatives have all
contributed to the continual decrease in Average Cost
…driving profits higher
Growth is Outpacing Resources
FutureSupply
The Party is Over…
ResourceDemand
Living in a Resource Constrained World
Raw material prices are rising… in some Industries, the annual increase is in excess of 50%.
The Result of the Perfect Storm: Global Margin Redistribution
• Digest cost increases in the most profitable manner
• Capture value added from R&D & Green initiatives
• Segment customers in order to properly address local needs
• Efficiently address global price competition in local markets
Price Management is necessary to ensure your share of the Global Profit Pool
Surviving The Perfect Storm…in a row boat!
• Information to support process is hard to obtain• No single system of record for Price• Excel still supports much of the process
Analyze
•Orders •Quotes •Prices •COGS •Rebates, •Cash disc
•Customer •Products •Regions •Sales Reps•Channels
•Competitive
1. Gather transaction data
•Excel •Data WhseOR
2. Load into Excel or Data
Warehouse
3. Measure by Segmentation
Plan
•COGS•Customer •Products •Regions •Sales Reps
•Channels
1. Gather data to create pricing
2. Create custom excel spreadsheets to model price
3. Final Price Plans
Manage
1. Enter pricing
from plans
2. Maintain pricing
Execute
Apply Pricing per
channel
Apply Pricing per
channel
Price Execution is
the only process that is integrated
today
Enforce
1. Manually enforce deal negotiation
Analyze
•Orders •Quotes •Prices •COGS •Rebates, •Cash disc
•Customer •Products •Regions •Sales Reps•Channels
•Competitive
1. Gather transaction data
•Excel •Data WhseOR
2. Load into Excel or Data
Warehouse
3. Measure by Segmentation
Analyze
•Orders•Orders •Quotes•Quotes •Prices•Prices •COGS•COGS •Rebates, •Cash disc•Rebates, •Cash disc
•Customer •Products•Products •Regions•Regions •Sales Reps•Channels•Sales Reps•Channels
•Competitive•Competitive
1. Gather transaction data
•Excel •Data WhseOR
2. Load into Excel or Data
Warehouse
3. Measure by Segmentation
Plan
•COGS•Customer •Products •Regions •Sales Reps
•Channels
1. Gather data to create pricing
2. Create custom excel spreadsheets to model price
3. Final Price Plans
Plan
•COGS•COGS•COGS•Customer•Customer •Products•Products•Products •Regions•Regions•Regions •Sales Reps
•Channels•Sales Reps•Channels•Sales Reps•Channels
1. Gather data to create pricing
2. Create custom excel spreadsheets to model price
3. Final Price Plans
Manage
1. Enter pricing
from plans
2. Maintain pricing
Manage
1. Enter pricing
from plans
2. Maintain pricing
Execute
Apply Pricing per
channel
Apply Pricing per
channel
Execute
Apply Pricing per
channel
Apply Pricing per
channel
Price Execution is
the only process that is integrated
today
Enforce
1. Manually enforce deal negotiation
Enforce
1. Manually enforce deal negotiation
Negotiate
Why Price Management? Big Customer Management Performance Gap
Why Price Management?Performance Gap exists because of Excel
2008 Survey of PPS Members
Price Management Product Line
Plan
• How should I segment customers?
• What are the optimal prices and policies by segment?
• What promotions should I run?
Publish
• Publish customer and partner price lists
• Manage standard discount matrix
• Manage global price coordination
Execute
• Execute accurate prices at time of quote or order
• Accrue off-invoice discounts
• Execute promotions
• Enforce policies
Negotiate
• Negotiate on all points of Waterfall
• Model incentives to drive customer behavior
• Provide price recommendations
• Manage approval workflow
Analyze
• How are my price strategies doing?
• Where should I make corrective action?
• What action should I take?
