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Leveraging Big Data of Pricing Can Help Sales Boost
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Orange County Convention CenterOrlando, Florida | June 3-5, 2014
Leveraging the Big Data of pricing can help Salesboost margins by as much as 3% with SAP Price andMargin Management by Vendavo and SAP HANA
Jack Nehmer, SAPChase Powell, Vendavo
An understanding of price management and thesubstantial value it can bring to your organization Insight into how SAP HANA is being leveraged for
Pricing Analytics as part of a holistic solution An overview of how SAP Price and Margin
Management can fit into your solution landscape
LEARNING POINTS
Some of the key challenges facing sales organizations
Growing earnings in ancompetitive market Across-the-board price increases
no longer work Unclear where price increases
will stick Unsure where volume is at risk
without price reduction
Sales teams inadequatelyarmed for negotiations Growing sophistication of
procurement departments Insufficient deal-specific
negotiation guidance to sales No visibility to margin impact of
non-price gives in negotiations
No shared version ofprofitability across teams High level reporting obscures
pockets of opportunity Incomplete profitability data,
missing off-invoice items Silos of information, no
enterprise view of deal margins
Unprecedented commodity &energy cost volatility
Increasingly aggressive andnimble competitors
Price administrationinfrastructure cant keep up
Increasing cost volatility, morefrequent market price changes
What is Price Management?
PRICE MANAGEMENT &OPTIMIZATION is
the ability to understand theIMPACT OF PRICING on revenue &margin and MANAGE ITSTRATEGICALLY over time toensure fair prices for the valueyour company creates.
A systematic approach to price management is a best practice leading companiesuse to turn pricing from an administrative cost center to a strategic profit center
Pricing as a Profit Lever
Profit Levers
7%
3%
2%
10%
Fixed Costs
Volume
Variable Cost
Realized Price
Source: McKinsey
A 1% improvement in each lever increasesa companys operating profits by . . .
Which of these levers would you want to pull?
10%
Improvement Percentage
List Price
You start outwith this.
Market Price
Regional, country, channel, pricecontrol and segment adjustments
Invoice Price
Distributor discounts, end-customer discounts, etc.
Pocket Price
Cash discount,volume rebate, etc.
Pocket Margin
COGS,Cost to serve
You end up with this.
Exposing one version of pricing truth through a waterfall
Hidden Cost-to-Serve expenses that can cost you yourprofitability, without your knowledge
Case Study: Fortune 100CPG Company
Findings: ~28% oftransactions fell belowbreak-even
ProfitableTransactions
UnprofitableTransactions
Invoiced Price
Margin
%
Source: Vendavo Sample Case Study
Pricing Variability Often a sign that there is room forimprovement in pricing practices
Money-losing business
Unjustifiedvariability
The ROI from pricing projects is so significant, it canfund adjacent IT investments
0.0%
1.0%
2.0%
3.0%
4.0%
Ret
urn
onS
ales
Source: Information based oncustomer experiencesInitial Typical Transformational
Transformational
Typical
Initial
Over 3% of return onsales and as much as30% more profit
Average 1-3% returnon sales and ~10%additional profit
Average 0.5 -1.5%return on sales
5.0%A 3% return on sales equatesto $30M added annual profitper $1B in revenue
Consistent customer results of 10 30+% additional profit yearly.
In order to solve the price management challenge,a few key pieces are needed:
PricingInsight onBig Data
Price andPolicy
Management
Pricing Guidanceat the
Point of Sale
For SAP Customers we recommend SAP Price and MarginManagement as a best practice to improve profitable pricing
Pricing Analytics*
Price Management
Deal Management
*Pricing Analytics available powered by SAP HANA
SAP Priceand Margin
Managementby Vendavo
SAP Business Suite
Pricing Analyticsin SAP Price and Margin Management
Helps you toquickly unlockprofit opportunitiesin your businessby pinpointing the rootcause of unprofitablepricing practices
z Identify business problem areasand tell tale trends
zCompare between differentbusiness segments
zDiagnose low marginsymptoms and find root cause
z Perform data analysis from anystage in deal lifecycle
z Save, export, and share analysis
Pricing Analyticsprovides a broad array of sophisticated analytics
Identify
Diagnose
Monitor
Where does HANA fit in?
