Half, n. – The amount of market-share change that is typically explained by pricing. That’s the good news. The bad news is that no-one has any clue what the other half is due to.
Paul’s Pricing Dictionary: Half
January 18, 2016 by ·
Paul’s Pricing Dictionary: Re-present, an illustration
December 10, 2015 by ·
I was asked if I could give an example of a deal which had been “Re-presented”.
Here’s are two simplified (fictional) deals:
| DEAL 1 | Region 1 | Region 2 | Region 3 | Region 4 |
| Product 1 | 15% | 10% | 20% | 15% |
| Product 2 | 25% | 35% | 35% | 25% |
| Product 3 | 40% | 35% | 40% | 40% |
and
| DEAL 2 | Region A | Region B | Region C | Region D |
| Product A | 40% | 40% | 40% | 35% |
| Product B | 35% | 25% | 25% | 35% |
| Product C | 20% | 15% | 15% | 10% |
Which is the better deal for the customer? Deal 1 or Deal 2?
Scroll down for the answer …..
They are the same deal.
Deal 2 looks better because it has been presented with the larger discounts in the top-left hand corner of the matrix. Using this approach certainly placated one customer who it turned out was becoming unhinged by the first discount which met their eye as it was presented in Deal 1: 15%. And then by time they got to the second number – 10% – they were no longer rational. Conversely when Deal 2 was presented they immediately thought that 40% was a huge improvement over the 15% – even though they knew they were for different products. In their mind they had characterized Deal 1 as 15%, and Deal 2 as 40%. And they thought, in the same way that probably everyone does, that they were a sophisticated, rational and objective purchaser.
So why was HP’s X86 Servers’ turnaround ignored in last quarter’s call?
November 23, 2015 by ·
And HP Storage and HP Enterprise Services’s non-existent turnaround emphasized so much?
Maybe it has something to do with some other aspect of the business …….. Just to re-cap, 7 out of the last 8 quarters have shown positive year-over-year growth. Last quarter was a record quarter for 3Q:
So what’s the problem? Let’s look at market-share:
A decline of 860 bps in global revenue market-share from 38.5% to 29.9% from 4Q10 to 2Q15 (according to IDC) might be the reason. Which is really brought into sharp focus when you look at market-share gap:
Although the gap to Dell has now widened to 800 bps from a low of 560bps (D), this is less than half what it was in 4Q10 (A) – 1,740 bps. And there are no signs of recovery in market-share either: it has been pretty flat since 1Q14.
And to simplify the visual, selecting specific quarters:
That’s a lot of market-share to lose. And there are no indications that ISS is making any traction in re-gaining any of that lost market-share opportunity. So maybe this is why ISS’s progress in its revenue growth is being over-looked.
Let’s see what Tuesday’s results from HP and next week’s market-share update from IDC brings.
Paul’s Pricing Dictionary: Panic
November 18, 2015 by ·
Panic, n. If your Pricing Team isn’t panicking, don’t panic. If the Pricing Team is panicking, then you should really feel free to panic.
Paul’s Pricing Dictionary: Re-present
November 17, 2015 by ·
Re-present, vb. To re-present a deal by re-ordering and re-formatting discounts in order to give the impression of an improved deal. Not the same as re-structure in that the discounts quoted are exactly the same as before.
Paul’s Pricing Dictionary: Currency
October 28, 2015 by ·
Currency n. The first refuge of the scoundrel. 1) The first excuse used as soon as there is an adverse movement in exchange rates to explain business under-performance. This is a phenomenon which miraculously disappears as soon as there is a beneficial shift in exchange rates. 2) The perfect excuse for a list price increase. 3) One of the many reasons why list prices matter.
So What Should a Turnaround at HP Enterprises Look Like?
