Patent Application
20100262548
The present invention relates to business to business market price control and management systems. More particularly, the present invention relates to systems and methods for multiple pricing comparisons in order to guide salespersons in the proper pricing schemes during negotiations.
Generally, three major pricing models are used for service quotes and long term contracts. These include i) time and material quotes, ii) fixed pricing quotes and iii) gain share quotes. Time and material quotes are typically the most widely utilized quote types. Here, the quote invoice itemizes specific costs for resources and profit margins. The total sum of these itemized costs is the final deal quote. Line items, from a deal summary, may be utilized to generate a time and material quote.
Fixed price quotes, on the other hand, peg fixed payments to milestones. The most simplistic fixed price quotes state a total cost for the service with payment due upon project completion. However, staged payments and variable milestones may be also utilized in more sophisticated deals. For example, milestones may be date based, with periodic payments over a set time period. Or they may be dependent upon internal deadlines, such as after completion of a demo, or based upon number of units produced.
Lastly, the gain share quote relies on payments that are typically a percentage of gains or savings. Often this percentage is variable over a set time period. Thus, for example, if a particular service saves the purchasing company one million dollars of operation cost a year, a gain share quote system may specify that 50% of the gain is paid to the servicer in the first year, 40% the following year, and 30% thereafter on a yearly basis.
Determining which method of pricing a particular deal should be negotiated with, however, may be difficult for salespersons due to the large amount of data involved, complexity of conversion between pricing structures, and the impact of inflation. Thus, in a typical negotiation setting (or request for proposal), the most favorable pricing method may often be overlooked by the salesperson. This may lead to a loss in profits.
In the Business to Consumer (hereinafter “B2C”) setting, this may not pose much of a challenge since negotiations are often not utilized, and due to the large volume of clients and transactions. However, in Business to Business (hereinafter “B2B”) markets, where negotiations prevail, and a small number of customers represent the lion's share of the business, proper negotiation practices may be crucial to the continued success of the business. This is because managing the prices of these key customers is where most of the pricing opportunity lies.
Due to the difficulties inherent in a B2B negotiation environment, there is a strong need for a system able to provide guidance for deal negotiations which minimizes the guesswork inherent to B2B negotiations. Such a system would enable the ability to easily and efficiently compare pricing methods of a given deal in order to provide more profitable deal negotiations.
In view of the foregoing, System and Methods for multiple pricing comparisons are disclosed. The present invention provides a novel system for the conversion of a time and material deal quote to either a fixed pricing and/or gain share quote for rapid comparison. Guesswork on the user's part as to the best pricing strategies is reduced, thereby enabling more profitable deal negotiations.
The present invention discloses business to business market price control and management systems. More particularly, the present invention teaches systems and methods for generating a deal summary including comparisons of different pricing methods. Such a system may automatically generate fixed pricing quotes and gain share quotes given a time and materials quote. The pricing quotes may be presented to the user in a deal summary view which may then be leveraged to facilitate favorable negotiations of deal terms.
In some embodiments of the present invention, a user supplies a time and materials quote to the system through a negotiations interface. In some alternate embodiments, the time and materials quote may be generated by a multi-dimension top down negotiator system as a line item quote. Regardless of origination of the time and materials quote, this quote type typically includes dates and resources for the project.
A fixed price quote generator may then utilize the received time and materials quote to generate a fixed price quote, in some embodiments. The fixed price quote may include one or more of a time and milestone based payment schedule.
Likewise, a gain share quote generator may utilize the received time and materials quote to generate a gain share quote, in some embodiments. The gain share quote may include a variable percentage share on future return on investment.
In some embodiments, a net present value calculator may then generate the net present value for the generated quotes. This calculation may utilize expected future interest rates in the applicable regions. These interest rates may be user defined, default rates, or received from some external source, such as an investment think-tank.
