Simon-Kucher Product Tank Pricing Session November 2017

www.simon-kucher.com
By Simon-Kucher & Partners
Pricing Session
Amsterdam, 23 November 2017
Hong-May Cheng
Ruben de Lange
Amsterdam office
Barbara Strozzilaan 380
1083 HN Amsterdam
The Netherlands
Tel. +31 20 75312 53
ruben.delange@simon-kucher.com

Simon-Kucher & Partners | Producttank | Pricing Session | November 207
Program overview
Part 1:
Essence of Pricing Power
Part 2:
Mastering the Recurring Revenue Trade-Off
Hong-May Cheng
Partner
Tel: +31 20 753 1253
Mob: +31 65 4220406
hong-may.cheng
@simon-kucher.com
Ruben de Lange
Manager
Tel: +31 20 753 1253
Mob: +31 655 419 891
ruben.delange
@simon-kucher.com
2

Simon-Kucher
& Partners
on a par with
Boston Consulting
Group
McKinsey &
Company
Briefly introducing Simon-Kucher & Partners:
Market leader in marketing, sales and pricing
Growth strategies
Digital monetization
Value proposition (re)design
Pricing excellence
Customer journey redesign
Omni-channel optimization
End-to-end transformation for
customer excellence
…
Global presence
Best consultancy in marketing and sales
> 1.000 TopLine Power® projects per year
World leader in giving
advice to companies on how
to price their products
Pricing strategy
specialists
The world’s leading
pricing consultancy
World market leader on
pricing strategies
BusinessWeek The Economist
Het Financieele DagbladThe Wall Street Journal
World leader in pricing
34 offices worldwide, > 1,100 employees
Amsterdam
Atlanta
Barcelona
Beijing
Bonn
Boston
Brussels
Cologne
Copenhagen
Dubai
Frankfurt
Geneva
Hamburg
Hong Kong
Istanbul
London
Luxembourg
Madrid
Milan
Mountain View
Munich
New York
Paris
San Francisco
Santiago de Chile
São Paulo
Singapore
Stockholm
Sydney
Tokyo
Toronto
Vienna
Warsaw
Zurich
Source: Forbes, Survey of best management
consulting firms in the US, October 2016
Marketing, brand, pricing
Source: Capital, survey of the best
consultancies in France, October 2016
Marketing, sales, pricing
Simon-Kucher
& Partners
on a par with
Boston Consulting
Group
McKinsey &
Company
1
...
Source: brand eins Thema special edition:
Consulting – industry report from brand eins
Wissen and Statista, online survey, May 2014,
2015, 2016, 2017
Marketing, sales, pricing
Simon-Kucher
& Partners
Boston Consulting
Group
McKinsey &
Company
1
2
3
Capital Forbesbrand eins Thema
3

Source: Simon-Kucher & Partners - Global Pricing & Sales Survey 2017 amongst 1,925 companies
Insights from our recent Global Sales & Pricing Study:
Digitalization is top of mind, but impact is missing
What is the focus of your
digitalization initiatives?
75%
Other
4%
Increase
topline &
reduce cost
54%Increase
topline
21%
Reduce
cost
21%
of initiatives is focused on
increasing topline
Acknowledge that their pricing strategy is not optimal and has uncovered potential87%
Have you invested in digitalization
initiatives in the past three years?
have invested in
digitalization initiatives
81%
No
19%
Yes
81%
Have your initiatives had a visible
impact on your top line?
of these initiatives had no
visible top-line impact77%
No
77%
Yes
23%
4

Source: Simon-Kucher & Partners
Pricing Power has become a top management priority
Pricing Power is a company's ability to get the
price it deserves for the value it delivers
5

Pricing Power requires action on three core disciplines
Typical deficiencies and leakages
Prices which are either
too high, or too low
Value not defended,
selling on price
Solutions and offerings that
do not fit customer needs
Strategy &
marketing
What the customer
is willing to pay…
…and what we
actually get
Pricing &
margin mgt
Sales
effectiveness
Simon-Kucher & Partners | Producttank | Pricing Session | November 207 6

