pricing maturity report_telecommunications industry
DESCRIPTION
Being such a technology driven industry, the importance of Big Data Analytics is more than clear and also illustrated by the fact that their survey scores reveal a strong need to further develop thesystems and tools to complement their pricing initiatives.TRANSCRIPT
European Pricing Maturity2013Results and key findings - Telecommunications Industry
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Results and key findings - Telecommunications Industry
With 80% of respondents having more than 5 years of experience in a pricing function, that makes this sector the “most experienced” in pricing.
We also notice that 80% of the respondents have pricing departments worldwide that comprise more than 15 people.
Not hard to imagine that this is necessary if we take into account the profound changes that this industry has experienced in the last 20+ years with the move of revenue streams from fixed to mobile. Just as a matter of interest, did you know that the mobile penetration rate in Europe in 2010 was already at 128%? (Whitehead, Phillips, Page, & Molina, 2011).
Being such a technology driven industry, the importance of Big Data Analytics is more than clear and is also illustrated by the fact that their survey scores reveal a strong need to further develop the systems and tools to complement their pricing initiatives.
Perceived pricing maturity 2,60 = LEVEL 2
Actual pricing maturity 2,24 = LEVEL 2
Ambition within 12 months3,27 = LEVEL 3
Telecommunications industry – observations
“most experienced” industry in pricing
Figure 1: Distribution of respondents within the Telecommunications industry
Figure 2: Distribution of respondents within the Telecommunications industry
Source : EPP European Pricing Maturity Study – 2013
Source : EPP European Pricing Maturity Study – 2013
Perception Reality Ambition
Level 1: Price list maintenance
0% 40% 0%
Level 2: Transactional control
40% 40% 40%
Level 3: Full value capturing
60% 20% 60%
Level 4: Full profit optimisation
0% 0% 0%
perception reality ambition
0%
40%
Level 1:Price List Maintenance
You try to sell anything to anyone at all prices
40% 40% 40%
Level 2:Gain transactional control
and optimize
You sell the right products to the right cutomers at the
right prices
60%
20%
60%
Level 3:Full Value Capturing
You sell segmented solutions at value based
prices
0% 0% 0%
Level 4:Profit Optimisation
You develop end-user solutions with different
revenue models
CHASM0%
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Results and key findings - Telecommunications Industry
On the right, we highlight a number of attention points and possible actions which arise from the gap analysis in Figure 3.
Urgent attention to pricing tools & systems needed: Improve availability of cost price info amongst pricing decision makers. Trigger automatic signal for sales price updates to avoid realising too late that there were serious cost price fluctuations.
Actively enforce systematic win/loss analysis by the sales team and analyses plus feedback by the pricing/analytics team – use as input for action plans. Better prepare price increases and equip sales force with value argumentations. Link sales force’s incentive scheme to price realisation and margin optimisation targets.
Establish clear value components per segment and use them for guiding value pricing. Review pricing policy minimum twice per year and follow up deviations with corrective actions. Investigate the price elasticity of offerings and use it to anticipate and prepare for the outcome of pricing initiatives.
Tools & Systems
Price execution
Price policy & setting
Telecommunications industry – gap analysis
Source : EPP European Pricing Maturity Study – 2013
Source : EPP European Pricing Maturity Study – 2013
Reality Ambition
Price Strategy 2,45 3,15
Price Policy & Setting 1,93 3,17
Discounting strategy 1,80 2,80
Price Execution 1,93 3,27
Monitoring 2,55 3,50
System & Tools 1,90 3,30
Governance & Org. 2,56 3,48
Tendering 2,21 3,14
Figure 3: Gap analysis: Telecommunications industry
Figure 4: Distribution of maturity scores across components of the pricing framework
TenderingGovernance & Org.
System & ToolsMonitoring
Price ExecutionDiscount Strategy
Price Policy SettingPrice Strategy
Actual PMI score
0.00 1.00 2.00 3.00 4.00
Gap with Ambition
0.930.92
1.400.95
1.331.00
1.230.70
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Results and key findings - Telecommunications Industry
While the percentage of respondents who make use of tendering is rather small in the Telecom industry, half of the respondents find that it is sufficient to maintain a philosophy of winning the tender first (price to win) and then looking at opportunities to increase the margin within the agreed price. The other half is more in favour of moving to the best practice of having a margin improvement plan per tender in place with regular account reviews taking to check the life time value of the tender.
Other areas they have identified for improvement are:
How tender information is obtained: Information should be collected well before the tender. It should be checked and critically assessed by the commercial team and then actively used in pricing the tender.
How item selection for a tender takes place: Margin improvement alternatives should be identified and offered whenever possible.
Calculate the total amount of sales revenue the tender customer contributes to the company over the life of the relationship, taking all possible factors (e.g. account year-end rebates and bonuses of sales team, etc.) into account.
If you would like more information or to arrange an informal discussion on the issues raised in the EPP European Pricing Benchmark Study and how they affect your organisation, please contact:
Project Manager:Nicolene [email protected]
President & Founder of EPP:Pol [email protected]
Price to win vs. optimise margin
Thorough evaluation of info
Item selection
Life time value calculation
Telecommunications industry – Tendering