Lastly, in some embodiments, a deal summary generator may compile the net present values for the quotes into a deal summary for comparison purposes. The deal summary may compare the net present values of the quotes at a deal header level. This deal summary may also be utilized to answer a request for proposal. In some embodiments, a pricing method optimizer may select the most profitable pricing method from the time and materials quote, the fixed price quote and the gain share quote.
Note that the various features of the present invention described above can be practiced alone or in combination. These and other features of the present invention will be described in more detail below in the detailed description of the invention and in conjunction with the following figures.
The present invention is illustrated by way of example, and not by way of limitation, in the figures of the accompanying drawings and in which like reference numerals refer to similar elements and in which:
The present invention will now be described in detail with reference to selected preferred embodiments thereof as illustrated in the accompanying drawings. In the following description, numerous specific details are set forth in order to provide a thorough understanding of the present invention. It will be apparent, however, to one skilled in the art, that the present invention may be practiced without some or all of these specific details. In other instances, well known process steps and/or structures have not been described in detail in order to not unnecessarily obscure the present invention. The features and advantages of the present invention may be better understood with reference to the drawings and discussions that follow.
As previously noted, the present system and methods provide enhanced tools for the negotiation of favorable deal terms in the Business to Business (B2B) environment. In some embodiments of the invention, the user may input a time and material quote into the system. The system may then automatically generate fixed price quotes and gain share quotes for comparison purposes. These quotes may be normalized to present day values to facilitate comparisons.
The B2B environment has a number of unique difficulties related to properly pricing of products and services. These arise from the relatively small numbers of consumers which make traditional modeling of demand unrealistic. Thus, improving revenue and profitability in the B2B market may be a substantial hurdle for many companies. The present system addresses these problems by facilitating negotiation processes, thereby positively influencing profitability in the B2B markets.
Below are provided, in greater detail, numerous embodiments of the system and methods for multiple pricing comparison. This discussion is divided into number of subsections for the sake of clarity. These subsections are intended to aid in the reading of the application are not limiting in nature. Thus, relevant portions of any given subsection may be applied to another subsection as is applicable.
To facilitate discussion,
The Negotiated Dimensions 110 provided by the User 102 may, in some embodiments, include providing the value of total resources, period allocation, regional distributions, skillset distributions, inflation rates and billing hours. Of course, more or fewer dimensions may also be utilized as is desirable for a given industry or deal type.
In some embodiments, not all dimensions need be supplied by the User 102. In these embodiments, unspecified dimensions may be populated with default or other viable source. For example, published indexes may be relied upon to populate inflation rate data when the User 102 fails to provide specific information for this dimension.
The dimensions provided to the Multi-dimension Top Down Negotiator 120 may be analyzed to produce a line item level breakdown of the specific deal. Overrides may be performed on these generated line items, in some embodiments. The line item data may be provided to the Negotiation Interface 130 where a deal summary is produced. This deal summary may be utilized by the User 102 or other sales force member to actively engage in a negotiation process.
In some embodiments, the Negotiated Dimensions 110 may be received by a Resource and Product Allocator 210 which applies the dimensions to specific resource categories. These resources and products may then be utilized by a Line Item Generator 220 to generate line items. Generation of line items may include divergent transformational operations on the dimensions in order to generate individual line items. In some embodiments, the transformations may be user defined, or may be defined by a system default. These system defaults may include industry specific line item models. In some cases, this may include the use of a resource model. An example of a transformation for the generation of a line item is provided below:
The line items may be normalized by the Normalization Engine 240 to net present values. A Deal Summary 250 may be presented on the negotiation interface for the user. The user may utilize the deal summary for negotiation purposes, or may identify line items which are inaccurate. Inaccuracies may rise from incorrect line item transformations, or may be due to specified negotiated terms. Likewise, the user may have experienced knowledge regarding a particular deal, and it may be desirable to include this knowledge in the deal summary. In these cases, or in instances where the user desires to pursue hypothetical deal scenarios, the user may provide Override Instructions 260 to a Line Item Override Module 230. The Line Item Override Module 230 may then apply the overrides to the line items in order to update the deal summary.
