BCA

From: World Advertising Reseach Center (WARC)

Many brand owners are still struggling to set prices in a way which serves their wider strategic objectives, according to a new study.

Accenture, the consultancy, surveyed 1,000 CMOs and CFOs worldwide, and found that 56% expected company sales to rise by 5% or less in 2011, while just 14% anticipated posting double-digit revenue gains.

However, although 71% of firms put price optimisation in their top three priorities for the next 18 months, only a quarter boast “sophisticated” capabilities here at present, and 36% stated processes are “manual and fragmented”.

Indeed, three-quarters of corporations fail to tailor pricing for different marketing goals, and the same number suggested pricing is not closely linked to overall strategy.

Marketing teams make pricing decisions

Marketing teams were always involved in making pricing decisions at 70% of the featured companies, ahead of product managers, registering 58%, and finance departments, on 52%.

Exactly 66% of manufacturers use analytics to inform pricing levels, compared with 56% using such systems to generate insights, 52% monitoring the impact of price changes, and 50% testing hypotheses.

“In a market of essentially permanent volatility, CFOs and CMOs are staying a bit more reserved in their plans, despite their own expectations for growth,” said Greg Cudahy, managing director of Accenture’s Operational Strategy practice.

Recovery periods allow shift away from cost cutting

“In past recovery periods, there has been a greater expectation of the ability to capture price leverage across the board, and a related shift away from cost cutting and cash- position building.”

Elsewhere, a 54% majority of the panel agreed good service was a primary factor in securing a competitive advantage, beating innovation and product differentiation on 53%, and price positioning with 51%.

Marketing and branding logged 48% on the same metric and the value proposition received 42%.

Advertsing expenditure rates to decline

Looking forward six months, 27% of firms intend to reduce their advertising expenditure rates, measured against 21% pursuing such an approach during the last 18 months.

Around 30% of organisations planned to implement product redesigns and rationalisation, as well as customer rationalisation, while 49% hoped to streamline corporate structures.

Data sourced from Accenture; additional content by Warc staff, 4 August 2011

By John Riley

With a depressed economy and lagging sales, companies have significantly reduced their purchases.  As a result, sales personnel are dealing with tight fisted buyers intent on preserving their company’s money. However, with a little extra effort and creative thinking, a salesperson can find a way to pry some of that money loose.  That extra effort can be influenced by an incentive program.

 Incentive programs are most commonly associated with sales campaigns, however , they can also be used to increase employee loyalty.  Both programs have been effective. Over the years, these programs have become more pervasive, as  management felt pressures to increase revenues and profits.

 The Incentive Federation conducted a study in 2003 and found North American companies spent approximately $27 billion a year on travel and merchandise programs.  They also found that 78% of respondents remembered travel and merchandise longer  than cash payments.

 Companies have found, as they move to online administration, they can cut costs and improve their ability to exercise good control. The Incentive Federation pegs the cost savings at 60% . When you consider the printing costs of all the literature, direct mail and catalogs or brochures used to implement earlier incentive programs, savings were substantial by switching to the Internet. Other cost factors are award selection and award fulfillment.

Ironically, cost is also the reason many companies have not used incentive programs.

The Federation’s Harold D. Stolovitch, Richard Clark and Steven J. Condly conducted an additional study that revealed more metrics:

When incentive programs are directed toward individuals, performance increases by 27%.

When the program is directed at teams, performance increases by 45%.

Some 92% of respondents who reached their goals credited the incentive plan.

A properly structured incentive plan rewards only those who meet their performance goals. That means you don’t pay for substandard performance. In general, any function that generates metrics can be measured and therefore is a candidate for an incentive plan.  A basic tenet of designing a plan is to have ‘stretch’ goals, i.e. goals that can only be achieved with extra effort. 

 In my own experience, most of the metrics mentioned above were validated while with my former employer. For example, one year, we took 350 of the top building product distributors on a week-long trip to Monaco and London with accommodations at quality resorts . Each year it was a different international locale.  There was not a single distributor on that trip or any other trip who didn’t extend that extra effort to make sure he or she was included.

Travel tends to be more popular than merchandise.

Another incentive program was used in the agricultural market. Again, distributors were the target, but this time the awards were merchandise.  The awards were individual  and pegged to the distributors specific merchandise interests which were determined in advance of the program. In this case, the length of the program was six months and tied to the farm building construction season. The program achieved its objectives  and was continued for four years.

 As a testimonial to the success of incentive programs, the Online Incentive Council , a strategic industry group of the Incentive Marketing Association,  recently reported the online incentive industry is doubling every year. 

Online incentive programs properly structured and administered by the right provider can make a difference in your business.  Revenues can increase.  Costs can go down.

 If the sale department is worried about meeting their quota this year, an incentive program could be the answer.