Implementing Pricing Best Practices in the Context of a Deregulating Market

1. Implementing Pricing Best Practices in the Context of a Deregulating Market A joint presentation by: Ian Thompson, Client Manager, KSS Silke Lehmann, Subject Matter Expert - Retail Pricing, Accenture

2. Price is a Powerful Lever • Lowest-cost lever to pull to meet performance goals • Highly tactical • Requires • Appropriate strategy • Efficient, responsive process & organisation • Enabling technology • Critical element in developing & maintaining brand image • Impact of a 1% improvement…….on profit

3. 1/month 1/week 2/week 1/day Pricing Frequency 1/month 1/week 2/week 1/day 2/day+ Emerging Stable Highly competitive Volatile Regulated Markets Market Evolution – emerging Micro-Markets • Channels of trade • Pricing less cost-driven, more competitor-oriented • Growing consumer awareness of price • Networks develop (locations, facilities) • Business models change • Need for pricing strategy development • Non-traditional competition • Timescales shorten (stable to rapid change) • Predictability diminishes

4. Pricing Challenges Key capabilities for operation in a dynamic market: • Visibility of market dynamics and competitor activity • Greater responsiveness based on real time data • Up-to-date information to manage network performance • Price strategies that address a changing market • Ability to maintain consistent brand/price image • Ability to remain competitive – defend volumes, retain customers, drive profit • Ability to capture local market opportunities • A transparent process to justify actions

5. Critical Areas of Pricing Practice • Understanding and analysing the market and customers • Selecting tactics to support chosen strategy • Executing tactics accurately and consistently • Monitoring performance • Challenging strategy to identify new opportunities • Responding quickly and efficiently to market changes

6. Requirements • Central repository of price information • Pricing platform • Consistent pricing rules • and workflow • Management reporting and control • Forecasting & analysis • Demand-based pricing • Price optimisation • Culture of pricing The Solution Opportunities Pricing Strategy Pricing Process Pricing Resource & Education Pricing System

7. Setting up pricing the right way enables first mover advantages in deregulating markets “As-is” & “To-be” Processes Enhanced pricing • Market intelligence (data capture & availability) • Managed according to multiple performance goals • Highly automated (price decision and implementation) • Ability of sites to accept & implement changes • Site compliance monitoring • Gaining and applying market insights Traditional pricing • Limited access to market data • High degree of paper-based processes • Significant manual interaction required • Limited use of pricing experience for broader network performance management

8. Key triggers of organizational size Market conditions Competitive position Network size Business Model Number of price changes Sophistication of pricing Pricing engine Skills & experience Duration of price transaction Number of resources required Degree of automation Data quality Required manual interaction Resources Key challenges setting up a pricing organisation: • Skill requirements • Sizing • Pricing culture • Team organisation & Decision authority • Field sales education

9. Technology

10. Central repository • Manage data • Validate data • Define micro markets • Price generation • Price/management rules • Process automation • Performance monitoring • Site sensitivities • Quantify/rank competition • Optimise prices • Forecast volume/profit • Simulate price impact • Schedule distribution • Exception reporting • Routine reports • Ad hoc analysis PriceNet Solution Price Management System Data management Price management Modelling & Optimisation Reporting & Analytics

11. Solution Attributes • Highly configurable • Market, tactics & strategy will evolve & change • Identify & respond to variety of price triggers • Scalable • Flexible • provide range of integrated pricing engines • variety of reporting/analysis options • Organisation-wide platform for consistency • Distributed access for field/remote workers

12. Project readiness Step 1 Phased System Rollout Step 2 Extend Pricing Capabilities Initial System Implementation Scoping & Definition Bringing Pricing Capability into Reality • Data preparation • Network data • Competitor data • Dynamic data Training Field awareness Dynamic data collection Process definition Define price & management rules • Define and qualify • Brand pricing strategy • Brand objectives Integration requirements

13. Consistent implementation of pricing policy Resource and process efficiency • Protect brand image • Greater knowledge & visibility • Price verification • Automation, price by exception • Reduce operational costs • Time for higher value decisions Increase your competitiveness Increase profitability from pricing policy • Speed of response • Real time, event driven • Optimal response to competitors • Increase gross margin • Immediate and sustainable • Identification of true competition The Benefits

14. Incorporated in 1993 Strong revenue growth, profitable operations Experience across USA, UK/Europe and Far East / Australia Solutions for fuels & merchandise Offices in UK & USA Focus on pricing 50% of staff in R&D Advisory board for solutions development Complete Pricing Solution Strategy Process Accenture KSS Technology Resources KSS and Accenture • FY 2003 revenues: US$ 11.82 billion • ~ 95,000 professionals • Offices in 48 countries • Serve 87 of the Fortune Global 100 • Strong track record in the oil industry • Extensive experience helping clients to manage challenges in deregulating markets

15. Markets are changing Market Position • Competitive pressures • Market dynamics • Readiness • Defend volumes • Management and control • Visibility & understanding • Transparency Conclusion A call to action: • Price is a powerful lever • Establish a proven pricing capability now • Consider process, strategy & enabling technology as one • Engage KSS & Accenture to deliver complete solution

16. Contact Details Ian Thompson, Client Manager KSS Ltd 7th Floor St James’ Buildings 79 Oxford Street Manchester, M1 6SS UK Tel. +44 161 228 0040 info@kssg.com http://www.kssg.com Sandeep Biswas Accenture India 17th Floor, Express Towers Nariman Point Mumbai 400 021 Tel. +91 22 5630 4128 sandeep.biswas@accenture.com http://www.accenture.com