Overrides of a particular line item may result in incompatibility with dimension values or other line items. For example, increasing the quantity of hours of a programmer in Bangalore may result in an increased cost associated with this programmer line item. This may cause the total cost of the deal to exceed the negotiated total resource dimension. The system may deal with such incompatibilities by automatically adjusting other line items to compensate for the override, in some embodiments. This may include reducing other programmer hours, reducing hourly rates, reducing margin, or the like. Alternatively, the system may provide a warning flag to the user of the incompatibility, and request user input to resolve the conflict.
The updated line items may then be provided to the Normalization Engine 240 for updating of the Deal Summary 250. Overriding of the Deal Summary 250 may be performed as often as desired by the user, in some embodiments.
The Total Resource Module 302 typically includes fields for total dollars and/or man-hours negotiated. Additionally, the production of particular products or services may likewise be set at the Total Resource Module 302. Likewise, a total length of time for the deal may be input at this module.
The Period Allocation Module 304 may include fields for the period of the deal, as indicated from the Total Resource Module 302. These fields may include percentage breakdown of the deal, milestone timing or other allocation. Thus, for example, in a service agreement, the services may be rendered at a split percentage across the entire period. Conversely, for other agreements, such as a systems upgrade, the deal may be skewed where the bulk of the infrastructure work is completed early in the period, and afterwards only service of the system is provided. Further, in a growing business, a particular deal may increase over time to meet the demand of the growing client.
The Regional Distribution Module 306 may include a pull down menu, or fields, for the selection of where the goods are produced and/or where the deal services are provided. Again, this breakdown is typically provided as a percentage of location where the deal is performed.
The Skill Set Distribution Module 308 indicates the required skill level (i.e., skillset) required for deal completion. Again skillset may be provided as a percentage of the entire employee requirements. Skill levels required for a given deal may vary significantly; thereby impacting wages and costs. Thus, the Skill Set Distribution Module 308 provides a convenient way for the user to indicate the general levels of skill required for deal completion.
The Inflation Rate Module 310 may rely upon data inputted in the Regional Distribution Module 306 and the period of the deal in order to generate a listing of fields for the inflation rate, over a time period in each region. The inflation rate is typically input as a percent, or other index. Additionally, inflation rates may be set by year in each region. In alternate embodiments, the time period for inflation rates may be changed to reflect the user's desires. Thus, for a short-term deal in a volatile market, the user may desire to input inflation rates on a monthly basis rather than yearly.
The Billing Hours Module 312 may utilize data garnered from the Regional Distribution Module 306 to generate a set of fields for hours worked per day by given region. The user may then input current average hours in these fields.
Further, at least one Additional Dimension Module 314 may be utilized as is desired. For example, an additional dimension may include Phases of the Project. Phases of the Project may further include Discovery, Requirements, Proof of Concept, Design, Implementation, Testing, Performance tuning, UAT, Go Live, Post Go Live and Maintenance. Thus, given a particular negotiated deal, the user may select any combination of applicable dimensions. Thus, fewer or more dimensions may be utilized, as is desirable for any given implementation of the present invention.
Once all dimensions have been input, the Dimension Values 320 may be compiled and output to the line item generator. As noted, the dimension values may be user input via a computerized interface, or may be automatically populated. Auto population may utilize default values and/or automated lookup of published values. For example, the system may be configured to automatically query an interest rate database to auto populate interest rates per region over the applicable period of time. Likewise, lookup tables for billing hours by region, industry specific skill set distributions, and additional lookup datasets may be utilized for auto population of dimension values.
These specific high level dimension values may be received at step 410. The dimensions may constitute input variables for divergent transformative functions, as outlined above. In this manner, line items may be generated, at step 420.
Line items may be displayed to the user. The user may determine that overrides to the line items are necessary. These overrides are received as line item exceptions at step 430. The line items are replaced by these exceptions. Additionally, any conflicts arising from the override may be resolved by the system. Typically, these conflicts revolve around the sum of line items no longer matching the inputted total resources dimension. Other line items must, thus, be modified to ensure all deal values match the original dimensions.
