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In many industries the path to the market involves other companies who provide services as an extension of your company’s sales offering. In some cases these companies are true partners who reflect the same values and services that you expect from yourself. In other cases they may be actual customers who view you as only a supplier of products or services to fill out their shelves or portfolio. How is your relationship with the channel defined? Are you the influencer in the relationship or does the channel drive the ultimate sales relationship with the downstream market? Effective channel management requires a fundamental understanding of these relationships by both parties, and appropriate actions must be taken to drive the performance of channel sales.
Determining the relationship with the channel starts with an objective analysis of how products and services flow to the market and where the influence lies. Slide 3 illustrates the Market Edge approach to analyzing channels by considering how channels are selected, how they perform and the policies required to track performance.
Through a combination of market research and our proprietary analysis tools we can graphically illustrate the size and influence of potential channel partners. Once channel relationships are agreed, leading and lagging indicators should be tracked to measure the performance and corresponding actions (e.g. offers, incentives, etc.) to be taken to drive desired performance. Having a clear understanding and agreement of the influence, values and performance expectations of each partner in the relationship can lead to improved sales and performance of the channel.
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Are customers taking the Pricing Lever from your control?
The day you understand the value you create is the day you stop giving discounts.
Does your organization have the required commercial capabilities to raise prices?
The strengthening global economy is driving the pace of price increases in the specialty chemicals and materials sector (see attached timeline of selected announcements).
However, not all businesses have the required commercial capabilities to raise and hold prices effectively.
Our experience with a range of global, category leading B2B companies has shown the following specific capabilities are critical to raising prices at the right time and retaining increased margins.
- Timing – knowing when to raise prices and leading increases from a position of strength
- Modeling – using dynamic value maps and scenario planning to model competitive response and associated impact on volume and margins
- Commercial discipline – implementing price increases clearly while minimizing exceptions and backsliding
- Price performance management – rigorous post increase analysis to ensure margin, volume and working capital effects are delivering the targeted increase in cash flow
Market vs. Category
by Ravat Bhutani, Sr. Consultant
One of the most common questions or misunderstandings we see in B2B companies is “What is the difference between a Market Segment and a Category Segment?”
In simple terms, they are two sides of the same coin. – Market Segment identifies a group of customers with similar buying criteria, needs, behaviors and attitudes. – Category Segment identifies the competitive product types a company manufactures, markets, and sells in their targeted Market Segments.
Here is a B2B example: ZipZip (totally made up) is a company that manufactures and sell zippers to clothing and luggage OEMs. Our first question when engaging a client would be, “What markets are you in?” A product focussed response would be, “we are in the zipper market.” Well, not exactly. Use the following construct to be more market focussed: is in the market competing to sell . In the case above: ZipZip is in the Clothing and Luggage Markets competing to sell Zippers.
That was simple, but some may ask why do we need this specific Marketing language to describe something that feels so intuitive? The answer is growth! Understanding that the Market is the customers’ competitive space makes all the difference in business investment strategies. Marketing leaders that recognize the difference between Market Segments and Category Segments know they have two large LEVERS to deploy in their growth strategy. Let’s use our made-up ZipZip example to explain the levers:
LEVER 1 – Prioritizing certain Market Segments over others. ZipZip has a choice to invest more marketing and sales into the clothing or luggage market. These markets include a wide range of segments, including women’s high fashion OEMs, athletic designers, waterproof luggage, e-luggage and many more. All of these market segments have varying end consumer populations, price points, and are growing/contracting at different rates. Picking the right target market segments is a critical decision for the calculating marketing leader.
LEVER 2 – Prioritizing the Category Segments to win the targeted marketing segments. Competing with zippers to meet the needs of the OEMs can be very profitable. Derivative zippers: sizes, teeth, pulls, and integrations, deliver increased value, differentiation and can grow the business. However, what happens when growth in zipper sales slows? Stepping into adjacent categories, e.g., buttons, velcro, laces, boas, or magnets (for those more avantgarde), can help sustain revenue growth with existing clients. Customer relationships, customer needs/gaps analyses, and knowledge of other products currently purchased by the market segment is the key to utilizing this lever.
Be a Calculating Marketer and push your organization even farther with these two questions: – What Market Segments are we targeting? – What Category Segments are we focussed on to serve those target markets?
WHEN: April 10 – 11 2018
WHERE: Sourcing Locations
Pricing Excellence is a valuable 2-Day program for business leaders, marketing managers, and pricing managers with responsibilities for setting and optimizing the value received for product and services.
This program integrates team-based learning and the application of program concepts to real business challenges. Market Edge complements the learning with instructor-led discussions and coaching.
Pricing Excellence is a proven, pragmatic approach that enables teams to integrate market and customer insight into product pricing.
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We have completed our Market Edge, EdgeSim™ Fall Corporate Challenge! Results displayed below.
EdgeSim™ Corporate Challenge kicked off on Monday, October 2. Teams received their business simulation packets on the 2nd and returned their strategic plans by 3pm for each step of the process over a 2 week span. Did you miss your chance to sign up? Inquire with Maggie email@example.com for registration information regarding our Winter EdgeSim™ Corporate Challenge or any of our other strategic, business, or other programs.
6 client companies competed in a global market to introduce an innovative new offer over 4 years. In an initial planning round, company teams created a strategic business plan that determined capital investment and financing. In subsequent rounds (years), teams made decisions regarding: segmentation and targeting; R&D investment and priorities; marketing spend and tactics; and segment specific pricing.
The multifunctional corporate teams who acted as the executive leadership group for their respective companies.
FinWizards: A global, financial investment strategy firm
FilterFans: A category leading B2B industrial equipment supplier
MedicalConcepts: An innovative, world wide producer of medical implants and devices
SealtheDeal: A globally operating technology focused process sealing company
FeedAll: Agricultural category leader in modern farming technology
BlastingCaps: Specialty chemical producer for critical performance applications
The Strategic Planning Round
Teams met to develop their strategic plans for entering the global market. Their critical decisions were where to build their plant as well as the manufacturing capacity. While all teams began with the same capital investment funding…
Filter Fans and Seal the Deal made the largest capital investment in production capacity
Blasting Caps tested Western Europe with a smaller production capacity
Based on competitive investments, global capacity = 8.5K units: 46% in North America, 25% Asia Pacific, 23% Western Europe, and 6% rest of world
EdgeSim™ Challenge Results: YR 1
Blasting Caps sells 90% of their plant capacity while achieving 2nd highest unit sales. Medical Concepts sold 1,855 units but operated at 53% of plant capacity. What will they plan for year 2?
Global average pricing analysis show the lowest pricing in North America at $11,200. Asia Pacific pricing was similar while Western Europe and Rest of World were respectively 12% and 18% higher.
EdgeSim™ Challenge Results: YR 2
As global sales triple to 24.5K units, FinWizards break out with 10x growth
Global markets are shifting with the rest of world growing to over 12%
Average pricing has dropped by 15%
EdgeSim™ Challenge Results: YR 3
Global Markets triple with FilterFans and SealtheDeal capitalizing via cumulative advertising investment. Global price drop of 30% – are companies forgoing profit for market share.
EdgeSim™ Challenge Results: YR 4
Global market matures and sales volume declines by 23%
SealtheDeal used a low price strategy to become the global sales leader
AND THE WINNER IS…
FeedAll WINS with $66.7M accumulated
Global Marketing Strategy showed regional focus in Year 1 followed by a balanced approach in subsequent years, and supported by well planned marketing and operations investments.
FinWizards in close 2nd with $64.3M
MedicalConcepts had to close their doors with a -$4M cash accumulation