Transcript Document

The Marketing – Finance Interface: Practical Examples
Gerben Algra
VP Marketing
DSM Marketing Office
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Table of contents
• Introduction
• DSM : who we are and what we do
• Pricing
• Product Launch
• Conclusions
DSM Marketing Office
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The Life Sciences and Materials Sciences Company
contributing to quality of life
DSM Marketing Office
Over a century of successful transformations
Evolution
Bioterials / Biologics
Life Science Products
Performance Materials
Petrochemicals
Fertilizers
Coal
1902
1930
1950
1970
1990
2000
2010 Technological competences
Mechanical engineering
Chemical engineering
Polymer technology
Material science
Fine chemicals
Biotechnology
DSM Marketing Office
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DSM from 2000 to 2005 : Focus and Value
IC
LSP
PM
2005
H2’02/H1’03
2000
Petro
4
IC
PM
Sales € 8
bn
Divestment Petchem
IC
IC
LSP
PM
Sales € 5.6
bn
Acq. Roche V&FC
PM
DNP
Sales € 8.2
bn
Acq. NeoResins
…………. Second major transformation of DSM …………
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Pharm
a
DSM Vision 2010: Building on Strengths
Building on Strengths
Market-driven Growth
and innovation
Increased Presence
Emerging Economies
Value Creation
DSM Marketing Office
Operational
Excellence
5
Reshaping the Portfolio
Carve out and divest
• Melamine/urea/fertilizers
and Energy
• Elastomers
• Special Products
• Maleic anhydride
and derivatives
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4 core clusters:
• Nutrition
• Pharma
• Performance
Materials
• Polymer
Intermediates
+ 5th cluster:
• Base Chemicals
& Materials
Carve out and partner
• Citric acid
• Anti-Infectives
Reposition
Fibre Intermediates
Strong leadership
provides backward
integration DEP
Focus on Life Sciences and Materials Sciences
DSM Marketing Office
Accelerating Vision 2010
Climate and
Energy
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Health and
Wellness
Functionality and
Performance
Life Sciences
Nutrition
Pharma
Shared
competencies
Emerging
Economies
Materials Sciences
EBAs
Performance Materials
 Markets
 Technologies
 Functional Excellence
Exploiting strong market positions and technology platforms
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Portfolio Synergy Creates EBA Growth Platforms
Personalized Nutrition
• First concepts
patentprotected
• Investments in
Jurilab,
Integragen and
Sciona
Specialty Packaging
Pharma
Biomedical Materials
• First coating
sales
• Investments in
Harland, OPM,
Xylos,
MicroMuscle
• Further growth
Dyneema
Purity®
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• Investment in
FQSI
• Active
systems in
development,
first in food
White Biotech
White Biotech
• Biofuels/
Bio-Based
Chemicals
Programs
• Joined
€ 100 m
French
Biohub
Program
Key Figures
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 Globally > 200 locations, ca. 23,500 employees
 Leadership positions in ~75% of the business portfolio
 R&D spend ca. € 350 million
 Solid balance sheet
(€ million)
2007
H1/08
D%
Net sales
8,757
4814
+ 11 %
EBITDA*
1,247
718
+ 14 %
EBIT*
823
514
+ 23 %
Net profit*
558
355
+ 24 %
Net profit incl. exceptional items
429
355
+ 203 %
* Before exceptional items
NB : EBIT expectations 2008 first increased to 970 Mio Euro, recently further
increased to 1025 – 1075 Mio Euro
DSM Marketing Office
Leader in Sustainability, Now & in the Future
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People, Planet, Profit
Climate &
Environment
Nutrition
Improvement
Internationalization
& Diversity
DSM Values: “We can’t be successful in a world that fails”
DSM Marketing Office
DSM Organizational Chart
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DSM Managing
Board
Corporate Staff
Corporate Staff
DSM Innovation
Center
DSM Innovation
Center
Shared
Shared Competences
&
Competences
&
Business Support
Business
Support
Nutrition
Pharma
Performance
Polymer
Base Chemicals
Materials
Intermediates
& Materials
DSM Nutritional Products
DSM Pharmaceutical
DSM Resins
DSM Agro
DSM Pharmaceutical
DSM Engineering Plastics
DSM Fibre Intermediates
DSM Agro
Products
DSM Nutritional Products
Products
DSM
Melamine
• Human Nutrition and Health
DSM Food Specialties
DSM
Engineering
Plastics
• Animal Nutrition and Health
DSM Dyneema
DSM Elastomers
DSM Anti-Infectives
- DSM Dyneema
DSM Anti-Infectives
DSM Fibre Intermediates
DSMFood
Special
Products
DSM
Specialties
DSM Resins
DSM Melamine
DSM Elastomers
DSM Energy
DSM Energy
DSM Marketing Office
DSM is everywhere
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PRICING
PROGRAM EXCELLERATE
… PRICING IS THE MOST POWERFUL LEVER FOR IMPROVING
REVENUE AND PROFITABILITY
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Impact of 1% change in a category on company profit
12.3
Price
Variable
Costs
8.7
Unit volume
3.6
Fixed costs
2.6
0
5
Source: McKinsey, Simon Kucher & Partners, BCG and Excellerate
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Source: Customers of pricing consultant Simon Kucher & Partners
THE DIRECT IMPACT PRICING HAS ON THE BOTTOM LINE, POSITIVELY AND
NEGATIVELY, JUSTIFIES PRICING AS A TOP PRIORITY!