Price Analytics• Cust/Prod Price Analysis• Deal Desk
• Price Performance Measure
• Mining of Social Price Norms
SiebelPrice Planning• Price Optimization
•Market, Social, Forecast/Demand Aware
• Opportunity visualization• Socialize Price Plans• What-If
Price Admin• Price List Admin• Price Publishing• Guideline Mgt
Dynamic Pricer• Price & Promo Execution• Pricing Hub (SOA)• Guideline Enforcement
Deal Mgt• Price Recommendation• Customer History• Deal/Profit Analysis• Social Collaboration• Social Price Analysis
Price Segmentation
• Customer Profiling & Attribute ranking
• Segment Determination• Price Strategies• Price Determination
EBSAdvanced Pricing• Price List Admin• Price Publishing• Guideline Mgt
Advanced Pricing• Price & Promo Execution• Pricing Hub (SOA)• Guideline Enforcement
Benefits of Deal Management…
• Better Decisions at Deal Time
• Improved Control Through Policy Visibility and Enforcement
• Easy-to-use, Rapid Response
• Pricing Strategies Moved Closer to the Field
• Preserve value of products
• Preempt price and margin erosion
Oracle Deal ManagementOffer The Right Price on Every Deal
Analyze Requested Price:• Against Price Score &
Recommendation• To determine market
exposure• Across similar deals
Price & profit Guidance:• Enforce pricing policies• Provide insight to deal
profitability • What-if analysis to improve
deal margin
Customer Price History:• Review price history and
trends• Win/Loss analysis against
price trend • Deal compliance analysis
Benefits of Pricing Analytics…
Use a single consolidated view of profitability and powerful analytics to:
Oracle Pricing AnalyticsActionable Insight from Monitoring Price Effectiveness
Deal Life Cycle and Price Waterfall Analysis
• Compare performance, quarter-to-quarter, region-to-region, segment-to-segment
• Configure alerts and drill-thru to “find the offenders”
• Common concepts and integration with Price Segmentation and Deal Mgmt
• Assess effectiveness of pricing segments and strategies
• Track revenue leakage from Opportunity to Quote to Order
• Track how price and cost are diluted from “top potential value” to realized prices & margins
Close the loop on Pricing Segments & Strategies:
• Visualize price erosion and the resulting true, realized price
• “Close the Loop” on pricing actions by monitoring price and discounting trends
• Be alerted to unexpected changes
• “Find the Offenders” to plug revenue and margin leaks
• Improve insights using advanced statistical analysis to aid decision support
Pricing Variance Alerts, Pricing KPIs:
Benefits of Price Segmentation…
Oracle Price SegmentationIdentify Selling Groups and Publish Floors for Profit Improvement
Identify Pricing Segments with Customer KPIs
• Mine data to understand which transactional attributes most impacted margins or share
• Create pricing strategies aligned with targeted objective
• Automatically determine and refine pricing floors to be enforced in deal management
• Select/Tune algorithms based on data availability; employ “consumable science”
• Profile customers by Buying and “Cost to Serve” characteristics using rich historical data
• Cluster customers into common price behavioral groupings
Determine Pricing Floors aligned with Strategies
Identify Targeted Pricing Strategies
• Identify segments & strategies with the biggest opportunity for improvement
• Create a measurable, Six-Sigma Segmentation™ framework
• Visibility into process eliminates the uncertainty offered in conventional “black-box”
• Segment performance defines success rather than repeated PhD calibration
• Create price floors and assess potential impact
• Publish floors to Deal Management
• Proven statistical and data mining techniques ensure ‘price science’ is operationally effective
Benefits of Price Planning & Optimization
• Optimal prices based on market history, product life cycle and organizational goals
• Strategy alignment between Global & Local Pricing Managers
• Horizontal Price alignment between markets, countries, regions
• Allocate commodity cost increase or competitive responses in or to drive margin and or share.
• Easy-to-use “Consumable Science” focused on solving the business problem, not the math
Oracle Price Planning & Optimization Setting the Optimal Price to maximize your market opportunities
• Customer price sensitivity• Product lifecycle position• Portfolio balance• Create/manage plans according
market breakdown
• Optimize cost allocation or competitive response to gain share and/or margin
• Allocation by Product/Customer hierarchy
• Margin, share “re-capture” tracking
• Tune the optimization calculatorto a single market
• Run & compare pricing simulations suggesting different constraintsand constraint threshold
Objective-based Price Optimization:
Dynamic Market Driver Modeling:
Interactive Optimization “Sand-box”:
Price Management Solution MapA Typical Implementation Approach
ROI
Evolution
What Drives ROI in Each Phase?
ROI ChasmPrice Analytics& Price Segmentation
Deal Management
EnterpriseIntegration
Price Segmentation& Price Optimization
1. Readiness
2. Visibility & Manual
Control
3. Pricing Process
4. Enterprise Alignment
5. Price Simulation
Margin Awareness
Low Hanging Fruit
Process Improvement
OptimalBusiness Outcomes
Step 1
Step 2
Step 3
Oracle OpenWorld 2008Price Management Activities
ID Time Location Session
S298480 Mon 1:00 PM Westin SF – Franciscian IINew Deal Management Solutions for Enhancing Margins and Operational Performance in High Tech Industry
S300122 Mon 4:00 PM Moscone West 2010Oracle Customer Order Management for Complex Product and/or Price Policy Enforcement: Customer Panel Discussion
S300121 Tue 9:00 AM Moscone South 308Oracle Customer Order Management for End-to-End Order Management Process: Quote-to-Cash Customer Case Study
S300126 Tue 5:00 PM Moscone South 310Pricing for Profitability: Oracle's Price Management for Oracle CRM On Demand, Siebel CRM, and Oracle E-Business Suite
S300127 Wed 11:30 AM Moscone West 2010Siebel Deal Management and Oracle Price Management: Accelerated ROI Leveraging Value-Added Pricing
S300123 Wed 5:00 PM Moscone South 310Customer Panel Discussion: Siebel Customer Order Management for Large Deployments
S300124 Thur 1:30 PM Moscone West 2010 Siebel Customer Order Management 8.1
Price Management (Red) & COM Sessions
Price Management Demo SocialWhere: Thirsty Bear Tavern
When: Wed 24, Sept @ 5:00-8:00PM