Pricing for Profitability with Oracle's Price Management Solutions

David TriceVP CRM Strategy

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions.The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

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Session Agenda

• Pricing Today: The Perfect Storm• Oracle Price Management• Demonstrations

• Deal Management• Pricing Analytics and Price Segmentation• Price Planning and Optimization

Pricing Today: The Perfect Storm

Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.

NY Times, The World: New Global Trade Line-up Sept 2008

Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.

NY Times, The World: New Global Trade Line-up Sept 2008

GlobalGlobalCompetitionCompetition GlobalGlobal

ProfitProfitPoolPool

Evolving Evolving CustomerCustomerLoyaltiesLoyalties

Constrained Constrained ResourcesResources

Companies that maintain a ‘business as usual’ strategy or wait too long to act will find it extremely challenging to sustain momentum as the competitive environment transforms around them.

Steve D’Arcy, Global Industry Practice LeaderPricewaterhouseCoopers

Global Competition

Global Competition: The Seven Struggles

• Minding the Cost Gap• Growing People• Reaching Deep into Markets• Pinpointing• Thinking Big; Acting Fast; Going

Outside• Innovating with Ingenuity• Embracing Manyness

Minding the Cost Gap

Reaching Deep into Markets

Embracing Manyness

Growing People

Pricing Today: The Perfect Storm

Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.

NY Times, The World: New Global Trade Line-up Sept 2008

Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.

NY Times, The World: New Global Trade Line-up Sept 2008

GlobalGlobalCompetitionCompetition GlobalGlobal

ProfitProfitPoolPool

Evolving Evolving CustomerCustomerLoyaltiesLoyalties

Constrained Constrained ResourcesResources

The Generation Gap & Reaching Consumers

Social Media is the way younger generations Connect.

Gen Y80M

Gen X18M

Boomers78M

Where is Loyalty Rooted?

Generation V (Virtual) defies traditional demographics…the behavior, attitudes and interests of people from all walks of life are blending together online, cutting across generations and traditional demographics.

Gartner, June 2008

Individuals that create trends,

build loyalty and define value

Trends in Customer Loyalties

• Value is being defined by• Zealots

• Customer Vigilantes

• Product Advocates

• Environmental Advocates

• And it is happening online

Trends in Customer Loyalties

• Value is being defined by• Zealots

• Customer Vigilantes

• Product Advocates

• Environmental Advocates

• And it is happening online

Value

will be elusive and companies

will compete on price

as a result of social influences in

all market segments.

Pricing Today: The Perfect Storm

Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.

NY Times, The World: New Global Trade Line-up Sept 2008

Across the globe…military alliances are changing, familiar trade alliances and rivalries are mutating or dissolving under pressure from forces far stronger than ideology: in this case, competition for profits and markets.

NY Times, The World: New Global Trade Line-up Sept 2008

GlobalGlobalCompetitionCompetition GlobalGlobal

ProfitProfitPoolPool

Evolving Evolving CustomerCustomerLoyaltiesLoyalties

Constrained Constrained ResourcesResources

The Delusional Past

ResourceDemand

ResourceSupply

Resource Abundance Drives Low Cost Manufacturing & Economies of Scale

Supply Chain Optimization, Lean Manufacturing, Six Sigma, Green initiatives have all

contributed to the continual decrease in Average Cost

…driving profits higher

Growth is Outpacing Resources

FutureSupply

The Party is Over…

ResourceDemand

Living in a Resource Constrained World

Raw material prices are rising… in some Industries, the annual increase is in excess of 50%.

The Result of the Perfect Storm: Global Margin Redistribution

• Digest cost increases in the most profitable manner

• Capture value added from R&D & Green initiatives

• Segment customers in order to properly address local needs

• Efficiently address global price competition in local markets

Price Management is necessary to ensure your share of the Global Profit Pool

Surviving The Perfect Storm…in a row boat!