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MOVING TO WORLD CLASS PRICING IS A JOURNEY
WORLD
CLASS
MATURE
PROCESS
L
E
V
E
L
Optimization
Tools
L
E
V
E
L
Price/Value
Analysis
L
E
V
E
L
Gain
Control
L
E
V
E
L
1
L
E
V
E
L
2
3
Internal
Process
In Place
Baseline
Process is
Ineffective
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5
Excellence
in
Execution
Optimization
Processes
In Place
Value
Processes
In Place
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<1% of companies
<10% of companies
20% of companies
40% of companies
PROCESS
MATURITY
LEVELS
30% of companies
Pricing Solutions Ltd., 2003©
PRICING MANAGEMENT : 2 ELEMENTS
OPTIMIZATION AND EXCELLENCE
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Pricing
Management
Pricing
Optimization
Price
Structure
Pricing
Excellence
Organization
Price
Level
Processes
Price
Consistency
Value Based
Pricing
Performance
Monitoring
Tools &
Systems
People &
Behavior
ACHIEVING THE FULL PROFIT IMPROVEMENT POTENTIAL OF PRICING REQUIRES QUITE
A JOURNEY, BUT ALSO SHORT AND FOCUSSED EFFORTS BRING LARGE GAINS
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Project Approach : Set up
Line Responsibility
Dedicated / Focused Project
Start up/
Kick Off
Define
Team
&
Explain
context
&
Clear
Objectives
Alignment
Analysis &
diagnosis
Quick scan
E.g. Analyze
current prices
• Historic
prices
• Prices
competitors
• Value for
customers
• Own costs
Key
Improvement
levers identified
Option
developmen
t
Prepare for
Execution
In Depth
analysis
& diagnosis
based upon
outcome Quick
Scan
Develop tools
&
Make choices
&
Set targets
Define
implementation
program
&
Training sales
force +other
depts
Define pricing
strategy
&
Segmentation
&
Differentiation
Detailed
Account Plans
&
Owners
&
Timelines
Monitoring
Tools
&
Roles /
Responsibilities
Your Organization Ready, Willing, Able ……………?
DSM Marketing Office
Implement &
monitor
Implement new
customer plans
&
Monitor / Analyze
&
Recalibrate /
Improve
(Deming Cycle)
Results
PCR
RANDOM EXAMPLE : PROFIT IMPROVEMENT POTENTIAL
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Price Index
• Any correlation ?
• Any conscious differentiation ?
• Right Price Level ?
0
1
2
3
4
5
Volume Index
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7
8
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10
PCR Global
Customer profit as percentage of Net Sales
RANDOM EXAMPLE : PROFIT IMPROVEMENT POTENTIAL 20
•
•
•
•
50%
40%
Cost allocation correct ?
Negative customer profits ?
Any conscious differentiation ?
Profitability Levels OK ?
30%
20%
10%
0%
0.0
-10%
-20%
-30%
-40%
-50%
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Volume
PROFITABILITY ANALYSIS PROVIDES INSIGHTS …..