Pricing Power requires action on three core disciplines
Growth & digital strategies
Brand & market positioning
Customer segmentation
Portfolio optimization
Omni-channel management
…
Revenue/price model innovation
International pricing
Value-based pricing & discounting
Pricing roles & process
Service monetization
…
Sales structure & processes
Lead generation & opportunity mgt.
Key account mgt. & planning
Value selling competence
Sales systems, incentives & tools
…
Selected project examples
Commercial enablers: Clear governance, processes, tooling and KPIs
Strategy & marketing Pricing & margin mgt Sales effectiveness
7

Summary of the discussion: create value, price value
and sell value
Summary
Pricing is the most effective
profit lever.
However, companies struggle
to obtain ‘pricing power’1.
Three key steps to obtain
pricing power:
− Create value trough
segmentation
− Price value and monetize
willingness to pay
− Sell value and boost top
line power
8

Program overview
Part 1:
Essence of Pricing Power
Part 2:
Mastering the Recurring Revenue Trade-Off
Hong-May Cheng
Partner
Tel: +31 20 753 1253
Mob: +31 65 4220406
hong-may.cheng
@simon-kucher.com
Ruben de Lange
Manager
Tel: +31 20 753 1253
Mob: +31 655 419 891
ruben.delange
@simon-kucher.com
9

Source: Zuora.com
The subscription economy is booming
9x fasterrevenue growth for
companies adopting
subscription models.
80%of customers are
demanding new
consumption models.
$420b
spent on subscriptions in
2015 in the US vs $215b in
2000.
80%
of German companies have dealt
with the issue of subscription
business models.
IDG Research services
The Economist
Credit Suisse
CEO Zuora
10

How to master the ‘recurring revenue trade-off’;
bottom line is that you need to differentiate
RetainMonetize
Acquire
The
trade-off
Low
commitment
High
commitment
More value
for less
More value
for more
Increase prices Hold prices
Packaging Price
model
Price level
1 2
3
Multi-tier packaging
to drive acquisition
and monetization
1
Sophisticated price
models to drive
acquisition and
retention
2
Differentiated price
levels to drive
monetization and
retention
3
11

Summary of the discussion: differentiate packaging,
price model and price level
Summary
The subscription economy is
booming
To win in the subscrption
economy you have to master
the ‘recurring revenue trade-
off’
Differentiation is the key to
balance the trade-off:
− Use a multi-tier packaging
approach with clear upsell
paths
− Apply sophisticated price
models that scale with the
customer
− Professionalize your pricing
and differentiate price
increases
12

Insight:
 Entry package too
valuable
Solution
Reduced value of the
entry package to better
align with existing price
point
Added new features
and shifted existing
features to premium
tiers to justify higher
prices
Source: Simon-Kucher & Partners project database
If done correctly, mastering the trade-off with the right
packaging and pricing can deliver substantial results
Before
re-design
After
re-design
Tier 1 (55%) -
$39
Tier 1 (24%) -
$39
Tier 2 (32%) -
$79
Tier 2 (48%) -
$99
Tier 3 (12%) -
$149
Tier 3 (21%) -
$199
Tier 4 (7%) -
$349
May August
New tier
ARPU: $66 ARPU: $124
Price
increase
Very valuable
entry package
Project example
Price
increase
13

www.simon-kucher.com
Americas
Atlanta, Boston, Mountain View,
New York, San Francisco,
Santiago de Chile, São Paulo,
Toronto
Europe/Middle East
Amsterdam, Barcelona, Bonn,
Brussels, Cologne, Copenhagen,
Dubai, Frankfurt, Geneva,
Hamburg, Istanbul, London,
Luxembourg, Madrid, Milan,
Munich, Paris, Stockholm, Vienna,
Warsaw, Zurich
Asia/Pacific
Beijing, Hong Kong, Singapore,
Sydney, Tokyo
Amsterdam office
Barbara Strozzilaan 380
1083 HN Amsterdam
The Netherlands
Tel. +31 20 75312 53
Thank you for your attendance

Simon-Kucher Product Tank Pricing Session November 2017

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