Six Sigma Pricing: Improving Pricing Operations to Increase Profits

Six Sigma Pricing: Improving Pricing Operations to Increase Profits

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by ManMohan S. Sodhi, Navdeep S. Sodhi, Navdeep Sodhi

Apply Six Sigma to Your #1 Business Challenge: Pricing

“Six Sigma is well known for having helped companies save billions of dollars. This book is the first to show us how to use it on the revenue side of the equation to generate profitable growth. This step-by-step guide will be an instant classic–a seminal book on a topic critical to

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Apply Six Sigma to Your #1 Business Challenge: Pricing

“Six Sigma is well known for having helped companies save billions of dollars. This book is the first to show us how to use it on the revenue side of the equation to generate profitable growth. This step-by-step guide will be an instant classic–a seminal book on a topic critical to profitability.”

–Robert Cross, Chairman and CEO, Revenue Analytics Inc. and author of Revenue Management

“Six Sigma Pricing provides companies with a practical toolkit to improve their price management. The authors show executives how to use Six Sigma tools in their pricing processes and instantly improve profits and their bottom-line. This is a truly ‘must-have’ resource for managers everywhere.”

–Eric Mitchell, President, Professional Pricing Society

Many companies have developed solid sales strategies— but without equally good pricing operations, those strategies alone will not add a dime to the bottom line.

The goal of pricing operations is to consistently control price deviations in transactions and contracts over time and across customer segments. This goal of ensuring the prices are not too low or too high in different transactions relative to guidelines lends itself perfectly to Six Sigma. Using the authors’ breakthrough Six Sigma-based approach, you can systematically eliminate pricing-related revenue leaks, driving higher profits without alienating customers. You’ll learn how to define pricing “defects,” gather and analyze relevant pricing data, review pricing-agreement processes, identify and control failures, implement improvements, and then ensure continuous, ongoing improvement in price, profits and customer satisfaction.

The book reflects the authors’ pioneering experience implementing Six Sigma pricing. Whether you’re a business leader, strategist, manager, consultant, or Six Sigma specialist, it will help you or your client recover profits that have been slipping through the cracks in pricing operations.

•Learn why Six Sigma Pricing makes sense

Why you should target pricing operations, and how to do it

• Identify profit leaks from inefficient pricing operations

Why “sloppy pricing” occurs, how to find it, and how to root it out

• Illuminate your current pricing processes, so you can improve them

Understand your market-facing and internally focused pricing processes pertaining to product launch and lifecycle price management, price increases due to escalation in costs of raw materials, promotions, and discounting

• Set up your pricing operations for continuous improvement in line with your pricing and sales strategy

Use Six Sigma to improve and control processes, ensuring alignment with agreed-upon strategy for pricing and sales

• Create an organization that is successful at pricing

Align different functions and levels of the company to achieve targeted profits

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Product Details

FT Press
Publication date:
Six Sigma Series
Product dimensions:
6.24(w) x 9.26(h) x 1.11(d)

Meet the Author

Navdeep S. Sodhi is managing director of Six Sigma Pricing, a consulting firm based in Minneapolis and London. He has more than twelve years of global pricing experience spanning several industries: airlines, medical device, and B2B manufacturing. He has an MBA from Georgetown University. He has applied Six Sigma and Lean methods to pricing in his work for industrial manufacturers. He is the recipient of the Award of Excellence from the Professional Pricing Society. His articles on pricing have appeared in the Harvard Business Review, Quality Digest, The Pricing Advisor and the Journal of Professional Pricing. Navdeep is based in Minneapolis.

ManMohan S Sodhi is professor and head of Operations Management and Quantitative Methods at Cass Business School, City University London. Before coming to Cass, he consulted full-time for ten years at senior levels with Sabre, Accenture, and Scient in a variety of industries including chemicals, consumer-packaged goods, and airlines in the US and in Europe. His managerial articles have appeared in the Harvard Business Review, MIT Sloan Management Review, The Wall Street Journal, Supply Chain Management Review, and other prestigious journals. He has a Ph.D. from the Anderson School of Management at University of California, Los Angeles (UCLA) with previous degrees in manufacturing and in industrial engineering. He is based in London.

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Table of Contents

Preface     xix
Motivation and Context     1
Why Pricing Operations and Six Sigma Pricing     3
Introduction     4
Who Should Read This Book and How They Should Read It     6
Why Target Pricing Operations     8
Pricing Challenges and Six Sigma Pricing     10
What Six Sigma Pricing Is     15
What Six Sigma Pricing Is Not     16
Summary     17
Profit Leaks from Inefficient Pricing Operations     19
Introduction     20
Examples of Price Leaks     21
Why Price Leaks Occur     29
The Role of the Pricing Function     35
Summary     37
Case Study-Pricing Operations and Six Sigma Pricing     39
Introduction     40
Background     41
Six Sigma     42
Define     43
Measure     44
Analysis     48
Improvement     50
Control     51
Results     52
Summary     53
Basics-Pricing Operations and Six Sigma     55
Price and Pricing     57
Introduction     58
Different Types ofPrices     59
Different Levels of Pricing     63
Summary     68
Pricing Operations     71
Introduction     72
Processes and Roles     72
List Price Increase     74
New Product Launch Pricing and Lifecycle Maintenance     75
List Price Increase Due to Increase in Input Costs     79
Promotions     85
Discount-setting and Concession Process     87
Analysis, Report, and Review Processes     88
Summary     89
Six Sigma     91
Introduction     92
Historical Background     92
Why Six Sigma and Not Five or Seven     95
Misperceptions of Six Sigma     98
Application of Six Sigma to Non-manufacturing Situations     99
Five Steps of a Six Sigma Project (DMAIC)     100
Summary     102
Tools for Six Sigma     105
Introduction     106
Tools for the Define Phase     106
Tools for the Measure Phase     113
Tools for the Analyze Phase     116
Tools for the Improve Phase     126
Tools for the Control Phase     128
Summary      129
Doing a Six Sigma Pricing Project     131
Selecting a Six Sigma Pricing Project     133
Introduction     134
Acme     141
Summary     147
Define Phase     149
Introduction     150
The Charter     150
Customers and Their Requirements     155
High-level Process Map     155
Define Checklist     156
Acme     156
Summary     165
Measure Phase     167
Introduction     168
Process Map     169
Data Collection Plan     170
Acme     176
Summary     181
Analyze Phase     183
Introduction     184
Process Analysis     185
Root-Cause Analysis     187
Data Analysis     188
Acme     189
Summary     198
Improve and Control Phases     201
Introduction     202
Improve     202
Control     203
Final Presentation     204
Acme     205
Summary     218
Enterprisewide Deployment      219
Deploying Six Sigma Pricing Enterprisewide     221
Introduction     222
Developing an Enterprisewide Plan for Six Sigma Pricing     224
Goals for Enterprisewide Deployment     229
A Starting Toolset for Six Sigma     231
Pitfalls and Challenges     232
Summary     237
The Takeaway     239
Notes     245
Index     249

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