Graph gives insight into profitability of customers
EBIT Contribution Sold-to Parties Tests
EBIT EUR x 1000
2500,0
2000,0
1500,0
Profitable
customers
1000,0
500,0
0,0
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Unprofitable
customers
‘Bleeders’
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ARE YOU CONFIDENT THAT PRICE
LEAKS ARE NOT ERODING YOUR PROFITABILITY?
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Price Leaks By Product
List Price Price exceptions
%
of sales
Incentives
Selling
<10%
volume
Returns
Terms
Freight
Net realised price
Opportunities to control undesirable price leaks in the organisation
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MONITORING SALES FORCE PERFORMANCE
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Average Price And Volume By Salesperson For Product A, Region A
Price
‘Excellent’
EBIT
Impact
15%
Median
5%
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2
3
4
5
6
7
8
9
Volume
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Salesperson
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Project Approach : Set up
Line Responsibility
Dedicated / Focused Project
Start up/
Kick Off
Define
Team
&
Explain
context
&
Clear
Objectives
Alignment
Analysis &
diagnosis
Quick scan
E.g. Analyze
current prices
• Historic
prices
• Prices
competitors
• Value for
customers
• Own costs
Key
Improvement
levers identified
Option
developmen
t
Prepare for
Execution
In Depth
analysis
& diagnosis
based upon
outcome Quick
Scan
Develop tools
&
Make choices
&
Set targets
Define
implementation
program
&
Training sales
force +other
depts
Define pricing
strategy
&
Segmentation
&
Differentiation
Detailed
Account Plans
&
Owners
&
Timelines
Monitoring
Tools
&
Roles /
Responsibilities
Your Organization Ready, Willing, Able ……………?
DSM Marketing Office
Implement &
monitor
Implement new
customer plans
&
Monitor / Analyze
&
Recalibrate /
Improve
(Deming Cycle)
Results
Price setting model
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Price setting based on inside-out and outside-in insights
Inside - Out
Pricing : Financial model /
Internal perspective
Reflects Key drivers
Aims for consistency
Provides Targets
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Outside - In
Customer /
Competitor
Perspective :
Sales Pitch vs. Next
best Alternative
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Account Plans : Key to actions and monitoring
Account plan
Present account
data
Sales
argumentation
Price calculator
Actions
Value calculator
Nr
Action
1
2
3
4
5
6
7
8
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• Standard Format
• Easy link to
reporting Systems
• Every Account
• Every Product
Account Plans :
• Written by Account Manager
• Upfront agreed with Line (Up and Down)
• Transparent Targets and Timelines
• Basis for regular monitoring / review
DSM Marketing Office
List
prices
Owner Due Date Status
Nr
Action
1
2
3
4
5
6
7
8
9
10
11
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13
14
15
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19
20
Owner Due Date Status
MONITORING : SPIDER IN THE WEB !!
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Management & Organisation
 Adjust roles & responsibilities
(RASCI)
 Steer organization towards
price leadership
Processes
 Implement new pricing process
- Regular review /calibration
- Price setting in line wit
business dynamics
- Continuous competitor
intelligence (Value calculator)
Infrastructure
Performance
Measurement
 KPIs
 Monitoring
People & Culture
 Strengthen pricing capabilities
- value based selling / pricing
- Train (new) sales staff
- Lead by example
- Align incentives
- Communicate successes
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 Implement support structures:
- Annual Account Plan writing &
Account Plan database
- Monthly price instructions
- Fast & user friendly tools
Improvement Cycle and making results SUSTAINABLE
Recalibrate
Pricing Model :
Price AND Value calculator
Services
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Account Plans
Segmentation
Leadership
Nr
Customers
Value in
Use
Global vs.
Regional
Competition
Review :
External Factors
Internal Factors
Monitor Progress
Raw
Materials
• Formalize Process
• Define frequency
• Report and Collect : prerequisite for learning
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Action
1
2
3
4
5
6
7
8
9
10
11
12
13
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16
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Owner Due Date Status
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Product Launch
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Innovation : Bigger, faster, cheaper, better
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Business Development Time & Cash Line(s)
€
Opportunity
time
Accumulated Losses
Source: Prof. JP Jeannet, AIM course
DSM Marketing Office
Key Functional Involvement over the Launch Cycle
IDEA
GENERA
TION
Screen?
BUSINESS
FEASIBILITY
R&D
Manufacturing
Marketing
Sales
Legal
Finance
DSM Marketing Office
Develop?
