Mark Burton is co-founder of Holden Advisors and a strategic marketing expert for more than 16 years. As a formulator of the firm’s project methodologies and analytical processes, Mark is the driving force in creating offering and pricing strategies for firms in industries such as IT outsourcing, semiconductor, financial and business services, and enterprise software and maintenance. About The AIPMM The Association of International Product Marketing and Management (AIPMM), founded in 1998, promotes worldwide excellence in product management education and provides training, education, certification and professional networking opportunities. With members in 65 countries, the AIPMM is the Worldwide Certifying Body of product team professionals and offers globalized trainings and credentials localized for specific markets designed to meet the challenges of a constantly changing business landscape. As the only professional organization that addresses the entire product lifecycle from inception to obsolescence in any industry, the AIPMM supports strategic partners with offerings in Europe, the Middle East, Australia, and SouthEast Asia, as well as North America. AIPMM Membership benefits include the national Product Management Educational Conference, regional conferences, the Career Center, peer Forums, tools, templates, publications and eligibility to enroll in the Certification Programs. The Agile Certified Product Manager® (ACPM), Certified Product Manager® (CPM), Certified Product Marketing Manager® (CPMM), Certified Brand Manager® (CBM), and Certified Innovation Leader (CIL) programs allow individual members to demonstrate their level of expertise and provide corporate members an assurance that their product professionals are operating at peak performance. http://www.AIPMM.com Subscribe: http://www.aipmm.com/subscribe LinkedIn: http://www.linkedin.com/company/aipmm Membership: http://www.aipmm.com/join.php Certification: http://aipmm.com/html/certification Webinar Series: http://aipmm.com/aipmm_webinars/ Articles: http://www.aipmm.com/html/newsletter/article.php Moderated by Cindy F. Solomon, CPM, CPMM Founder, Global Product Management Talk @ProdMgmtTalk http://www.prodmgmttalk.com http://bit.ly/nbw9Yr

1. September 28, 2012
AIPMM Webinar Series
www.aipmm.com
© AIPMM 2012

2. © AIPMM 2012 http://www.aipmm.com

3. Today’s Speakers
Moderator:
Cindy F. Solomon, CPM, CPMM
Global Product Management Talk , Startup Product Talks, Startup Product Summit
Twitter: @cindyfsolomon @prodmgmttalk @startupproduct
Presenter:
Mark Burton
Vice President, Co-founder | Holden Advisors
Linkedin: http://www.linkedin.com/in/pricingwithconfidence
email: MBurton@holdenadvisors.com
Blog: http://markrburton.wordpress.com/
Twitter: @M_R_Burton
© AIPMM 2012 @AIPMM #prodmgmt http://www.aipmm.com

4. Mark’s Book: Pricing with Confidence
Stay on to win!
"This book helped take complex pricing topics
and issues and make them simple enough
so that virtually anyone in our business can use
the insights and learnings and put them into
practice."
http://www.pricingwithconfidencebook.com/
© AIPMM 2012 http://www.aipmm.com

5. FEATURED PRESENTATION
© AIPMM 2012 http://www.aipmm.com

6. How to Use Offering Tiers and Levers
to Control Price Negotiations
September 28, 2012

7. Today‘s Agenda
• Why today‘s pricing environment is so challenging
• The rise of the economic buyer
• Why traditional approaches no longer work
• Solutions to take back control of price negotiations
© 2012 Holden Advisors Corp., Concord, MA 7

8. The Legacy of The Great Recession:
Procurement has Emerged as ―The Winner‖
―We are in the middle of a
major transformation in the ―B2B purchase decisions more than ever
B2B sales model driven are being driven by financial requirements,
by customer‘s enterprise- such as enabling growth, improving
wide strategic procurement profitability, and reducing costs leaving
initiatives‖ economic buyers in clear control‖
Forrester Research IDC Research
B2B buyers are becoming more demanding and
sophisticated in purchasing.
© 2012 Holden Advisors Corp., Concord, MA 8

9. Procurement is Flexing its Muscles
• 86% have expanded their
control over the last five years1
• Procurement now controls 64%
of major spend categories2
• 70% of CPOs carry VP title
• 42% report to the C-suite2
• Procurement monitors supplier
health closely (66%), using
market intelligence (75%) and
sensing from frontline staff
(55%)3
1. Supply Management 2011 survey of CPO‘s
2. Supply‘s Organizational Roles and Responsibilities, 2011, F. Fraser Johnson and Michiel R. Leenders, CAPs Research, Arizona State University
3. CPO Agenda, January 2012
© 2012 Holden Advisors Corp., Concord, MA 9

10. And Leaning on Suppliers to Help Deliver
Savings
• Procurement must deliver 5-
10% overall savings annually,
with up to 20% on sourcing
initiatives1
• Skeptical that suppliers always
offer the best price
• 81% have asked suppliers for
price cuts2
• And reign in ―rogue spending‖
by departments and ―back- Unless your sales team is well
door selling‖ by reps prepared, you could be
outmatched
1. CPO Agenda, January 2012
2. CPO Agenda, Summer 2009
© 2012 Holden Advisors Corp., Concord, MA 10

11. When Customer Relationships Change, the
Response of Selling Firms is Predictable…
Invest more in relationship selling
Create value-added bundles of
products and services
Sell more value
…and often completely ineffective
© 2012 Holden Advisors Corp., Concord, MA 11

12. Why Isn‘t Value Enough? Because Not All
Customers Want Value.
• While need is similar, customers have different
view of vendors:
– Price-oriented
– Relationship-oriented
– Value-oriented
– Poker players
• Based on ―view,‖ customers require different
pricing/offering approaches
© 2012 Holden Advisors Corp., Concord, MA 12