After the line items have been updated, the system may generate a deal summary, at step 440. The deal summary may be utilized by the user to facilitate deal negotiations. An inquiry is then made if the negotiations are continuing or not. Once negotiations are concluded, the process ends. However, if negotiations are ongoing, new dimension values may be agreed upon. Thus, the process may return to step 410. In this way, new deal summaries for the negotiated deals may be continually generated. Moreover, in addition to aiding the user with negotiations, the deal summaries may be generated in order to run hypothetical deal scenarios and/or for other business planning
Also of note, in this example process the receipt of all the dimension values is illustrated as occurring in parallel. While some situations may enable the user to enter data simultaneously for each dimension (or in any order), other embodiments of the present invention may require systematic input of the dimensions. For example, it may be desirable that the user inputs regional distributions before entering the billing hours. This is because the billing hours module may configure the displayed fields to match the regional distribution, in some embodiments.
In some embodiments, the dimension values received by the system include any of total resources (step 510), period allocation (step 520), regional distribution (step 530), skill set distribution (step 540), inflation rates (step 550), billing hours (step 560), and any other additional dimensions (step 570). Detailed discussions of these dimensions may be found above in reference to
Note that these dimensions are determined by the applicable negotiation; thus, fewer or more dimensions may be utilized for any given negotiation. Further, any combination of dimension types may be utilized for any given negotiation.
After the last applicable dimension is received, this process ends by progressing to step 420 of
Additionally, the instant top down negotiation system may be part of a greater business management suite. Thus, in some of the example screenshots the top buttons may enable the user to navigate from one business management tool to another. Note that these figures are provided as way of example, and are not intended to limit the functionality of the present invention.
An overview of the deals in the selected category of deals is then displayed at 620. The deal overview may include the deal ID, owner, who it was sold to, invoice price, and validity dates.
The user may select any of the deals indicated at 620. Selecting any particular deal may open the header screen for the selected deal. Header screens may be seen in
In
The header data can be seen at 720. The current header has not yet been populated and includes fields accessible by the user to define the deal in high level terms. These header fields include the deal ID (already provided), customer, sold-to data, sales operation, primary location of the project, industry segment, customer classification and the sales person ID.
At
Some of the illustrated dimension menus have static fields, in this example screenshot. For example, the regional distribution window lists particular locations. These locations may be selected from known operating locations of the customer, which was selected in the header menu. Alternatively, a set default listing of regions may be utilized for every generated deal.
Other dimension menus are dynamic, i.e., they change in response to input into other menus. A good example of a dynamic field is period allocation. This menu requires the total deal duration, as indicated at the total resources menu, before fields are generated.
At
In this example figure, inflation rates for each region and across the applicable time period are populated with percentages. Likewise, billing hours by country are also populated. Billing hours indicate the number of hours spent working per day by a single employee in the given region/country. These and other fields may be populated by the user; however, operational data such as this is often automatically populated from databases. Thus, average billing hours by country may be tracked on an ongoing basis and stored in a database for retrieval by the system. Likewise, current interest rate projections are widely available.
At
After all dimension values have been input, the user may select the next tab, at 710, for line items. The line items tab, as illustrated at
Conversion of the dimensions to line items has been discussed in detail above. In general, a resource model is applied to the dimensions in order to generate the line items. The resource model may utilize divergent transformational algorithms in order to generate the line items.
The line items may include data relating to the resource type, location, project, skillset, rate, quantity, sales discount, invoice price, product price and the product margin, to name a few. Additionally, line items may include data relating to
Specific line items may be selected for review and for overrides.
After overrides of the line items have been made, the user may select the tools tab at 710. The tools tab may include a number of tool options in a pull down menu, including the display of the deal summary.
Deal summaries may be utilized for invoicing purposes and for negotiation facilitation.
