Pricing and Profitability Management A

Pricing as a discipline and a management tool has evolved in recent years, and both the tools themselves and the organizations that use them have grown in sophistication. A comprehensive reference book for all competencies in Pricing and Profitability Management is needed for businesses to understand the right approach, tools, and techniques for each focus area, as well as the integration across all focus areas. The Deloitte Handbook of Pricing and Profitability Management will serve as a "how to" manual for any executive or manager to develop and integrate the capabilities required for effective Price Management. The Handbook will address how to build these capabilities to a level of sophistication that is appropriate for his or her organization. It will present a holistic, comprehensive framework that reflects our belief that companies that integrate the six key pricing competencies into a cohesive pricing and profitability management program can realize gains far beyond what can be achieved with a singular approach. By taking a comprehensive view of pricing, companies can position themselves to tap a vast source of shareholder value: the ability to set and enforce profitable prices, not just once, but again and again in response to marketplace changes and evolving business needs.

An international business consultant with Deloitte Consulting, Julie Meehan focuses on strategy development and operational improvement, including profit enhancement through pricing. She helps clients in diverse industries develop pricing and sales channel strategies, improve price execution, redesign pricing processes in Marketing, Sales, and Finance, and perform in-depth analytics to remedy issues of poor profitability. She frequently speaks on pricing at professional conferences and teaches at top U.S. MBA programs. Julie currently lives in Savannah, Georgia, with her husband and identical twin sons.

Mike Simonetto is the founder and global leader of Deloitte’s Pricing and Profitability Management Practice. He guest lectures at a number of leading graduate schools and international pricing seminars and has published numerous articles on pricing. He is an adjunct instructor for the Executive MBA Program at the University of North Carolina, Chapel Hill, spent a year managing a leading pricing software firm, and sits on the Advisory Board for the Professional Pricing Society. Mike currently resides in Atlanta, Georgia, with his wife Theresa, and spends whatever time he can in the mountains of North Carolina.

Larry Montan, Jr. is a director with Deloitte Consulting. His love of pricing takes him from the frozen tundra of Minnesota (where he was born and bred) to companies around the world to help them with the “soft side” of pricing. The soft side of pricing includes important capabilities such as developing strong pricing leadership, organizing people into high-performing pricing teams, building pricing skills, and helping the organization embrace the new discipline of pricing. Larry is a frequent presenter with the Professional Pricing Society.

Chris Goodin’s passion for the success of his clients—a diverse, global mix of leading retail and consumer goods companies—finds its foundation in a remarkably common pursuit: driving more profitable top-line sales growth. He helps companies improve their bottom line through advanced analytics, innovative pricing strategies, and smartly conceived pricing tactics. In addition to his work as a principal with Deloitte Consulting, Chris frequently speaks at industry conferences and lectures at Columbia University and Duke University. He resides in Chagrin Falls, Ohio, with his wife and three children.

Foreword	p. xi
Acknowledgments	p. xv
Introduction to Pricing and Profitability Management	p. 1
Pricing: The Critical Lever for Raising Performance	p. 2
Common Obstacles to Pricing and Profitability Management	p. 5
Understanding-and Leveraging-the Human Side of Pricing	p. 9
An Integrated Approach to Pricing: The Six Core Competencies	p. 11
Beginning the Journey: Key Questions to Ask	p. 16
Conducting a Pricing and Profitability Diagnostic	p. 23
The Case for a Diagnostic	p. 24
How to Execute a Diagnostic	p. 26
Consolidating Findings and Identifying Opportunities to improve Capabilities	p. 34
Challenges and Considerations	p. 38
Developing an Effective Pricing Strategy	p. 41
What Comprises a Successful Pricing Strategy?	p. 41
How to Make Value Your Focus-and Why	p. 45
Formulating a Value-Based Pricing Strategy	p. 48
Designing and Integrating an Effective Pricing Structure	p. 68
Identifying and Using the Principal Pricing Archetypes	p. 72
Critical Challenges Faced by Pricing Strategists	p. 82
Tips for Moving Forward	p. 85
Price Execution	p. 89
What Is Price Execution?	p. 90
Using the Best-Practice Pricing Process Framework	p. 91
Setting Policies to Reinforce Pricing Processes	p. 123
Tips for Moving Forward	p. 134
Advanced Analytics and Price Setting	p. 137
Building a Transaction-Level Data Set	p. 138
Conducting Transactional Profitability Assessments	p. 140
Integrating Cluster Analyses to Segment Customers, Products, and Services	p. 163
Assessing the Competition: Value Equivalency Analytics	p. 163
Demand-Based Optimization Modeling to Improve Price Setting	p. 167
Tips for Moving Forward	p. 178
Achieving Effective Organizational Alignment and Governance	p. 183
Five Key Components for Aligning a Pricing Organization	p. 184
Aligning Sales to Support Pricing and Profitability Goals	p. 185
Identifying and Empowering Pricing Leaders	p. 192
Designing Robust Organizational and Governance Structures	p. 197
Implementing Change Management and Adoption Processes	p. 204
Evaluating and Managing Pricing Talent	p. 215
Making the Organizational Commitment to Change	p. 223
Pricing Technology and Data Management	p. 225
What Is Pricing Software?	p. 226
The History of the Pricing Software Market	p. 232
Building a Business Case for Pricing Technology	p. 238
Selecting Pricing Management Software	p. 243
The Pricing Software Development Lifecycle	p. 249
Future Trends in Pricing Technology	p. 252
Pricing Technology Selection and Implementation Recommendations	p. 255
Integrating Tax and Regulatory Policies with the Pricing Strategy	p. 257
The Convergence of Tax and Pricing Strategy	p. 258
How to Integrate Pricing and Tax Functions-and Why	p. 262
Managing Pricing and Compliance Costs to Maximize Returns	p. 276
Navigating Regulatory Environments When Making Pricing Decisions	p. 279
Where to Go from Here?	p. 281
Pricing as a Sustainable Competitive Advantage	p. 285
Why Taking a Holistic Approach to Pricing Matters	p. 285
Bringing it All Together: A Case Study	p. 287
Emerging Trends in Pricing and Profitability Management	p. 294
Lessons Learned: Getting Pricing on the Executive Agenda	p. 298
Appendix What Is Value and Why Is It So Difficult to Measure?	p. 301
Index	p. 305
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Pricing and Profitability Management A Practical Guide for Business Leaders

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