13. How To Identify Poker Players
• Buyers grab control from the real customer and
block access to anyone else in company
• Will qualify multiple vendors often with an RFP
• Their internal promise: ―Watch This‖
• Need to understand their real power not their
stated power—it‘s often a bluff
© 2012 Holden Advisors Corp., Concord, MA 13

14. Want to Play the Game Better? Create an
Offering That Forces Trade-offs
• Match with needs of
target customers
• Meet/beat competitor
in low value flanking
offering
• Augment with value
features/service
• Create offering levers.
• Can be driven by
– Customer value
– Cost to serve/deliver
– Performance risk
© 2012 Holden Advisors Corp., Concord, MA 14

15. Example of Offering Tiers
Small Business Accounting
Source: Intuit company website
© 2012 Holden Advisors Corp., Concord, MA 15

16. With Tiers Established
Optional Services Increase Revenues
Source: Intuit company website
© 2012 Holden Advisors Corp., Concord, MA 16

17. Criteria Help Determine Where to Place a
Feature or Service in the Tiers
Criteria – is the Description Best tier
feature…?
Necessary to Product does not work without it Core
function
Not necessary but Typical customer requires it to be Expected
expected by most minimally satisfied
customers
High value Significantly affects customer Expected or Premium
performance, or is demanded by a if possible
select group of customers
Differentiated Is unique to your firm Expected or Premium
if possible
Able to be turned off Given present architecture, feature or If yes – use above
service an be disabled If no – evaluate full set
of ―always on‖ features
© 2012 Holden Advisors Corp., Concord, MA 17

18. Use Pre-Planned Offering Tiers to Flush Out the
Poker Player
Relationship
24/7/365 Buyer
Service Offering
Value
Integration Buyer
Offering
Core Price
Product Buyer
Offering
The most effective approach is based on clearly
defined differences in value
© 2012 Holden Advisors Corp., Concord, MA 18

19. Using Fences to Control Access
• Fences control
customer access to
valued attributes
• Need to be disciplined
• Based on objective
criteria
• Clear to sales, service
and customers
© 2012 Holden Advisors Corp., Concord, MA 19

20. Dow Corning‘s High and Low Value Offering
Use of Fences to Manage High- and
Low-Value Offerings
Dow Corning Xiameter
7000 Products 350 Products
Premium Price 20% Price Discount
Rapid Delivery 7-20 Day Delivery
Full Technical Service No Technical Service
Custom Lot Sizes Full Truck or Pallet Orders
International Terms Limit to 6 Currencies
© 2012 Holden Advisors Corp., Concord, MA 20

21. For Services, a Detailed List of Offering Levers is
Required to Manage Negotiations
Outsourced application development example
Lower Prices Higher Prices
Offering Levers Offering Levers
–% SLAs Expected Feature SLAs +%
Package
Initial Price Level Set by a neutral
price strategy and:
Size
Delivery Delivery
–% Complexity +%
Model Criticality Model
© 2012 Holden Advisors Corp., Concord, MA 21

22. Underlying Each Offering Lever is an Analysis of
Value, Cost or Risk
Offering Levers Price Lower Price Neutral Price Higher
Technology Supplier Strategic Supplier strategic Not an Supplier strategic
capability capability eg, .net, Java capability
(standard environment)
Delivery Location More than 80% off shore 80% best shore, 20% Greater than 20% on–shore
on–shore
Architecture Control Supplier Controlled Agile – Supplier Control Customer Controlled No
compliance with Supplier customer standards – have to
technology policy be defined
Compression or Supplier controlled and Optimal +/– % from the Customer defined and more
Relaxation of Schedule ability to manipulate to estimating model aggressive schedule
drive down cost – optimal
schedule
Requirements Detailed requirements Well defined, detailed Incomplete, high–level, or
Completeness captured by the client in requirements already ambiguous business
Supplier preferred toolset captured by the client requirements
Production Supplier controlled Supplier controlled Customer controlled
Infrastructure Competitor infrastructure in
place
Primary Price Driver
Value Cost Risk
© 2012 Holden Advisors Corp., Concord, MA 22

23. Preparing for the Game: No Detail is Too Small
• Prioritize your options
internally
– Both ‗gives‘ and ‗gets‘
• What is the cost of each give,
and the value of each get?
• Attach ―prices‖ to everything
• Tightly control the process
– Prevent ―nibbling‖
– List customer benefits – and
their corresponding obligations
– Charge extra fees if they fail to
perform
– List anything that‘s off the table
© 2012 Holden Advisors Corp., Concord, MA 23

24. What‘s Required to Make it Work?
• Clear, unambiguous evidence of the damage that is
being done
• Logical, well-defined give-gets
– That are relevant (and sometimes painful) to customers
– And easy for the sales team to understand
• Supported by clear data on value, costs, or risk
– Needed as much for internal support as external justification
• An understanding that negotiations are theater
• Senior leaders that understand their role in the play
• The ability to stay cool under pressure
© 2012 Holden Advisors Corp., Concord, MA 24

25. Any Questions?
Thank you for joining us today. If you have any
additional questions, please reach out to:
Mark Burton
Vice President, Co-founder
Holden Advisors
mburton@holdenadvisors.com
617-285-2963
© 2012 Holden Advisors Corp., Concord, MA 25

26. Please Join Us Again!
AIPMM Webinars
Oct 3 Role Of Product Management In The Success Of Your Company
Oct 12 From Idea to Reality with Glen Lipka,VP UX, Marketo
Oct 19 Developing A Compelling Business Case
Product Talk Podcast & Twitter Chat #ProdMgmtTalk Mondays
Oct 1 From Idea to Reality w/ Glen Lipka, VP UX
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