October 9, 2015 by ·
A turnaround is going to be gradual. a progression, an evolution. Perhaps it would look like this …
- most recent quarter posted shows Y-o-Y growth
- four most recent consecutive quarters posted show Y-o-Y growth
- most recent posted quarter is a record quarter
- four most recently posted quarters are records
Well looking at HP ISS …. and this format might be strangely familiar to some of you: dark green highlighting indicates +ve Y-o-Y growth; red, negative.
Green good, red bad. Still with me? Yes?
Green with yellow bolded font shows record quarters; light green indicates weak +ve growth between 0-2% … the reason for this will be clear when we look at HP Storage.
- most recent quarter posted shows Y-o-Y growth – YES
- four most recent consecutive quarters posted show Y-o-Y growth – NO
- most recent posted quarter is a record quarter – YES
- four most recently posted quarters are records – NO
So in the past 8 quarters there has been quite a lot of dark green: 7 of the past 8 quarters have shown growth which came after 8 consecutive quarters of red. So ISS clearly is showing signs of a turnaround, whereas looking at HP Storage:
- most recent quarter posted shows Y-o-Y growth – NO.
– The trouble with storage is that the only quarters that they’ve shown growth have been <2% of which there have been no less than four. Excluding those, HP Storage hasn’t shown significant (i.e. >2% Y-o-Y growth – dark green) since 4Q 2011. - four most recent consecutive quarters posted show Y-o-Y growth – NO.
– 5 of the past 6 are red; 10 of the past 13 are red. - most recent posted quarter is a record quarter – NO
– most recent record quarter for a quarter was back in 1Q 2011, and for 2Q through 4Q, back in 2008. - four most recently posted quarters are records – NO
So that’s pretty clear. No turnaround there. But what about Technology Services, HP Enterprises’s “crown jewel” according to Meg Whitman:
- most recent quarter posted shows Y-o-Y growth – NO
- four most recent consecutive quarters posted show Y-o-Y growth – NO
- most recent posted quarter is a record quarter – NO
- four most recently posted quarters are records – NO
Just lots of red. Well, that seems pretty straightforward. It’s just not a “great business”. And since we have mentioned them, just to complete the picture, let’s add HP Networking:
- most recent quarter posted quarter shows Y-o-Y growth – NO**
- four most recent consecutive quarters posted show Y-o-Y growth – NO
- most recent posted quarter is a record quarter – NO**
- four most recently posted quarters are records – NO
– Although while it should be noted that in 2014 all four quarters were record, they were only marginally higher than the previous three years. Indeed 1Q & 2Q of 2015 were the worst quarters for HP Networking since 2010.
**I’ve excluded 3Q 2105 because of (a) non-organic growth was only cited with currency impact excluded (and so isn’t consistent with everything else above) (b) the impact of acquisitions – and not just because there is non-organic growth that has been rather expensively paid for, but think about it: also the core business is now highly incented to perform, particularly if “adopt -and-go” is the integration approach for overlapping product segments, i.e. they had better grow or they are out ….
So why was HP Storage and HP Enterprise Services’s non-existent turnaround highlighted so much in the quarterly call?
Paul’s Pricing Dictionary: Commodity
October 7, 2015 by ·
Commodity, n. An undifferentiated product or service which enhances neither customer choice nor business nor investor returns. Often used in the context of an excuse “it’s only a commodity” by those who have either not tried, given up or are lacking in imagination.
Paul’s Pricing Dictionary: Haste
October 1, 2015 by ·
Haste, n. Hurry, rush. Price in haste, re-price at leisure.
Pricing still a mystery to most people: 9 out of 10 executives strongly underestimate or do not know the impact of price reductions
September 24, 2015 by ·
In a study by IE Business School & Simon-Kucher & Partners, 1,225 executives from all industries were asked: “With a profit margin of 20%, how much does the volume of a product need to increase in order to compensate for a price reduction of 10%?” Only 4% estimated the answer correctly. 74% strongly underestimated the answer and 17% didn’t know.
Presented at a Professional Pricing Society webinar on 14th September, 2015 by Philip Daus of Simon-Kucher Partners.
Which category do you fall into?