The pricing methods comparison system utilizes time and material quotes in order to generate fixed quotes and gain share quotes. As previously discussed, time and material quotes are typically the most widely utilized quote types. These quotes itemize specific costs for resources and profit margins. The total sum of these itemized costs is the final deal quote.
Fixed price quotes, on the other hand, peg fixed payments to milestones. The most simplistic fixed price quotes state a total cost for the service with payment due upon project completion. However, staged payments and variable milestones may be also utilized in more sophisticated deals. For example, milestones may be date based, with periodic payments over a set time period. Or they may be dependent upon internal deadlines, such as after completion of a demo, or based upon number of units produced.
Lastly, the gain share quote relies on payments that are typically a percentage of gains or savings. Often this percentage is variable over a set time period. Thus, for example, if a particular service saves the purchasing company one million dollars of operation cost a year, a gain share quote system may specify that 50% of the gain is paid to the servicer in the first year, 40% the following year, and 30% thereafter on a yearly basis.
The system, after generating the different quote types, may compare the quotes to determine which pricing method generates the highest profits.
The dimensions provided to the Multi-dimension Top Down Negotiator 120 may be analyzed to produce a line item level breakdown of the specific deal. Overrides may be performed on these generated line items, in some embodiments. The line item data may be provided to the Negotiation Interface 130 where a deal summary is produced. This deal summary may be utilized by the User 102 or other sales force member to actively engage in a negotiation process. Additionally, the line items from the deal summary may be provided as a time and material quote to the Multiple Pricing Comparator 1210.
The Multiple Pricing Comparator 1210 may rapidly and reliably convert a time and material quote into a fixed quote and a gain share quote. A summary for the quotes may be provided to the user, as well as a suggestion of the best pricing method in order to maximize deal profits.
The Multiple Pricing Comparator 1210 may generate the deal summary of quotes with differing pricing methods in net present values (1340). This deal summary may be provided to the User 102 to negotiation purposes.
As noted, the Multiple Pricing Comparator 1210 may likewise determine the ‘best’ quote type. This may be performed via an optimization for profit or net revenue comparison.
The Multiple Pricing Comparator 1210 may include a Fixed Price Quote Generator 1422 for the generation of the fixed price quote, and a Gain Share Quote Generator 1424 for the generation of the gain share quote. The quotes may be provided to a Net Present Value Calculator 1426 for normalization to net present values. This normalization may rely upon interest rate data for the period of time the deal is occurring over.
The raw quotes, along with normalized quotes, may then be provided to the Deal Summary Generator 1428. The Deal Summary Generator 1428 may generate summary Data Summary Data 1430 for presentation to the user via the negotiation interface. Additionally, the Deal Summary Generator 1428 may provide recommendations of which price quote maximizes profits, in some embodiments.
As previously noted, determining which method of pricing a particular deal should be negotiated with may be difficult for salespersons due to the large amount of data involved, complexity of conversion between pricing structures, and the impact of inflation. Thus, in a typical negotiation setting (or request for proposal), the most favorable pricing method may often be overlooked by the salesperson. This may lead to a loss in profits. The deal summary produced by the Multiple Pricing Comparator 1210 may facilitate the decision making process of pricing methodology. This may, ultimately, increase profitability of negotiated deals.
The time and materials quote typically includes a listing of costs for resources. These costs may include bill rates, raw material costs, margins and other related resource costs.
At step 1520 the time and materials quote may be converted into a fixed price quote and a gain share quote. Conversion of the time and material quote into a fixed quote may include summing the individual line items to generate the final total cost. This total cost may then be rounded to a suitable number (i.e., to the closest thousand dollars). Likewise, adjustments may be made to the total cost, in some embodiments. Additional ways to create a fixed price quote is to start from scratch and build it up. Also, the fixed price quote may be generated by converting the gain share quote.
Conversion of the market share quote into the gain share quote involves summing costs for the given deal. This cost sum is subtracted from the existing costs for the deal, as is currently being expended by the company. The percentage(s) of gain share may then be applied to this resulting cost difference (client benefit) over the deal period in order to determine the gain share quote.
