Why Sanitary Products Providers are Ditching the Status Quo & Embracing Value-Based Pricing

Dr. Rainer Schlamp, partner at EbelHofer Consultants, joins us to dissect an industry that often flies under the radar, but is essential to our everyday lives. The sanitary products industry is a complex and vibrant ecosystem weaving together producers, wholesalers, retail stores, contractors, and web shop consumers.

Often products are bundled and sold together as a total solution to fit architectural design specifications and must be priced as such. Rainer and host Barrett Thompson discuss why value-based pricing is essential in this industry, how to factor value into a solution sale, and the challenges facing commercial leaders charged with setting and updating price in an evolving digital commerce landscape.

Learn more about EbelHofer Consultants here

Featuring
Dr. Rainer Schlamp

Dr. Rainer Schlamp

Remember, a successful pricing strategy is a blend of art and science, strategy and tools, process and people. So dive in, be ready to adapt and keep a focus on delivering the value you have to deliver. And above all, never underestimate the power of well-crafted pricing strategies. It can be a real game changer for your success.  
- Dr. Rainer Schlamp

Episode Transcript

Dr. Rainer Schlamp: It's not just about numbers. It's about understanding the value from the customer's perspective. Remember a successful pricing strategy is a blend of art and science, strategy and tools, process and people. So dive in, be ready to adapt and keep a focus on delivering the value you have to deliver. Above all, never underestimate the power of well crafted pricing strategies.

It's not just a part of the business. It can be a real game changer for your success.

Barrett Thompson: Hello everyone. My name is Barrett Thompson. I'm the vice president of customer and industry relations at Zilliant, and I'll be your host for our podcast. I'm joined today by Dr. Rainer Schlamp from EbelHofer Consultants.

Rainer, before we jump into our topic, can you share something interesting or even surprising about yourself that we wouldn't learn if we would check you out on LinkedIn?

Dr. Rainer Schlamp: Yeah, sure. My professional life revolves around [00:01:00] pricing, as you know, and sales optimization, where data and strategy intersect to drive business growth.

Yeah, my personal life is fueled by many joyful moments with my family. I've got a wife and three kids and we are very active. Now it's more skiing and in summer it's more biking, bike rides, very long bike rides. And those are the moments that are really priceless.

Barrett Thompson: You're making memories. You're making memories and putting them away in the treasure vault.

I commend you for that. It's great. Well, thank you for sharing. Let's talk a little bit about your professional background and also let our listeners know what EbelHofer is doing for its clients.

Dr. Rainer Schlamp: Absolutely. So here at EbelHofer, we like to think of ourselves a bit of a secret weapon for the businesses.

We are a boutique consultancy, but don't let the word boutique fool you because our team is really experienced and seasoned with very much experience. What we do is really straightforward. [00:02:00] So, but very impactful. We deep dive into the worlds of pricing and sales optimization, mainly. In a nutshell, we are all about commercial excellence, right?

It's pricing, it's sales, but it's tailor made for each client. And this one size fits all, this is not our turf. So we want to make it really work for our clients. We're not just crunching numbers, but really making sales strategies, pricing strategies. And this is what it's all about at EbelHofer.

Barrett Thompson: And there's a great need for that in the market without question. I'm so glad to have you with us today as we're going to take a deep dive into the sanitary fixtures industry, which you know very well, and it's expected to continue expanding, but we know they're facing some unique challenges.

And I think these might be familiar challenges, even in other industries. Rainer, please characterize this sanitary fixtures industry. Let's talk about the products they're selling and who's buying it, how they go to market just to get our conversation started.

Dr. Rainer Schlamp: [00:03:00] Of course. We're examining an industry that's quite important for everyday life for every one of us, but often flies under the radar.

So we're talking about the world of bathroom fixtures, as you just mentioned, and fittings. The products, they are fundamental, but essential, right? Wash basins, faucets, toilet bowls, all the nice things that you can imagine. And a range of various installation products that make everything smoothly running and looking good in our wash and bathrooms.

And now, but when it comes to getting those products into our homes and businesses, the journey quite is fascinating, some producers opt for a direct approach, going to the markets, connecting directly with their end customers. But the real powerhouse in this market, this is the wholesale industry. Giants dominate this market.

