1. 1050 N. Lindbergh Boulevard St. Louis, Missouri 63132 PH 314.983.1200 888.279.2792 FX 314.983.1329 WWW.BSWLLC.COM Strategic Pricing Steve Epner Center for Supply Chain Management Saint Louis University Brown Smith Wallace Consulting Group

2. Page 1 Thank You and Disclaimer This program is being sponsored by SPA of Cleveland Ohio for ISA This is an independent program on Strategic Pricing Initiatives and there is no endorsement implied by either BSW or ISA

3. Page 2 Why companies struggle to maximize price? Cost-Plus Mentality Unstructured discounting Complexity Systems issues and data weakness Difficult to measure / evaluate Lack of Training, standards

4. Page 3 Distributors fail to manage pricing A typical industrial distributor Small Customers Getting Lowest Prices

5. Page 4 Core vs. Non-Core CORENon CORE BuyFrequentlyInfrequently Sales $HighLow VisibilityHighLow Incentive to HighLow shop price CompetitorsWill quoteIgnore

6. Page 5 Pricing Opportunities Raise prices for small customers Premium prices for Low-sensitivity SKUs Small Customers Getting Low Prices Low-Sensitivity SKUs Getting Low Prices

7. Page 6 Pricing Opportunities Price to Value, not Cost Profitability vs. Competitiveness Focus Discounts Where It Pays Off Get Premiums on Less-Sensitive Products and Customers Optimal Price: Product / Customer

8. Page 7 Sales Force Issues Culture: Please the customer at any cost Lots of pricing structures: But no pricing architecture Vaguely defined goals: Get more margin

9. Page 8 The pieces of the puzzle Analytics Strategy Process Training

10. Page 9 Learning from the Puzzle Frameworks keep us in the past We learned it is bad to be wrong Gloating is fun, but non productive Just because they look the same, not all puzzles are the same

11. Page 10 Puzzles imitate real life We can spend our time with coasters like everyone else or We can create cubes of competitive advantage What are you working on?

12. Page 11 Battle lines Buyer’s Goal: Buy From The Best Supplier at the Worst Supplier’s Price Buyer’s Tactic: Convince The Best Supplier That They Are No Better Than The Worst Supplier

13. Page 12 Seller’s Solution: Define Your Value Proposition and Competitive Positioning Sales Sets Customer Expectations: “We are a high-value supplier that delivers competitive but rational pricing. Out of desperation, our competitors can quote a low price, but whom do you want to partner with?”

14. Page 13 Price Indexing: Typical Segmentation 6 key vertical market segments 1.Contractor 2.OEM 3.User 4.Industrial 5.Reseller 6.Government

15. Page 14 Price Indexing: Typical Segmentation 5 customer sizes / vertical segment 1.Tiny 2.Small 3.Medium 4.Large 5.Huge

16. Page 15 What’s in it for sales? Customers focus on value not price Remove guesswork from pricing More consistency and fairness Principled variations Effective competitive positioning Healthy company can invest / grow More compensation dollars

17. Page 16 Managers get paid for one thing Moving numbers What are the metrics? Where are we today? Where do we want to be? What are we willing to invest? How will we reward people?

18. Page 17 In theory There is no difference between THEORY and REALITY In reality THERE IS ! ! ! !

19. Page 18 Meet Bill Henricks Chief Operating Officer DoALL Company He implemented Strategic Pricing 1.What have been your results 2.Was it hard to get sales buy in 3.How long before getting results 4.What was worst roadblock

20. Page 19 Time for Questions

21. Page 20 Will All Of This Work? It all depends on how you put the puzzle together