Semiconductors Part III: Reaching Peak Price and Sales Effectiveness

By Israel Rodrigo
October 11, 2016

In Part I and Part II of this series, I highlighted two ways companies can continue to grow once their merger or acquisition deal is complete. Pricing effectiveness and sales efficiency are the two best ways a company with new considerations can ensure sustained profit growth. Let’s look at each of these in little more detail:

Implementing Smart Pricing:

There are numerous ways companies can approach pricing effectiveness, but many companies are adopting “Smart Pricing”—a combination of data-based segmentation and price optimization—to create meaningful pricing guidance for the Sales team to add bottom-line revenue.

A focus on Smart Pricing keeps pricing as a top priority, receiving consistent, meticulous attention from all levels, even the C-suite.

Many companies use segmentation in some capacity, determining a product’s price and making adjustments based on a few dimensions. In the B2B world, where companies are operating in negotiated environments, different prices can be charged for different customers based on the volume they commit to or a company’s share of the total spend (share of the wallet).

Product pricing can also be adjusted across regions, countries, and go-to-market channels. In this “conventional” segmentation approach, management simply reviews the available dimensions and chooses those which, based on experience, drive the biggest differences in pricing behavior. This approach has the virtues of simplicity and speed, and in some cases, may yield reasonable results, especially if there are relatively few candidate dimensions and the key drivers of pricing are well understood.

But nowadays, companies are getting more sophisticated. They recognize that using a data science approach for pricing can be helpful for creating statistical segmentation, which allows them to set prices in a more “scientific” manner. A deeper level of segmentation enables you to group together transactions that are characterized by a similar “willingness to pay,” which combines customers and products together with a variety of relevant categories to determine an optimized target price range.

This approach can further be layered with the business rules and insights to leverage smart pricing guidance and deliver the insights directly to pricing teams and field sales representatives for effective negotiations each deal at a time, every time.

Increasing Sales Efficiency

Post merger, the unified sales team is now tasked with selling additional products from each of the pre-merger companies. This brings on additional challenges of product training and understanding the value proposition of products. With the new information and cross-sell options, representatives must be prepared at the time of negotiation and able to identify the synergy that exists for each sales opportunity.

Here are 7 key questions to consider for increasing the efficiency of your Sales team:

  • Do they know all the cross-sell opportunities that exist post-merger?
  • Do they understand that if a customer asks for a discount, they can substitute an equivalent featured product with similar or better gross margin?
  • Do they have the right mobility tools to quote on the spot, increase win rates, and add to top line revenue?
  • Can they see all pertinent pricing approval levels they have to go through prior to submitting the deal? 
  • Can they access the customer’s volume compliance data prior to going into the negotiations?
  • Can they access the customer’s spend over time and how often the customer actually buys?
  • Do they know the right target prices for each of the micro-segments they are selling into?

This is where it gets really interesting! Semiconductor companies post-merger can greatly benefit from an investment in the right set of tools to make sure the sales process is mobile and sales reps get the smart price guidance while on the road. In this system, representatives can expedite the sales cycle time by no longer needing to check back with HQ to see what price point works for which customer; they have the answer at their fingertips and an upper hand during negotiations.

The recent group of mergers and acquisitions led to growth for certain companies, but once the dust settles, the growth will plateau. By properly utilizing pricing and improving sales effectiveness, these companies can set themselves up for sustained success on a long-term basis.

  • COGS , High-tech OEM , pricing , profit , profit equation , sales , Sales Effectiveness , semiconductor

    Israel Rodrigo

    Israel is a Business Consultant at Vendavo with more than 15 years of extensive international experience in logistics, wholesale distribution and software industries. Prior to Vendavo, he worked at Deutsche Post DHL and McKesson in several strategic positions, such as controlling, customer finance, sales development, and leading profit optimization and pricing transformation. He holds a BS degree in Statistics and Economics from Universidad Carlos III de Madrid (Spain) and lives in Seattle, Washington.