They are the crucial link and they are ensuring that installation companies have everything they need to bring their top products to the end customers. [00:04:00] But here's an interesting twist as well. Wholesalers, they are just not behind the scenes players, but many have stepped into the spotlight with their own workshops, having really huge web shops behind their facades and making it even easier for folks to find, purchase what they need. So in a sense, it's a very vibrant ecosystem where products flow from producers to wholesalers, then to installation companies. And finally, to the place where it all matters, and this is our bathrooms.

Barrett Thompson: Thanks for sharing that description. And what forces are at work then in this multi step evolving industry?

Dr. Rainer Schlamp: Oh, this industry is certainly feeling the heat from a few different directions from my perspective. First of all, the rise of the online shopping, this online business is a real game changer here.

They have thrown the doors wide [00:05:00] open to the end customers, right? They can have a peek into a world of options and prices that they never had before. This transparency is really fantastic for the online shoppers, but it's really shaking the industry.

They're really afraid, and you see when prices starts ringing widely and drifting away. And from the recommended retail pricing, you can imagine, and you know from yourselves that those prices are real moon prices sometimes. It can slow the whole price quality balance out of whack. And then there's the feedback loop, or should I say the lack of it, because trends go into the marketplace.

But they are not always making the way back to the manufacturers. So this disconnect can leave producers a step behind. So they are lagging, trying to catch up with what the market’s really craving. And then let's talk about the sheer scale of offerings of those, in those platforms. We are talking about product portfolios of millions sometimes, right?

So it's really complex and keeping track of those changes. monitoring [00:06:00] prices and staying on top of some also regulatory things and regulatory adjustments. It's like trying to find a needle in a haystack. It's not just time consuming, but very complex and huge. But there is the kicker from my perspective.

It's a massive chunk of business that's already happening online. And this isn't just a trend, it's the future knocking on the door. So the industry is not just struggling with the challenges of today, but. It's gearing up for a digital first tomorrow.

Barrett Thompson: Yeah, I think clearly the online is going to continue to grow.

It will continue to be dominant. And I too have seen signs of what you've described here. There's reaction and then overreaction and misdirection in pricing. The disruption and the suddenness with which online has arisen for some of these B2B manufacturers and channels has created that kind of back and forth.

And I think we're learning how to grapple with it. Hey, we're trying to get our arms around it. Let's talk about the products themselves for a moment. As you were [00:07:00] describing the various fixtures, you know, when I've been in commercial buildings, residential buildings public buildings, for example. You see many different types, shapes, colors, styles, arrangements, right?

No two look the same. You can see that designers have been at work. Architects are at work, different amounts of space that they're allowed to work with and layouts. Can you talk about that and what influence it may have on some of the complex products that you were just mentioning before?

Dr. Rainer Schlamp: Yeah, exactly.

I mean, the product landscape here is really complex and complicated as you just mentioned. So I was thinking in a kind of a puzzle where certain pieces are designed to fit together, particularly in the installation context, right? So you have the fitting and you have to write according products to one close to each other.

Some products are like partners in a dance, I would say, they're meant to move together, but these relationships, [00:08:00] they can guide or limit those choices, right? So it's not, everything goes with each other quite well. And there's the realm of possibilities. As you just mentioned, a bathroom can be a canvas with multiple visions of what it can become.

Bath planners or installation companies, architects, as you name it, often juggle various types of things. Configurations, each technically sound, but different in design and function. And ultimately the end customer's decision often boils down to cost. Steering the final choice from a bouquet of options.

Barrett Thompson: What do you think is the right way to connect? The ability of the product, the complexity of the product, the connected nature of the various parts of the total solution to the price that's actually offered at the time of sale, what guidance are you giving to people in this industry on how to approach that?

Dr. Rainer Schlamp: I mean, the main thing, how to approach it is manifold from my perspective. You have to make sure that in core the products are priced per se [00:09:00] on a value based pricing approach. So this is the topic that we are focusing on. But in total, the total system price has to be adequate as well. So you're always thinking of one product having the right price, but in total, all the products in total have to be the right price for a whole bathroom, for example.

