Last September we were fortunate to have Ingo Hennecke, Global Pricing Manager at Bayer CropScience share his story of how to execute a value strategy in a competitive, global market. Bayer CropScience is a large global organization that operates in over 120 countries with over 23,000 employees and nearly €9.5 billion in revenue (2014). The lessons here are certainly useful for any organization that is serious about value.
Here are questions that webinar participants asked at the end of the presentation and Ingo’s responses:
How long does it take before you see results?
A valid question because everyone wants a quick win and pick the low-hanging fruit. Our business is seasonal — we don’t change prices often so it takes time to see our activities reflect in the business results. After 2 or 3 years we’re starting to harvest what we’ve sown, and we expect good results coming up. I guess in industries with more dynamic pricing, you’d see even faster results.
Have you seen EBITDA growth because of this? Do you track value models versus profit growth?
We’re not tracking it on EBITDA level. We’re using different KPI’s because there are other factors that might influence EBITDA. As an example, we track how many countries and how many new products are covered with value models.
Which products in your portfolio do you use LeveragePoint?
We’re using it for new products, because it is a good exercise to better understand what we can provide to our customers. However we are also using it for mature products in order to give sales people better arguments to defend prices against competitors or channel partner pressure.
How long does it take to develop a value model?
It depends. We can set up an initial one in 2-3 hours. Higher quality and/or more complex ones can take a few days to collect all relevant data and enter it into the tool.
Are users becoming more efficient as they are getting more experienced in value modeling?
Absolutely! Users can copy from other markets or countries a relevant model and adapt it to their market specifics.
What are your experiences on the sales execution of value pricing? How do you get sales people to use value propositions and keep them engaged?
It doesn’t make sense to create value models if we are unable to communicate it to the customer in an adequate way. Sales excellence and sales management is covered by a separate team. We work closely together with them, and they fully understand and support the concept. We include them in our trainings.
How do you bridge the gap between marketing, sales, and pricing teams?
I don’t see an issue here. They talk to each other in our company – this has improved nicely over the years. We involve the sales people in our trainings. We go to sales excellence meetings. If we show them value they have a new story to tell to customers. Everybody wants to earn more money.
Where do you get the customer data to build these models?
In India there are more than 100 million farmers. Other countries have 100-200 thousand customers. We can’t make one value model for every customer. We start with value models based on customer segments. The data is from focus groups, surveys and sales and marketing guys from other countries. We use a generic model, but the sales person can then refine it in a direct conversation with their customer.
Do you have to collect a lot of data before you start?
We’ve already invested a lot of time and money to understand our customers better. We as pricing managers can use this information, like for instance how our customers perceive our benefits, in our value models to calculate value.
Please share your experiences in getting corporate leadership support and buy-in for value pricing program.
The biggest challenge is to create a sense of urgency – to communicate the power we have with value versus the old “cost-plus” method. What helps is to have advocates for value pricing and when you have success stories that show how much additional profit you might make if you use this methodology. Finally, you need skilled pricing managers who are really driving this topic.
Who sets price in your company? How do you manage prices across regions (with cross-regional customers)?
I’ll answer the second question first. Cross-regional customers have dedicated key account managers who take care of that (that’s the easy one).
A lot of people are involved in setting price. Global people set the direction. We have regional people who have certain revenue targets and country people who know their markets best. They all work together, but the final price is set in the country organization.
Where do you start?
Understand how your prices are being set now. Then start some pilot projects, say in a particular country and see how that works out. I would not start with a big roll-out. Get a few people to support you first until you see the results.
One big challenge is that people move to different positions and then you need to find new supporters. You need to refresh the training to support different countries. You’ll need some resources to pay for the tools, trainings and consultants. Of course you need the backing of senior management. To access this webinar with Ingo Hennecke On Demand, click here