• Information to support process is hard to obtain• No single system of record for Price• Excel still supports much of the process

Analyze

•Orders •Quotes •Prices •COGS •Rebates, •Cash disc

•Customer •Products •Regions •Sales Reps•Channels

•Competitive

1. Gather transaction data

•Excel •Data WhseOR

2. Load into Excel or Data

Warehouse

3. Measure by Segmentation

Plan

•COGS•Customer •Products •Regions •Sales Reps

•Channels

1. Gather data to create pricing

2. Create custom excel spreadsheets to model price

3. Final Price Plans

Manage

1. Enter pricing

from plans

2. Maintain pricing

Execute

Apply Pricing per

channel

Apply Pricing per

channel

Price Execution is

the only process that is integrated

today

Enforce

1. Manually enforce deal negotiation

Analyze

•Orders •Quotes •Prices •COGS •Rebates, •Cash disc

•Customer •Products •Regions •Sales Reps•Channels

•Competitive

1. Gather transaction data

•Excel •Data WhseOR

2. Load into Excel or Data

Warehouse

3. Measure by Segmentation

Analyze

•Orders•Orders •Quotes•Quotes •Prices•Prices •COGS•COGS •Rebates, •Cash disc•Rebates, •Cash disc

•Customer •Products•Products •Regions•Regions •Sales Reps•Channels•Sales Reps•Channels

•Competitive•Competitive

1. Gather transaction data

•Excel •Data WhseOR

2. Load into Excel or Data

Warehouse

3. Measure by Segmentation

Plan

•COGS•Customer •Products •Regions •Sales Reps

•Channels

1. Gather data to create pricing

2. Create custom excel spreadsheets to model price

3. Final Price Plans

Plan

•COGS•COGS•COGS•Customer•Customer •Products•Products•Products •Regions•Regions•Regions •Sales Reps

•Channels•Sales Reps•Channels•Sales Reps•Channels

1. Gather data to create pricing

2. Create custom excel spreadsheets to model price

3. Final Price Plans

Manage

1. Enter pricing

from plans

2. Maintain pricing

Manage

1. Enter pricing

from plans

2. Maintain pricing

Execute

Apply Pricing per

channel

Apply Pricing per

channel

Execute

Apply Pricing per

channel

Apply Pricing per

channel

Price Execution is

the only process that is integrated

today

Enforce

1. Manually enforce deal negotiation

Enforce

1. Manually enforce deal negotiation

Negotiate

Why Price Management? Big Customer Management Performance Gap

Why Price Management?Performance Gap exists because of Excel

2008 Survey of PPS Members

Price Management Product Line

Plan

• How should I segment customers?

• What are the optimal prices and policies by segment?

• What promotions should I run?

Publish

• Publish customer and partner price lists

• Manage standard discount matrix

• Manage global price coordination

Execute

• Execute accurate prices at time of quote or order

• Accrue off-invoice discounts

• Execute promotions

• Enforce policies

Negotiate

• Negotiate on all points of Waterfall

• Model incentives to drive customer behavior

• Provide price recommendations

• Manage approval workflow

Analyze

• How are my price strategies doing?

• Where should I make corrective action?

• What action should I take?

Price Analytics• Cust/Prod Price Analysis• Deal Desk

• Price Performance Measure

• Mining of Social Price Norms

SiebelPrice Planning• Price Optimization

•Market, Social, Forecast/Demand Aware

• Opportunity visualization• Socialize Price Plans• What-If

Price Admin• Price List Admin• Price Publishing• Guideline Mgt

Dynamic Pricer• Price & Promo Execution• Pricing Hub (SOA)• Guideline Enforcement

Deal Mgt• Price Recommendation• Customer History• Deal/Profit Analysis• Social Collaboration• Social Price Analysis

Price Segmentation

• Customer Profiling & Attribute ranking

• Segment Determination• Price Strategies• Price Determination

EBSAdvanced Pricing• Price List Admin• Price Publishing• Guideline Mgt

Advanced Pricing• Price & Promo Execution• Pricing Hub (SOA)• Guideline Enforcement

Benefits of Deal Management…

• Better Decisions at Deal Time

• Improved Control Through Policy Visibility and Enforcement

• Easy-to-use, Rapid Response

• Pricing Strategies Moved Closer to the Field

• Preserve value of products

• Preempt price and margin erosion

Oracle Deal ManagementOffer The Right Price on Every Deal

Analyze Requested Price:• Against Price Score &

Recommendation• To determine market

exposure• Across similar deals

Price & profit Guidance:• Enforce pricing policies• Provide insight to deal

profitability • What-if analysis to improve

deal margin

Customer Price History:• Review price history and

trends• Win/Loss analysis against

price trend • Deal compliance analysis

Benefits of Pricing Analytics…

Use a single consolidated view of profitability and powerful analytics to:

Oracle Pricing AnalyticsActionable Insight from Monitoring Price Effectiveness

Deal Life Cycle and Price Waterfall Analysis

• Compare performance, quarter-to-quarter, region-to-region, segment-to-segment

• Configure alerts and drill-thru to “find the offenders”