And this is then connected to the topic of value based pricing, of course, with this magnitude of different articles that you're talking about.

Barrett Thompson: Let's get a bit more into that phrase, value based pricing. I hear that used different ways sometimes in different contexts. And I'd like to understand what you're meaning specifically by value based pricing.

Dr. Rainer Schlamp: Value based pricing is always good because everybody understands it a little bit different from my perspective. It's like flipping from my perspective, the traditional pricing script. So. Instead of starting with cost plus, this means you're adding a markup to the cost basis, you have to identify what the customer is really willing to pay.

And it's about perceived value of the manufacturer's [00:10:00] product in the customer's eyes. It's not only the manufacturer that defines the value, but it's the customer who assesses that. And this perception can be influenced on, by how your product stacks up with competitors. And of course, the pricing landscape they've set.

Now, the beauty of this approach is twofold from my perspective. First, it can lead you to price your products higher than the cost plus price method would suggest, tapping into the real value customers see in what you're offering. And second, it introduces flexibility and responsiveness to a pricing strategy.

A traditional cost plus price pricing tends to be more static and only reacting when costs are changing. But with real value based pricing, you're more in tune with the market's pulse. You're not just reacting to cost changes. You're actively shaping your prices based on value perception, which can of course change again, if some competition changes their product landscape, this can be particularly powerful in times of fluctuating [00:11:00] costs and evolving market expectations.

Barrett Thompson: It's an interesting contrast. I think many businesses today are working with a cost plus approach. I'll hear them say, I aspire to be moving into value based. I think that's it. There's an aspiration. There's a hope to get there. Sometimes challenges to take that step. I can imagine there are many. What have you seen?

Why are companies failing to operate with a value based pricing approach today?

Dr. Rainer Schlamp: Well, when we start talking with those companies, the answer is more or less, sometimes it's the same, it's historically grown it's perception and it's practicality. So because it's easier to make a markup, a simple markup on the cost base, many companies are stuck in the historical loop.

They are used to use that approach, those cost based approaches simply because it's the way they have always done that. They may, might recognize the value in their products, but there's a gap. They're not systematically leveraging that value in their [00:12:00] pricing. And of course there's some kind of assumption trap believing that every customer sees the same value in a product.

Each customer needs and perceptions are unique and in a one size fits all price, you leave a lot on the table from our perspective. Differentiation is key in our consulting business. And for why value based pricing isn't more widespread in B2B, It boils down to effort and mindset. So shifting gears from a cost based to a value based approach isn't just a strategy change.

It's a cultural shift. You have to have willingness and you have to work and change to apply change management, to view your products and customers through a fresh lens. And let's bust the myths. While we're at it here, there's a notion that value based pricing is only viable for high priced items or high ticket items or small product ranges.

But that's just not the case. So our experience is loud and clear with the right pricing team and the robust strategy, you can inject value based pricing logics into [00:13:00] pricing structures, even for extensive protocol for you. So big ones sold across multiple channels and then be differentiated by customer segments.

And so it's about crafting a pricing structure that's not just consistent, but also reflects the value, the competitive landscape. And the margin goals. So from my perspective, this whole value based thinking and methodologies is a game changer.

Barrett Thompson: So you've done this in customers. You've seen it work. You've seen it go into the business and make it, it's not a theory for you, right?

You know, often we recognize even in our work with clients from the Zilliant perspective, that in addition to, you know, having a right mindset and approach, if you will, like value based, selecting that, committing to that, often customers will think about what tools do I need to enable that? And we acknowledge that's important for their success, but I feel like there might be other things in the mix that are needed for a pricing transformation.

And I wonder [00:14:00] what you have seen, what other things you ask clients to think about.

Dr. Rainer Schlamp: I think there are many more things to consider here because strategy and tools are just the starting point for a truly transformative pricing journey. There's a whole mix needs to come together. So, think of it like a recipe, you have your base ingredients and there's the seasonings and the techniques that really make the dish first up process optimization, for example, including a solid governance model to allocate who is responsible and who's not.

So this is one key element here to consider. It's not just about streamlining, but it's simply setting clear roles and also checkpoints who's, who can do what until which level of prices as well. It's a breathing part of the business then. And then there's of course the organizational structure that comes along.

