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
Table of Contents:
Preface
PART I
Motivation and Context
1 Why Pricing Operations and Six Sigma Pricing
1.1 Introduction
1.2 Who Should Read This Book and How They Should Read It
1.3 Why Target Pricing Operations
1.4 Pricing Challenges and Six Sigma Pricing
1.5 What Six Sigma Pricing Is
1.6 What Six Sigma Pricing Is Not
1.7 Summary
2 Profit Leaks from Inefficient Pricing Operations
2.1 Introduction
2.2 Examples of Price Leaks
2.3 Why Price Leaks Occur
2.4 The Role of the Pricing Function
2.5 Summary
3 Case Study–Pricing Operations and Six Sigma Pricing
3.1 Introduction
3.2 Background
3.3 Six Sigma
3.4 Define
3.5 Measure
3.6 Analysis
3.7 Improvement
3.8 Control
3.9 Results
3.10 Summary
PART II Basics–Pricing Operations and Six Sigma
4 Price and Pricing
4.1 Introduction
4.2 Different Types of Prices
4.3 Different Levels of Pricing
4.4 Summary
5 Pricing Operations
5.1 Introduction
5.2 Processes and Roles
5.3 List Price Increase
5.4 New Product Launch Pricing and Lifecycle Maintenance
5.5 List Price Increase Due to Increase in Input Costs
5.6 Promotions
5.7 Discount-setting and Concession Process
5.8 Analysis, Report, and Review Processes
5.9 Summary
6 Six Sigma
6.1 Introduction
6.2 Historical Background
6.3 Why Six Sigma and Not Five or Seven
6.4 Misperceptions of Six Sigma
6.5 Application of Six Sigma to Non-manufacturing Situations
6.6 Five Steps of a Six Sigma Project (DMAIC)
6.7 Summary
7 Tools for Six Sigma
7.1 Introduction
7.2 Tools for the Define Phase
7.3 Tools for the Measure Phase
7.4 Tools for the Analyze Phase
7.5 Tools for the Improve Phase
7.6 Tools for the Control Phase
7.7 Summary
Part III Doing a Six Sigma Pricing Project
8 Selecting a Six Sigma Pricing Project
8.1 Introduction
8.2 Acme
8.3 Summary
9 Define Phase
9.1 Introduction
9.2 The Charter
9.3 Customers and Their Requirements
9.4 High-level Process Map
9.5 Define Checklist
9.6 Acme
9.7 Summary
10 Measure Phase
10.1 Introduction
10.2 Process Map
10.3 Data Collection Plan
10.4 Acme
10.5 Summary
11 Analyze Phase
11.1 Introduction
11.2 Process Analysis
11.3 Root-Cause Analysis
11.4 Data Analysis
11.5 Acme
11.6 Summary
12 Improve and Control Phases
12.1 Introduction
12.2 Improve
12.3 Control
12.4 Final Presentation
12.5 Acme
12.6 Summary
PART IV Enterprisewide Deployment.
13 Deploying Six Sigma Pricing Enterprisewide
13.1 Introduction
13.2 Developing an Enterprisewide Plan for Six Sigma Pricing
13.3 Goals for Enterprisewide Deployment
13.4 A Starting Toolset for Six Sigma
13.5 Pitfalls and Challenges
13.3 Summary
14 The Takeaway
Notes
Index
About the Author :
ManMohan S. Sodhi and Navdeep S. Sodhi wrote the seminal Harvard Business Review article that first revealed how great companies are using Six Sigma in pricing. Mohan is professor and head of Operations Management and Quantitative Methods at Cass Business School in London. He has a Ph.D. from the Anderson School of Management at UCLA with previous degrees in manufacturing and in industrial engineering. 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 Europe. His managerial articles have appeared in the Harvard Business Review, MIT Sloan Management Review, The Wall Street Journal, Supply Chain Management Review, Interfaces and other journals. Navdeep is a pricing practitioner and thought leader with over eleven years of global pricing experience spanning different industries: airline, medical device, and 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 and the Journal of Professional Pricing.
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