professionals highlight data accuracy, availability and reliability as key to
optimising price and profit performance
Model N and European Pricing Platform survey reveals 30% of high-tech companies are still using manual pricing mechanisms
|The venue for the recent European Pricing Platform’s Pricing and
Profit Optimisation Forum in partnership with Model N.
Chertsey, UK and Brussels, Belgium, 15 March 2013: Only 50% of European high tech companies are successfully integrating and using data in managing pricing and profitability, with 30% still using spread sheets, making it almost impossible to implement effective reporting as part of a process of continuous improvement.
Yet the majority identified the importance of data accuracy, availability and reliability as the foundation of a sustainable corporate price and profit optimisation strategy. These were among the main findings of a survey of leading high-tech professionals from 14 countries across Europe and South America attending the recent High Tech Forum in Cologne, sponsored by Model N and the European Pricing Platform (EPP).
“Companies in the semi-conductor industry face a challenging year, with analyst IHS predicting a volume decline of 2.3% in 2013,” says Niels Skov, managing director, Europe, Model N. “This year’s Forum, which saw a 60% increase in attendance over last year, reflected how firms are currently addressing this, by taking a long, hard look at issues around operational effectiveness, technologies, skills and strategy in optimising price and profit performance.”
The Forum identified four key themes in managing better financial outcomes:
•Pricing and the CEO: Effective pricing and profit management needs to be on the boardroom agenda. The CEO needs to engage directly in pricing strategies and how these will deliver broader business goals. Board-level sponsorship and support is essential to transform pricing from a series of isolated projects to a company-wide ‘price and profit’ culture and mind-set. The survey identified that a structured pricing organisation and business-wide sales and process disciplines were central to competent pricing and profit management;
•Data quality and reliability: Data is a core component in developing pricing and related processes. Ensuring quality data from all internal and external channels is also seen as critical in supporting strategic decision-making, detailed analytics and ensuring accurate rebates, for example. However, as the survey found, half of the firms surveyed believed they were not currently making the most of their data in achieving this goal;
•Strategic customer alignment: Where manufacturers see individual customers as strategic partners, it is important that these customers see them in a similarly strategic light. Where the customer’s behaviour in areas such as price negotiations indicates a potential misalignment, this is likely to have cost implications for the vendor;
•Channel distribution: Attendees identified a widening gap between channel partners who add value that customers want and those who simply ship product. Almost three-quarters (73%) of those surveyed agreed that this evolution was happening, but already had plans in place to identify this change in each case, in order to make the right pricing decisions and retain effective control of the relationship.
“These findings strongly echo our own experience in working with customers,” confirms Skov. “Pricing cannot be regarded as a single isolated activity, as it impacts directly on other connected processes, including the management of contracts, rebates, margins and their effect on market share and market capitalisation.
“Pricing is one of the most influential elements of profitability. As a result, the monitoring of pricing and its execution is key, yet our survey highlighted that three-quarters of participants have yet to define the KPIs to help them identify revenue leakage from list price to invoice price and take steps to correct the situation. Improving data quality and end-to-end automation are the two main contributors to better revenue management performance.”
EPP president Pol Veraerde adds: “It is very apparent that senior management in European high-tech companies are increasingly focused on further developing pricing and profit optimisation skills in their organisations, something we have seen at first hand at this event.
“As a priority, they are looking to get better-organised and move along the pricing and profit optimisation maturity journey from ‘good’ to ‘excellent’. To achieve this, they are looking for strong knowledge partners and the opportunity to see what their peers are doing, which is the very purpose of the EPP.”
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Tel.: +44 (0)1932 895090
European Pricing platform