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Implementing Pricing Best

Practices in the Context of a

Deregulating Market

A joint presentation by:Ian Thompson, Client Manager, KSS

Silke Lehmann, Subject Matter Expert - Retail Pricing, Accenture

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Price is a Powerful Lever

Lowest-cost lever to pull to meet performance goals Highly tactical Requires

Appropriate strategy Efficient, responsive process & organisation Enabling technology

Critical element in developing & maintaining brand image

3%

4%

7%

11%

0% 2% 4% 6% 8% 10% 12%

Percent Profit Improvement

Fixed Cost

Sales Volume

Variable Cost

Price

Impact of a 1% improvement…….on profit

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Market Evolution – emerging Micro-Markets

Channels of trade Pricing less cost-driven, more competitor-oriented Growing consumer awareness of price Networks develop (locations, facilities) Business models change Need for pricing strategy development Non-traditional competition Timescales shorten (stable to rapid change) Predictability diminishes

RegulatedMarkets

Emerging

1/month

1/week 2/week

Volatile Highly

competitive Stable

1/dayPricing Frequency

1/month 1/week 1/day 2/day+2/week

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Pricing Challenges

Key capabilities for operation in a dynamic

market: Visibility of market dynamics and competitor activity

Greater responsiveness based on real time data

Up-to-date information to manage network performance

Price strategies that address a changing market

Ability to maintain consistent brand/price image

Ability to remain competitive – defend volumes, retain

customers, drive profit

Ability to capture local market opportunities

A transparent process to justify actions

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Critical Areas of Pricing Practice

Understanding and analysing the market and

customers

Selecting tactics to support chosen strategy

Executing tactics accurately and consistently

Monitoring performance

Challenging strategy to identify new opportunities

Responding quickly and efficiently to market changes

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Requirements

The Solution

Opportunities• Central repository of price information

• Culture of pricing

• Management reporting and control

• Consistent pricing rules and workflow

• Forecasting & analysis

• Demand-based pricing

• Price optimisation

• Pricing platform

Pricing Strategy

Pricing System

Pricing Resource& Education

Pricing Process

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“As-is” & “To-be” Processes

Traditional pricing Limited access to market

data High degree of paper-

based processes Significant manual

interaction required Limited use of pricing

experience for broader network performance management

Setting up pricing the right way enables first mover advantages in deregulating markets

Enhanced pricing Market intelligence (data

capture & availability) Managed according to

multiple performance goals Highly automated (price

decision and implementation)

Ability of sites to accept & implement changes

Site compliance monitoring Gaining and applying

market insights

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Resources

Market conditionsCompetitive positionNetwork sizeBusiness Model

Number of price changes

Sophistication of pricingPricing engineSkills & experience

Degree of automationData quality

Duration of price transaction

Required manual interaction

Number of resources required

Key triggers of organizational size

Key challenges setting up a pricing organisation:

Skill requirements Sizing Pricing culture Team organisation & Decision authority Field sales education

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Technology

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PriceNet Solution

PriceManagementSystem

Data management

Price management

Reporting &Analytics

Modelling &Optimisation

• Central repository• Manage data• Validate data• Define micro markets

• Price generation• Price/management rules• Process automation• Performance monitoring

• Site sensitivities• Quantify/rank competition• Optimise prices• Forecast volume/profit• Simulate price impact

• Schedule distribution • Exception reporting• Routine reports• Ad hoc analysis

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Solution Attributes

Highly configurable Market, tactics & strategy will evolve & change

Identify & respond to variety of price triggers Scalable Flexible

provide range of integrated pricing engines variety of reporting/analysis options

Organisation-wide platform for consistency Distributed access for field/remote workers

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Bringing Pricing Capability into Reality

Projectreadiness

Scoping &Definition

Initial System Implementatio

n

Step 2

Extend Pricing Capabilities

Step 1

Phased System Rollout

Data preparation•Network data•Competitor data•Dynamic data

Define and qualify•Brand pricing strategy•Brand objectives

Dynamic data collection

TrainingField awareness

Define price & management rules

Integration requirements

Process definition

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The Benefits

Consistent implementationof pricing policy

• Protect brand image

• Greater knowledge & visibility

• Price verification

Resource andprocess efficiency

• Automation, price by exception

• Reduce operational costs

• Time for higher value decisions

Increase yourcompetitiveness

• Speed of response

• Real time, event driven

• Optimal response to competitors

Increase profitabilityfrom pricing policy

• Increase gross margin

• Immediate and sustainable

• Identification of true competition

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KSS and Accenture

Incorporated in 1993 Strong revenue growth,

profitable operations Experience across USA,

UK/Europe and Far East / Australia

Solutions for fuels & merchandise Offices in UK & USA Focus on pricing 50% of staff in R&D Advisory board for solutions

development

FY 2003 revenues: US$ 11.82 billion

~ 95,000 professionals Offices in 48 countries Serve 87 of the Fortune Global

100 Strong track record in the oil

industry Extensive experience helping

clients to manage challenges in deregulating markets

Resources

Strategy

Technology

ProcessKSS Accenture

Complete Pricing Solution

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Conclusion

Markets are changing

• Competitive pressures

• Market dynamics

• Readiness

Market Position

• Defend volumes

• Management and control

• Visibility & understanding

• Transparency

A call to action: Price is a powerful lever Establish a proven pricing capability now Consider process, strategy & enabling technology as one Engage KSS & Accenture to deliver complete solution

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Contact Details

Ian Thompson, Client ManagerKSS Ltd7th Floor St James’ Buildings79 Oxford StreetManchester, M1 6SSUK

Tel. +44 161 228 0040info@kssg.comhttp://www.kssg.com

Sandeep BiswasAccenture India17th Floor, Express TowersNariman PointMumbai 400 021

Tel. +91 22 5630 4128sandeep.biswas@accenture.comhttp://www.accenture.com