A CPM® project with a margin impact of 1M Euro!

Posted on 07 Mar 2017 by Mia Pappijn

A CPM® project with a margin impact of 1M Euro!

Out of this pilot project, we identified other strategic projects which we kicked off by now.

Q – How was the situation – on pricing issues – at your company before you joined the Certified Pricing Manager Program? What were the challenges?  

One of the issues we were facing was that for EMEA we lost money with every MR monitor sold — thus a value based pricing approach was absolutely necessary.

Q – What triggered you to join the CPM programme?  

As described earlier we needed to develop a strategy how we could implement  the value based pricing concept much stronger in our company. We alsoc appreciated  the guidance received during our project which led to the certification. Secondly, it was important to us to also get some certification / accreditation outside of our company.

Q – How did the CPM programme help you to develop the pricing maturity in your organisation? 

Value based pricing was a topic where we needed to make progress, otherwise we would end up in a pricing war with Asian vendors. So by nowc we identified soem strategic project where we can apply these concepts and furthermore develop value calculators in order to equip sales with a small tool so that they can go confidently into conversations and negotiations, truly convincing the customers that our products are the best choice for them.

Q – Give a short description of the project you delivered for the certification project. What was the challenge and what were the concrete results in €. What was the impact on the profit margin? Will the training result in other concrete projects on pricing? 

Together with product marketing, field marketing and sales support, we did a mapping of our features, determined which of them are unique and also mapping them against our main competitors. From there we derived the econimc benefits which are measurable. Out of this two fairly simple value calculators were developed which we tested with some sales managers. Out of this discussion we persued and focussed only on one of them and continued to further develop that calculator.

The margin Impact was 1 M Euro anually.

Out of this pilot project, we identified other strategic projects which we kicked off by now.

Q – How do you feel now after completing this programme? What has changed, like in more visibility, more top level support, better stakeholder relationships, more involvement in innovation, clear KPI’s,… 

We now have a framework which we can follow along. Out of our CPM project other projects were identified. Our top managmeent is now well aware that this is one of our (pricing team’s) focus point in the near future.

Q – What are the success criteria of this successful value calculator that is actually and actively being used by sales?

  • Simple – It should be easy for the sales team to use and for the customers to follow. The model has to be so simple that if your sales rep hands it off to a client, they can sit with their internal senior team and walk through the model.
  • Credible – It should use the customer’s own data, and where data isn’t available, suggest value based on similar client scenarios. Remember the earlier example I gave of the sales rep, data credibility is very important. It makes your sales team trust worthy. Instead of using a national average, it is always better to use the customer’s own data.
  • Flexible  – The model should allow for a reasonable amount of tweaking, based on information relative to customer needs. If the client operates on a different cost base than the rest of its peers, the model should be flexible enough to incorporate that information.
  • Involve partners  –  …such as dealers as they are early users which can be used for validation
  • Validate with customers  –  In order to ensure that customers do accept our unique features and are willing to pay a premium for it. Thus a customer survey about our value calculator is extremely helpful.

Listen to Tobias Happel talking about his successful CPM project.