• Common concepts and integration with Price Segmentation and Deal Mgmt

• Assess effectiveness of pricing segments and strategies

• Track revenue leakage from Opportunity to Quote to Order

• Track how price and cost are diluted from “top potential value” to realized prices & margins

Close the loop on Pricing Segments & Strategies:

• Visualize price erosion and the resulting true, realized price

• “Close the Loop” on pricing actions by monitoring price and discounting trends

• Be alerted to unexpected changes

• “Find the Offenders” to plug revenue and margin leaks

• Improve insights using advanced statistical analysis to aid decision support

Pricing Variance Alerts, Pricing KPIs:

Benefits of Price Segmentation…

Oracle Price SegmentationIdentify Selling Groups and Publish Floors for Profit Improvement

Identify Pricing Segments with Customer KPIs

• Mine data to understand which transactional attributes most impacted margins or share

• Create pricing strategies aligned with targeted objective

• Automatically determine and refine pricing floors to be enforced in deal management

• Select/Tune algorithms based on data availability; employ “consumable science”

• Profile customers by Buying and “Cost to Serve” characteristics using rich historical data

• Cluster customers into common price behavioral groupings

Determine Pricing Floors aligned with Strategies

Identify Targeted Pricing Strategies

• Identify segments & strategies with the biggest opportunity for improvement

• Create a measurable, Six-Sigma Segmentation™ framework

• Visibility into process eliminates the uncertainty offered in conventional “black-box”

• Segment performance defines success rather than repeated PhD calibration

• Create price floors and assess potential impact

• Publish floors to Deal Management

• Proven statistical and data mining techniques ensure ‘price science’ is operationally effective

Benefits of Price Planning & Optimization

• Optimal prices based on market history, product life cycle and organizational goals

• Strategy alignment between Global & Local Pricing Managers

• Horizontal Price alignment between markets, countries, regions

• Allocate commodity cost increase or competitive responses in or to drive margin and or share.

• Easy-to-use “Consumable Science” focused on solving the business problem, not the math

Oracle Price Planning & Optimization Setting the Optimal Price to maximize your market opportunities

• Customer price sensitivity• Product lifecycle position• Portfolio balance• Create/manage plans according

market breakdown

• Optimize cost allocation or competitive response to gain share and/or margin

• Allocation by Product/Customer hierarchy

• Margin, share “re-capture” tracking

• Tune the optimization calculatorto a single market

• Run & compare pricing simulations suggesting different constraintsand constraint threshold

Objective-based Price Optimization:

Dynamic Market Driver Modeling:

Interactive Optimization “Sand-box”:

Price Management Solution MapA Typical Implementation Approach

ROI

Evolution

What Drives ROI in Each Phase?

ROI ChasmPrice Analytics& Price Segmentation

Deal Management

EnterpriseIntegration

Price Segmentation& Price Optimization

1. Readiness

2. Visibility & Manual

Control

3. Pricing Process

4. Enterprise Alignment

5. Price Simulation

Margin Awareness

Low Hanging Fruit

Process Improvement

OptimalBusiness Outcomes

Step 1

Step 2

Step 3

Oracle OpenWorld 2008Price Management Activities

ID Time Location Session

S298480 Mon 1:00 PM Westin SF – Franciscian IINew Deal Management Solutions for Enhancing Margins and Operational Performance in High Tech Industry

S300122 Mon 4:00 PM Moscone West 2010Oracle Customer Order Management for Complex Product and/or Price Policy Enforcement: Customer Panel Discussion

S300121 Tue 9:00 AM Moscone South 308Oracle Customer Order Management for End-to-End Order Management Process: Quote-to-Cash Customer Case Study

S300126 Tue 5:00 PM Moscone South 310Pricing for Profitability: Oracle's Price Management for Oracle CRM On Demand, Siebel CRM, and Oracle E-Business Suite

S300127 Wed 11:30 AM Moscone West 2010Siebel Deal Management and Oracle Price Management: Accelerated ROI Leveraging Value-Added Pricing

S300123 Wed 5:00 PM Moscone South 310Customer Panel Discussion: Siebel Customer Order Management for Large Deployments

S300124 Thur 1:30 PM Moscone West 2010 Siebel Customer Order Management 8.1

Price Management (Red) & COM Sessions

Price Management Demo SocialWhere: Thirsty Bear Tavern

When: Wed 24, Sept @ 5:00-8:00PM