interviews Jennifer Smith and Dr. Marcus Demmelmair, Pricing & Commercial Strategy Executives at Accenture Strategy, on how companies can leverage price model innovation, analytics and technology to navigate through the crisis.
[00:11]: Valerie introduces Jennifer Smith and Dr. Marcus Demmelmair of Accenture Strategy.
[00:53]: Jennifer share why businesses need to be immediately concerned with “minimizing the dip”.
[04:18]: Marcus discusses how businesses can look to maintain and protect cashflow.
[06:30]: Jennifer provides insight on how CAPEX businesses can adjust their business models to accommodate buyers’ needs in the new normal.
[08:20]: Marcus details how businesses can leverage the data they already have – transactional data and CRM data – to drive insights that can help them to protect future revenue.
[12:37]: Jennifer steps beyond her focus on top line to provide insight into how pricing teams can drive cost cutting efforts.
[15:02] Marcus identifies key criteria for evaluating pricing technologies.
[17:54]: Jennifer shares how businesses can get faster while getting smarter about deal reviews.
[19:50]: Marcus and Jennifer share their final words of advice for businesses looking to “minimize the dip” and effectively navigate the COVID-19 crisis.
Valerie Howard (00:00): Good day, everyone. Thank you so much for joining us. If you've been following along, we've been having conversations with pricing experts on pricing through market volatility in these unprecedented times. Today, I'm joined by Jennifer Smith and Marcus Demmelmair from Accenture Strategy. Marcus and Jennifer are both executives from Accenture's pricing and commercial strategy practice. I'm so thankful to have Jennifer and Marcus here to share with us their perspectives on pricing in harsh economic times. First off, welcome Jennifer and Marcus, so nice to have you here today....
Marcus Demmelmair (00:33): [crosstalk 00:00:34].
Jennifer Smith (00:34): Thank you for having us.
Valerie Howard (00:35): Thank you. Jennifer, let's go ahead and get started, if you don't mind telling me a bit about what price strategy concerns you're hearing in the marketplace from your clients today. I think we have a slide to showcase a bit about what you're hearing from those clients.
Jennifer Smith (00:53): What we're seeing in the market right now are obviously pretty significant disruptions to the way of doing business up until a couple months ago, pre-COVID. When we talk about pricing and commercial interventions, really we're talking about we're coming out of COVID, we're potentially going into a downturn. Everything is around how do we minimize the dip, the loss of revenue, and be able to start a recovery sooner? Some of the things that we're seeing that are going to impact companies' abilities to do this are some severe shocks to both supply and demand side. You've got companies who can't get enough product to stock their shelves. You have other companies who are sitting on inventory that they can't get rid of. On the demand side, we have a significant shift in consumer behavior, both in what they purchase and in how they purchase, so a huge shift to digital commerce, preferences around products are changing, services. Really, there's a lot of unknown about what comes out of this.
Jennifer Smith (1:55): What we do know is that historical data is no longer relevant. Many organizations look at their pricing and discounting and make decisions based on trailing 12 months or the last two, three years of data. That's just not going to be as relevant now coming out of this. There's a need for new and different data to help inform future pricing decisions.
Jennifer Smith (02:16): Another thing too is clients can't look at their customers the same way. I think a lot of organizations are challenged to have a portfolio view of customers, but it's really critical coming out of this because it is not a matter of if, it's when customers start coming back, asking organizations for price concessions. They are looking for extended payment terms. They don't have the same willingness and ability to pay that they once had. Organizations need to be taking a portfolio view of that so they can start to make really strategic investments in their pricing and discounting with the right customers, where they think they're going to see the demand recovered the soonest. It's really important to start taking some of those commercial interventions now.
Valerie Howard (03:03): I like the way you've oriented the slide from a perspective on when we were at the height of social distancing to how you see us coming to a place where we're moving beyond social distancing and how that aligns to your perspectives on minimizing the dip to recovering.
Jennifer Smith (03:19): Yeah, there's a lot of uncertainty coming now. States are starting to open one by one, commerce will start picking up, and I think this is the time now when organizations need to start figuring out how and when that recovery will happen and where.