DEVELOP
MENT
Scale-up?
SCALE-UP
&
VALIDATION
TRANSFER
TO
Launch?
RUNNING
BUSINESS
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Review
Marketing and Sales Focus
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Project
Management
Project
Management ProcessProcess
IN SYNC
Idea
generation
Business
feasibility
Development
Scale-up &
validation
Business models
Business
models
Context
Value chains
Value
chains
Adoption barriers
Adoption
barriers
Capabilitiesand
Capabilities
and
assets
assets
Customer
Needs and
Needs
and buying
buying
factors
factors
Segmentation
Segmentation
Market assessment
Market
assessment
Product
Target product
Target
product
profile
profile
Time-to-market
Time-to-market
sensitivity
sensitivity
Registration
Registration
Price
Value for
Value
forcustomer
customer
Cost base
Cost
base
Competition
Competition
Place
Geographic markets
Geographic
markets
Sequentiallaunch
Sequential
launch
vs. big
vs.
bigbang
bang
Sales channels
Sales
channels
Promotion
Product positioning
Product
positioning
Communication
Communication
channels
channels
Brand relevance
Brand
relevance
Company
Unlimited. DSM
Launch plan
Launch
plan
Crossfunctional teams
functional
teams
Sr mgmt
mgmt sponsor
sponsorship/ involvement
ship/
involvement
DSM Marketing Office
Launch
Partnerships
Partnerships
+ Reference
to “Guide to
Business
Planning”
Fit to
Fit
to product
product
positioning
positioning
Sales force
Sales
force
development
development
+ Reference
to “Guide to
Marketing
Planning”
Resource allocation
Resource
allocation
Concept Development : POSITIONING
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Concept # 2
Concept # 1
Concept # 3
Concept # 5
Concept # 4
…………. Creative Part of the Process …………….
DSM Marketing Office
Example Claryl® : Speaking the customer’s language
Description of technical features
Benefits
•
•
•
•
•
•
•
•
•
•
•
•
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“is there any glass there?”
“you don’t have to be up close to see what you’re
looking at”
“you can just concentrate on the picture”
“(it gives you) freedom to hang the picture where
you like”
“you can view your painting uninterrupted, all day
long”
“it’s like wearing sun glasses…it’s better”
“if you buy a picture you want to be able to see it”
“sharper and brighter”
“looks closer”
“the color looks better”
“would look great on tapestry”
“…it really is impressive…”
…also in pictures
Appealing to your mind
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Appealing to your imagination
SOLUTIONS DESIGN & ACTION PLAN
The Fruition …
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Preliminary
Business
concept
Artifact
Solution
concept
Generate :
- Business concept
- Artifact
- Solution concept
- Prototype
- Benefits
- Etc.
DSM Marketing Office
Shared Output and Alignment
between participants, departments
and stakeholders.
MAKE FINAL CHOICES !!
Product Launch
Launch Plan
• Build Product
Launch plan
Optimise
existing
Product
Launch plan
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Speed &
Expansion
SPEED:
• Review timelines
and remove
barriers where
possible
EXPANSION:
• Review target
markets
• Possibilities to
expand market
introduction (new
segments, new
target customers)
Brand
Market research
• Review
existing data
and market
information
• Design new
market research
• Review
market research
results
• Write brand &
communications
briefs
•Brand /
trademark
needed ?
• Write brief
• Write
brand
introduction
plan
Iterative process
Financials :
• Volumes, Price, Mix, Market Share
• COGS
• Costs R&D, M&S, Manuf. Etc
• Result calculation (NPV, ROI etc)
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Communication
& Product
Launch
• Write brief for
communications
agencies
• Write Launch plan
and implement
Conclusion :
Commercialization is as much of a craft as it is an art
•
•
•
•
Establish minimal DSM
standards for mandatory launch
and marketing plans
Develop set of tools, frameworks
and templates supporting plans
Establish disciplined process
with clear roles and
responsibilities
Ensure implementation (KPIs,
incentives, performance dialog)
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•
+
•
•
Foster creativity and
breaking of orthodoxies –go
beyond the obvious
Challenge and enrich plans
by bringing in "street-smart",
experienced managers
Build commercial judgment
in organization, especially
through role-modeling
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This presentation was made possible by ………….
DSM Marketing Office
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