Social
In-memory
Cloud
Mobile
Real-TimeEmpowerment
Consumerizationof IT
Big DataSensing andResponding
SentimentIntelligence
Predictive Analytics
Personalized Insights
New Signals
Real-TimeAnalysis
Pricing Analytics on SAP HANA
Real-time Analytics9 Your pricing waterfall brought to life
with immediate insights9 Improved agility on big transactional
data sets9 Evaluate more possibilities in far less
time
Performance & Scalability9 High performance through parallel processing9 Simplified integration/ETL on one platform9 New possibilities with HANA platform
SAP HANA
https://vimeo.com/89146749
Quickly implement pricingstrategy with tailored tools
Leverage pre-built pricingcontrol processes
Perform historical andforward looking impactanalytics
Price Managementin SAP Price and Margin Management
$
zComprehensive insight-richpricing console for managingpricing strategy
z Tailorable workbooks andworksheets for setting andmanaging pricing policies
zConvenient hierarchical-basedmass maintenance capabilitiesfor simplicity
z Efficiently plan and generateprice lists across products,regions, channels
zWhat-if analysis supportenables full impact analysis ofproposed changes
Price Managementin SAP Price and Margin Management
Empower sales reps tonegotiate confidently
Understand your pricingpower
Accelerate negotiationcycles
Deal Managementin SAP Price and Margin Management
Sales Rep
Sales Manager
Head of Sales
Deal Managementin SAP Price and Margin Management
z Line item and deal scores with in-line analysis drive improved margins
z Specialized deal approval workflowprovides full upstream transparencyand accelerates deals
zOptimized pricing approvalthresholds streamline the sales cycle
zDeal collaboration features like dealsharing, approver changes, andnotifications ensure deal velocity
z Integration to SAP CRM, Cloud forCustomer, and other CRM offerings
Deal Guidance and Analytics
Specialized Deal ApprovalProcessing
Overview of SAP Price and Margin Management inthe SAP Business Suite
Pricing Strategy
Pricing Execution
Lead-to-Cash in the SAP Business Suite
Quote Order Fulfill
SAP Price and Margin Management
Lead Opportunity ContractContractContract InvoiceInvoiceInvoice
SAP CRM/Cloud for Customer SAP ERP SD
DealManagement
PriceManagement Pricing Analytics*
*Now on SAP HANA!
SAP BIPricing Data Master Data
PricingGuidance Transactional
History
How it extends your Quote-to-Cash solution
SAP CRM or C4CAccountsContacts
Opportunities
Quotes &Orders
SAP Price & MarginManagement SAP ERP
Orders &Contracts
Financials
PricingAnalytics
SegmentationPrice Setting
&Optimization
PriceAdministration
DealExecution
SAP Analytics
HistoricalData
EnterpriseData Mngt
TransactionData and DealHistory
Pricing
MasterData
QuoteDetails
Deal Guidance.
Integration Framework
ProfitabilityData
Driving better decision support at the point of sale withCRM integration
SAP CRM Sales
SAP PMM Deal Quoting / VSN
3rd Party orLegacy CRM
SAP Cloud for Sales
Pricing Guidance
Deal Approval
Where does SAP Price and Margin Management fitin the SAP Solution Portfolio?
LEV
EL
ofE
NG
AG
EM
EN
Tw
ith
SA
P
LEV
EL
ofIN
TE
GR
AT
ION
wit
hS
AP
LEV
EL
ofS
UP
PO
RT
from
SA
P Exclusive
100s
1000s
Sold and Supported by SAPExclusive RelationshipExecutive SponsorshipCollaborative Development,Integration, and Go-To-Market
Sold and Supported by PartnerOpen ProgramCertification to SAP Interfaces
Endorsed by SAPSold by Partner, Mixed SupportModelsCollaborative integration
EndorsedBusinessSolutions
Open Ecosystem(Partner Program
Certifications)
SolutionExtensions
Pricing Analytics Coinnovation in Action
InitialBusiness
Case
Prototype
Design
Build
Test
Release toMarket
Collaborative businesscase product & senior
management
Early training,collaborative
development, hardwaresupport
Training and ongoingmentorship, collaborative
design assigned SAPHANA experts
SAP HANA DevelopmentExperts, assigned SAPHANA performance
architect
Test and sizingenvironment, PremiumQualification validation
Collaborative Field &Partner Enablement, Co-Marketing, SAP Support
Model
Why do IT organizations like SAP Price & MarginManagement?
One of the quickest returns I had witnessed inmy career CIO & SVP, Manufacturing
4 straight quarters of reduced price erosion CFO, High Tech
Return on Sales averaging 3.9%- Industrial Products
SAP really picked the right partner with Vendavo.They really know B2B pricing better than anyone.
- Director of IT, Chemical
Low risk
High ROI
Sustainedvalue
P&L owners need to enable processes and generateinsights that help them: Set optimal prices to increase margins and enable profitable
revenue growth Prevent low margin deals while still enabling fast response to
customer price requests Identify less profitable areas of the business where should
corrective actions be focused? Maintain profitability in the face of volatile costs and
increasing competitive pressure These key areas can be addressed by using SAP PMM to
leverage and enhance existing SAP investment
Summary SAP Price and Margin Management
Pricing Management projects offer significant ROIto companies, improving profitability by 10-30% SAPs Price and Margin Management by Vendavo is
a recommended best practice approach forrealizing the benefits of Price Management The Pricing Analytics module has now been
improved to work with SAP HANA, offering greaterspeed and agility for big transactional data sets The value delivered by a pricing management
project is so substantial that it can be used to fundadjacent IT initiatives
KEY LEARNINGS
FOLLOW US
THANK YOU
THANK YOU FOR PARTICIPATING
Please provide feedback on this session by completinga short survey via the event mobile application.
SESSION CODE: 1202
For ongoing education on this area of focus,visit www.ASUG.com