Valerie Howard (03:34): Thanks so much. Well, Marcus, I know you shared with me an infographic that we have about pricing in harsh economic times. What I saw in this particular infographic was perspectives on how businesses need to keep up cashflow, save margin and cut costs. When it comes to the fact that we know that a lot of businesses are concerned with maintaining cashflow right now, and it's becoming harder and harder to sell at those desired target prices, especially in B2B, you have an interesting perspective on how businesses can leverage new commercial models to do just that, to maintain their cashflow. Can you share a little bit more on that perspective?
Marcus Demmelmair (04:19): Basically what we see, and Jennifer has already mentioned it, is that pricing is, of course, increasing in the crisis. Pricing is getting more important because clients ask for concessions, ask for special discounts, but in order to keep up cashflow, it's very dangerous to slash down prices and be very aggressive and cut prices, cut prices until it hurts. Therefore, as you can see on the slide as the first lever, why not innovating your commercial model? For instance, we know that clients, especially in B2B, they are cash-strapped, but they still need to make investments to have their production going. Why not shifting the model from a transaction-based sale to a pay-per-use or subscription-based sale. We have seen this in previous economic harsh times. By the way, it is also an overall trend towards more usage or outcome-based price models.
Marcus Demmelmair (05:32): Let me give you an example. Looking at a Michelin, the tire manufacturer, a French tire manufacturer, they do not just sell tires. They sell miles driven on tires. They switched to a pay-per-use model, which is also good for clients right now because they only need to pay for the miles where they actually drive and create value to their clients. It's a win-win. We see this definitely as one lever to keep up cashflow and get out of the crisis.
Valerie Howard (06:05): Thanks so much, Marcus. To follow up on that, Jennifer, do you see any downsides in shifting price models? For example, for capex businesses, when it comes to they've been selling capital expenditures, right now, what can they do to accommodate perhaps new business models if they haven't already been considering subscription models?
Jennifer Smith (06:28): Yeah. I mean, Marcus mentioned this. There was already starting to be a trend towards more like outcome solutions selling over the last year or so, more important now. I think some things to watch for are cannibalization of revenue, ability to [inaudible 00:06:46] with the additional operational complexity, and also customer response. From the revenue side, subscription models are great. It's recurring revenue. It helps you stabilize your cashflow. Sometimes there's a downside if it's not ... If you're not careful with it, there's a downside in that your onetime cost of a product is sometimes higher than you might get for recurring revenue. Again, this goes also a little bit to the shifting from capex to opex spend. Being aware of where your customers are getting their money from, their budgets from, and how they purchase and procure your services or your products, you have to have a good understanding of how that impacts them. You've got different budgeting cycles, different approvals levels. There's a pretty significant impact to shifting a model like that. Not saying it can't be done, it's just these are some of the things that you have to take into consideration.
Valerie Howard (17:11): That's super helpful, Marcus. Thank you so much. Just to that point of manual efforts versus those that are enabled by technology, we've been working with some clients who have expressed that if it weren't for their pricing technology in today's environment, some of their pricing team members wouldn't have been able to go to virtual offices, just because so much of what they were previously doing was manual. Of course, that would absolutely slow them down as well in this type of environment. Really good emphasis on the fact that speed is king in today's environment, for sure. Jennifer, when it comes to customizing deals, I know we spoke a little bit about that earlier, about needing to customize to customers' changing needs. I know we've spoken a lot about leveraging analytics to review how you can customize deals, Jennifer. Is there any risk that that might slow down deals, actually, or slow down the review of those deals?
Jennifer Smith (18:07): When executed the right way, it should actually aid in the decision making and the speed of deal reviews. Ideally, we would see a logic set up in the backend of a system that would allow you to, with some deals, there's always a need for some customization, but it would allow you with, let's say, 80% of your deals, to have some sort of standardized flow through a system in an automated way that accounts for pricing, discount, promotions, historical performance, future forecast. If you can build that decision making, what you would normally have of a team of leaders sitting around a table with an Excel spreadsheet, if you can start to build that into the system and have the same rules and logic for decision making, you can start to automate and actually speed up the sales process, and also start to drive more standardization and reduce some of that pricing and discounting variability.
