The Pillars of Pricing Excellence: A Case Study

However, there was no team in place to organize, track, and grow the pricing model. This led to confusion and lost revenue across the board. Since 2017, Spijkers has grown a team from the ground up and created endless value for Schneider. At our recent Power of 50 event, he shared what his team learned, and outlined the five pillars of pricing excellence. 

Creating a Clear Pricing Framework

Spijkers and his team focused their efforts on creating a clear outline of a commercial policy, pricing strategy, and quotation process. This allowed them to standardize processes and ensure prices were consistent across markets. 

Commercial Policy 

The first step in their plan was to create a firm foundation to build upon. For Schneider, this took the form of a commercial policy outlining to whom they sold, what they sold, and how they sold it. This policy included instructions on 

• Channels/Partner Categories 
• Offer/Product Collections 
• Go-to-Market Model 
• Customer-Centric/Persona Driven Business
• PWF Structure
• Compliance 

Before they crafted this document, every department within the company operated independently with their prices. This is a major challenge as the market becomes more and more globalized. 

Pricing 

With a commercial policy in place, it was time to get serious about a universal pricing structure. Spijkers’ team needed to get specific about which price level would apply to each customer category outlined in the commercial policy. 

This pricing discussion included the creation of 

• Pricing Strategy 
• Pricing Corridors and Levels 
• Pricing Guidance and Optimization 
• Pricing Governance 

Having clear rules around pricing helps avoid situations where prices are drastically different in different areas. For example, if a customer discovers they can get your product for significantly cheaper by driving to the next country over, they are going to be upset. Consistent pricing levels keep this to a minimum. 

Quotation 

The final step is defining the process for pricing and responding to specific customer requests. Spijkers and his team set up policies for 

• Quoting Each Opportunity and Contract
• Delegating and Approving Quotes 
• Customer Self-Service 
• A Quotation Center 

Having these processes set eliminates the need to check in with higher-ups about any discounts or special circumstances surrounding every quote, saving time and empowering the sales team. 

Five Pillars of Pricing Excellence 

If you want to produce a tangible financial impact with your pricing reform, there are five specific areas you need to focus on.

Pricing Strategy 

The Schneider team’s approach to pricing strategy focused on providing strategic direction based on the market situation and the SE differentiation. 

Depending on where your company fits within the market, you need to adapt your prices. That’s why Spijkers developed a pricing strategy matrix that helped his team decide how aggressive they should be with each product re-price. 

The matrix is split into four quadrants. 

• Grow – High growth potential and high pricing power. Grow margins and volume 
• Protect – Low growth potential and high pricing power. Grow margins and retain volume 
• Optimize – High growth potential and low pricing power. Boost volume in attractive markets
• Skim – Low growth potential and low pricing power. Maintain your standing in attractive markets

These quadrants must be applied to the entire pricing waterfall because different prices in different countries and markets lead to miscommunication and unsatisfied customers. 

Pricing and Commercial Policy Excellence in Countries 

Negotiating prices with clients is challenging because you deal with pushback about data, competition, and more. However, if you are consistent, prepared, and backed with facts and figures, you’re far more likely to secure a contract. 

Any changes you make to your pricing to align with a local market need to be offset to maintain and grow your margins. For example, if you offer a higher discount at the beginning of a contract, you can not also offer special pricing agreements later on. Ensure your sales team has a thorough understanding of how this give-and-take works. 

Schneider’s pricing waterfall brings this into account. They start with a single price based on the value of a product’s features in the global market. The price is then affected by several factors to create a list price, a net price, and the final margins. 

• Country Coefficient – Align the offer prices with the local market to reach the list price 
• Standard Discounts – Attract potential customers with discounts that reflect the partner value add
• Special Price Agreements – Negotiate with specific clients to find the deal-specific value and reach the net price 
• Marketing Development Funds and Performance Bonuses – Re-invest some of the sale price into your team and future efforts to reach the net net price 

The next step for Schneider is to add compliance to their waterfall, ensuring they are consistent with any regulatory or legal requirements in their pricing decisions. This could include taxes, tariffs, or trade restrictions in specific countries. 

Global Reference Tariff and Pricing Corridors 

When operating in a global market, your team must be prepared to explain why each product is priced in a specific way.  The goal is to have consistency across product families, with clear reasons for why a price is what it is. This method also allows your sales team to focus on the value that a specific product has to justify a different price. 

For Schneider, this means understanding the value added by voltage, power, and protection, and creating a simple, understandable value tree to assist in pricing. By keeping a consistent focus on the value of a product rather than the cost to produce it, their team was able to go from 104 price lists to 1 price list. 

Services, Sustainability, and Software Monetization 

While physical product pricing was a major concern for Spijkers and his team, the full breadth of Schneider Electric’s pricing was more complex. You need to give the same care to your service packages and software as you do to products. 

Work alongside your service and aftermarket teams to create similar processes and policies for each of your offerings and optimize pricing across the board. 

Pricing Organization 

When Spijkers started the journey of pricing optimization, Schneider didn’t have anyone working specifically on pricing. This meant the team had to create a process and organization for pricing from scratch. 

They started by building a pricing organization blueprint. This document included everything the team would need to organize and maintain a consistent pricing strategy. This was built with input from stakeholders across the globe to ensure the processes work for everyone. 

The blueprint includes breakdowns of 

• Roles and Responsibilities 
• Pricing Activities ID Cards
• Process Flowcharts
• Organizational Charts and Sizing 
• Personas and Talent Management 

Having all this information in one place ensures the company has one set truth and a clear base to build upon. 

Looking Ahead 

Schneider’s journey with pricing is nowhere near over. They have achieved quite a bit with this process, and have a plethora of goals to continue working toward. This includes 

• Sustaining the positive impact generated thus far
• Building a resilient and scalable model for the future
• Extending to new business areas and topics for additional impact 
• Growing Recurring Revenue 
• Communicating results to shareholders and the market 
• Continuing to upskill talent and enrich the community 

As the team continues to focus on pricing optimization, the value it adds to the company and its customers will only grow. 

In Conclusion 

Manufacturing is full of passionate people working on innovation, product development, and finding value for customers. All these roles are incredibly important, but the real value for the company comes from pricing. 

If your team can craft an effective, scalable strategy for finding the optimal price every time, you’ll be able to grow your margins and invest in people, products, and the future of your company. All you need to do to get started is create a plan.