So it needs to be more than just a setup. It needs to be aligned. [00:15:00] It has to be ready and then to be able to support and drive the price and transformation. Every department, every team member should understand the part in this pricing game. So, and it's not only one pricing organizational parts that has to cover that, those aspects, but don't stop there from my perspective, because you have to take also other parts on that change management road with you, because just sales representatives who don't understand what you were doing in pricing.

You wouldn't ever have the acceptance of those guys, and they, from most of the time, the sales guys are the first customers of pricing transformation and not forgetting, of course, the backbone of any solid pricing strategy. From my perspective, it's data and data is key. If you have the right data, the data quality, you can handle the right tools.

So inaccurate, outdated, incomplete data [00:16:00] can be read even. the best pricing system yet that you have thought of. So ensuring your data is clean, consistent, reliable. It's like setting the foundation for everything in the house. So getting it right, and you'll have a structure that can be used and right pricing tools as well.

So like Zilliant does, for example.

Barrett Thompson: Yes, it's a multifaceted approach. And these things that you mentioned, a governance model, organizational structure, for example. My experience is those are not easy. Those are not just sit down in one meeting and we define it. It's hard work, right? It's hard work too, right?

The data is the challenge. I think people see and acknowledge right at the beginning. The technology and tools, they have a lot of experience with what it takes to put in systems and they understand the type of activities and the effort and the challenges and risks. I think that B2Bs maybe are less grounded in how do I implement a new governance model.

When I have, you know, I don't even know how to have the meeting to what, [00:17:00] to gather the requirements for governance. I don't know how to write down what it is we're proposing, how to make sense of it. You know, people are maybe kind of trapped in their history and tradition of how they have done the governance or not done it in the past.

The same thing with org structure, right? You're changing roles or you're changing activities within those roles. That can be difficult, right?

Dr. Rainer Schlamp: It's absolutely Barrett. Just let me add one more point to that scene. I believe that if you have, if you're doing the, this pricing journey and you're changing your price model accordingly, you have to make sure that management is, let's say, the player, the main driving force.

They don't have to just lean back and say, now you go with your pricing and I watch it. And I go into that play if I like it, but they have to be the driving force. And you have to make sure you have to make your strategy. You have to make some strategy workshops, including the CXO level to, to make sure that you can do it and you [00:18:00] will do it.

And this main governance topics, they are. The decision has to be taken from the management.

Barrett Thompson: Well, this thesis that you shared today makes sense. The industry is changing. The change is going to continue to deepen and expand and it will remain permanently. And businesses need to adapt to that. And when it comes to their pricing and pricing strategy, value based pricing is certainly the way forward that will put them in a position to.

Remain profitable, increase profits, and defend against the price transparency and the other things that are going on as the channels evolve and develop. And they need a holistic approach, including of course, their strategy and tools, but their governance, their change management, data quality. Rainer, thanks for sharing all of your perspective with us.

And is there anything else you want to leave with our audience before we wrap up the show today?

Dr. Rainer Schlamp: If there's one takeaway I'd love to leave with our audience, it's this: embrace the journey of transformation. Especially when it comes to [00:19:00] pricing, because pricing has a huge lever. It's not just about numbers.

It's about understanding the value from the customer's perspective. Remember, a successful pricing strategy is a blend of art and science, strategy and tools, process and people. So dive in, be ready to adapt and keep a focus on delivering the value you have to deliver. So it's not only saying we have value, but you have to have a value.

Above all, never underestimate the power of well crafted pricing strategies, not just a part of the business. It can be a real game changer for your success.

Barrett Thompson: Absolutely. It's at the heart of the business, isn't it? Rainer, it's been a pleasure speaking with you today. Thank you so much for joining us on the show.

Dr. Rainer Schlamp: Thank you Barrett for having me here today. It was really fun.

Barrett Thompson: And I want to thank each of you, our podcast listeners for being with us. Please check the show notes for more information from our friends at EbelHofer Consultants. We're committed to your [00:20:00] success. And if you need any assistance, please reach out to us at Zilliant.com. Would you do me a favor before you go and rate and review the show in your podcast app? This helps us to continue providing our free great content until next time. Have a great day.

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