Valerie Howard (19:02): That's great. That makes a lot of sense for negotiated deals. How does this affect, perhaps, buyers who are now coming through self-serve channels? Does it aid in pricing for those?
Jennifer Smith (19:12): It should be the same for digital channels. If I have buyers coming through a self-serve channel, again, it's all about how you build the rules and the logic on the back end that are meant to mimic the decision making that might happen around a table. You're taking that same logic and starting to apply it in an automated way. Regardless of whether or not you have somebody coming through a digital channel, and then the back end, you're able to automate all of that, where you're pulling together deals, or whether you have somebody, a deal review process with a seller who is, again, making the case internally, either way, you're still taking that logic and trying to find ways to automate it and speed that up.
Valerie Howard (19:47): That makes a lot of sense. Thank you, Jennifer. We discussed three strategic areas that businesses should be focusing on today, first, keeping up the cashflow, second, saving their margin, and third, cutting costs. Where are you seeing companies struggle the most today, Jennifer? Can you offer any advice to them on that topic?
Jennifer Smith (20:07): Yeah. I don't think organizations are going to struggle with one or two of the three. It's going to be all three and it's going to happen over time at different points. We're challenged with coming out of COVID, which is we've had much of the country and the world in lockdown and isolated. Buying behaviors, in many ways, have just stopped, and in other ways, have increased. It's understanding that shift. As we come out of this in eCommerce and industry starts moving again, how organizations ... First and foremost, they're going to have to focus on cashflow. They will need cash. It does not matter how much you cut your costs if you do not have revenue coming in.
Jennifer Smith (20:46): With that being said, we do know that coming out of the 2008 recession, there's a lot of research that has shown that organizations with a focus on not just cost cutting, but also on growth, had a much stronger recovery and a faster recovery. Companies need to be thinking about both. It's not just the cost cutting, it's how do I think about my new offers to the customers' changing needs? How do I price and discount those offers? Where am I willing to make investments in price and discount across my customer base based on where I think the recovery will happen the soonest? It's really have a plan, take a portfolio view, and start to make really strategic decisions and investments across your customers.
Valerie Howard (21:31): Thank you, Jennifer. Marcus, any words of advice from you on what firms should be thinking about and doing now?
Marcus Demmelmair (21:38): Yeah, absolutely. I think it would be wrong to now be in a status of paralyzation and react and steer ad hoc or steer in the fog. Instead, it's now the time to step up, to take clear decisions, because obviously it's also a great time to grab additional market share and come out of the crisis much stronger than before. I mean, all the investments in pricing, they are usually the projects that have the highest return on investment. This is definitely the area to now go in and develop further.
Valerie Howard (22:34): Thank you, Marcus. How about some final words of advice from you, Jennifer?
Jennifer Smith (22:41): I would say don't wait. The other thing I'll say is, we talked a little bit about analytics today, don't be intimidated by analytics. A lot of times organizations are intimidated by this idea of dynamic pricing or sophisticated analytics, thinking it's some multi-year journey and it's complicated. It doesn't have to be that way. There's some really pragmatic ways to start to use analytics for decision making right now. We've come a long way in the terms of analytics capabilities, and as Marcus said, computing power. Don't wait to start initiatives like that that can have a pretty significant impact on revenue and margin.
Valerie Howard (23:20): Okay, great. Final words of advice, don't wait, and move from inefficient to effective processes. With that, I'd like to thank you so much, Marcus and Jennifer, for sharing your expert perspectives with us today. We hope that our audience here has found this information timely and useful and relevant. Please check out the links below our video for Accenture's infographic and a link to the full library of pros resources on navigating your business through the COVID-19 crisis. Thank you so much, Marcus. Thank you so much, Jennifer. It was nice to speak with you.
Jennifer Smith (23:53): Thank you for having us.
Valerie Howard (23:54): Thank you.
Marcus Demmelmair (23:55): Thank you.