Video 3 - Pricing Impact on Sales - Pt 3 (Revenue Management)

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Из курса от партнера Fundação Instituto de Administração

Sales & Marketing Alignment

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Fundação Instituto de Administração

Sales & Marketing Alignment

13 оценки

Курс 4 из 5 — Specialization Strategic Sales Management

Welcome to Course 4 – Sales & Marketing Alignment. This course focus on what is considered by most academics and practitioners as the biggest challenge that sales professionals have to face. As we discussed in Course 1 – Effective Sales, strategy, and sales must be integrated to support a high potential for value creation through the sales functions. We also mentioned that strategy and sales integration can be supported by marketing functions. The discussions then went through sales strategy supported by intelligence analysis (Course 2), sales models and frameworks to support sales planning (Course 3). By the consequence, at this point of this specialization, you are in a good position to go further in the sales planning and management functions. And this is the moment to tackle one of the biggest challenges that most sales professionals must address with diligence – Sales & Marketing Alignment. The primary learning outcome of this course is to prepare you to apply concepts to support this alignment, with prescriptions and recommendations that contribute to improving the alignment. The improvement in the knowledge, competencies, and skills regarding sales & marketing alignment will contribute to increasing the potential for value creation from a strategic sales planning approach.

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MODULE 1 - Marketing Principles for Strategic Planning

This module is aimed to deepen the discussion regarding marketing and strategy concepts. And these concepts play a critical role in the sales planning and management functions. A company's managers can perform this role smoothly; another company's managers may have limitations in this process. In the latter case, marketing and sales functions will be misaligned, which reduces the company's value creation potential through the sales. Therefore, this module initiates Course 4 with focus on the marketing foundations that relate to sales. The module's primary learning outcomes are - Improved understanding of the foundations of marketing and how they interact with sales; identify the interactions between marketing related variables and the sales functions; and improved knowledge and skills to support marketing planning through the sales team contributions in product development, pricing, place, and promotions.

Video 1 - Pricing Impact on Sales - Pt 14:33

Video 2 - Pricing Impact on Sales - Pt 2 (Pricing Generic Strategies)5:07

Video 3 - Pricing Impact on Sales - Pt 3 (Revenue Management)7:30

Video 4 - Pricing Impact on Sales - Pt 4 (Improving the Pocket Price)5:19

Познакомьтесь с преподавателями

Samantha Mazzero
MSc, MBA, BS Math
FIA Profuturo – Futures Studies Program
Nelson Yoshida
Ph.D., MBA, B.Eng.
FIA Profuturo – Futures Studies Program
Cesar Rodrigues
Specialist Professor

Welcome back to our strategic sales management specialization.

This is our third lesson about pricing.

Let's get ourselves located.

This is course four.

We're talking about sales and marketing alignment.

We are on a first module marketing principles for strategic sales planning.

In this first module,

we have a taste of the history of marketing and talking about how pricing impacts

sales with a discussion how much influence should sales have in pricing decisions.

In today's lessons, we were approached pricing from another angle.

What happens after marketing has set the prices to consumers or clients?

The price clients and consumer space just the top of

what is described has the pocket price waterfall.

You can see that on the screen.

The pocket price waterfall is a powerful tool to

identify opportunities to increase revenues.

We call revenue our net sales.

What remains after all deductions are taken out of the gross sales.

These deductions are discounts, rebates, sales taxes,

distribution expenses, product returns,

retail margin, promotional allowance, and some more.

For the revenues, fixed and variable costs must be

deducted and you are left with your operating profits.

Some people call gross profits.

Pricing is the fastest and most effective way to increase profits.

Suppose you have a product that has a 12.5% profit margin.

Give it a 1% price increase in your profits will go up 8%.

The assumption here is that no loss of volume will occur.

Suppose now that you were able to cut your costs by 1%.

Instead of increasing price,

profits would increase should but by only 5% not eight.

Another scenario, instead of increasing price by 1%,

you increase the volume by the same percentage.

But, profits will of course go up by just 2.5% not 8%.

But as the same goes,

what goes around comes around,

the impact of price decrease is also enormous.

For a typical SNP 1500 company,

a 5% price cut would have to be compensated by growing

the sales volume by 18.7% just to offset the loss and profit.

This underscores the power of

pricing or should we say the power of net price or pocket price.

Pocket or net price is analogous to revenue.

List price or full price is equivalent to gross sales.

So, gross price times volume sold is equal gross sales.

Pocket or net price times volume sold is equal revenue or net sales.

Let's examine in detail the deductions that are typically made from the list price.

They are standard distributor discount,

special distributor discount, retail discount,

and customer discount, on invoice promotion.

It is always equal invoice price.

Those are deductions that generally appear invoices.

Nevertheless, there are other deductions that do not appear in the invoice.

They are off invoice items.

So, from your invoice price you must to deduct cash discounts, product returns,

cost of carrying an account receivables, cooperative advertising,

merchandising allowances, volume rebates,

special promotions, and even freight.

What is left? That's your pocket price,

and it will still have to take care of manufacturing costs and all the other expenses.

For now, we want to focus on improving the pocket price.

The discipline of managing pocket price is called

revenue management or gross-to-net management.

Why is it important?

Think about this, if you increase your list price,

you will in the great majority of cases lose demand in volume.

Customers again will buy less units.

But what you really want to achieve is to increase the pocket price which

can be achieved without messing with the end customer.

You can do it by decreasing the items that appear between list price and pocket price.

Let's have an example here.

Let's say your list price is $100 and your deductions are $50,

of which $8 is due to product returns.

Thus, your pocket price is $50.

Say your manufacturing costs are $20,

then your gross profit margin is 30 divided by 60%.

Imagine that by improving processes,

the product returns are cut in half.

Your list price is still $100 and your deductions are now

$46 of which $4 now is due to product returns.

Now, your pocket price is $54 and your manufacturing costs are still

$20 then gross profit margin is 34 divided by 54, 63%.

This means that by managing the gross-to-net,

you're able to increase your revenues without having

to touch on the price-to-customers, the list price.

What all this has to do with sales people,

the account managers and sales managers a lot.

The majority of deductions from gross sales to revenue or

list price to pocket price are under the control of the sales functions.

The marketing functions deals primarily with Price to Consumer.

In most of the time,

gross-to- net deductions fly under the radar.

The message here is that the sales function has the power to

improve the business by managing the pocket price waterfall.

How can this be done?

I'll give you some ideas and best practices,

but you'll have to wait for the next meeting.

I see you later. Chao.

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