Interest rates over the deal period may then be applied to each of the quotes to determine net present value, at step 1530. This normalization may have great impact on deal profitability when involved in a volatile currency, or over a long period of time. Thus, even if a fixed price quote pays more at the completion of a five year project, a time and material quote may be more profitable if the payments are staggered over time.
The deal summary may then be generated, at step 1540; after which the process ends. The generation of the deal summary may include presenting raw quote numbers to the user, as well as normalized quote data. Additionally, in some embodiments, a selection of the most profitable deal may be provided.
Below, in association with
In this example screenshot six windows are provided. These include the consumer and project summary 1602, project dates and discounts 1604, a deal summary 1606, a filtered deal summary 1608, a net present value 1610 and a resource type summary 1612.
The project summary 1602 includes crucial information relating to the negotiating party, payment terms and operating group. The project dates and discounts 1604 window includes applicable discounts. The deal summary 1606 includes total invoice prices, expenses, billing hours and net present value.
The filtered deal summary 1608 includes price filtered for services (i.e., excluding goods). The net present value 1610 indicates cash flow and the net present value for said cash flow by year of the deal. Finally, the resource type summary 1612 lists each category of resources with its corresponding invoice price, pocket price and pocket margin.
From the line items of the time and material quote, both fixed price and gain share quotes may be generated.
The project summary 2002 includes crucial information relating to the negotiating party, payment terms and operating group. The project dates and discounts 2004 window includes milestone information, and any applicable discounts. The deal summary 2006 includes total loaded client rate, total fixed fee agreement and other pertinent fixed fee deal information.
The filtered deal summary 2008 window displays filtered invoice prices. These prices may be filtered for services (i.e., excludes goods, etc.).
Similar to the fixed price conversion, the quote may be converted to a gain share style quote.
Unlike other header types, however, the milestone field in the project dates and discounts 2104 window displays the expected client benefit on a yearly basis. Likewise, the percentage of gain share is listed.
The converted quotes may then be presented side by side to the user to facilitate proper quote invoicing in order to produce a more profitable outcome. As noted before, the system may provide an indication of the most profitable quote type.
CPU 2322 is also coupled to a variety of input/output devices, such as display 2304, keyboard 2310, mouse 2312 and speakers 2330. In general, an input/output device may be any of: video displays, track balls, mice, keyboards, microphones, touch-sensitive displays, transducer card readers, magnetic or paper tape readers, tablets, styluses, voice or handwriting recognizers, biometrics readers, or other computers. CPU 2322 optionally may be coupled to another computer or telecommunications network using network interface 2340. With such a network interface, it is contemplated that the CPU might receive information from the network, or might output information to the network in the course of performing the above-described method steps. Furthermore, method embodiments of the present invention may execute solely upon CPU 2322 or may execute over a network such as the Internet in conjunction with a remote CPU that shares a portion of the processing.
In addition, embodiments of the present invention further relate to computer storage products with a computer-readable medium that have computer code thereon for performing various computer-implemented operations. The media and computer code may be those specially designed and constructed for the purposes of the present invention, or they may be of the kind well known and available to those having skill in the computer software arts. Examples of computer-readable media include, but are not limited to: magnetic media such as hard disks, floppy disks, and magnetic tape; optical media such as CD-ROMs and holographic devices; magneto-optical media such as optical disks; and hardware devices that are specially configured to store and execute program code, such as application-specific integrated circuits (ASICs), programmable logic devices (PLDs) and ROM and RAM devices. Examples of computer code include machine code, such as produced by a compiler, and files containing higher level code that are executed by a computer using an interpreter.
In sum, systems and methods for multiple pricing comparisons are provided. While a number of specific examples have been provided to aid in the explanation of the present invention, it is intended that the given examples expand, rather than limit the scope of the invention. Although sub-section titles have been provided to aid in the description of the invention, these titles are merely illustrative and are not intended to limit the scope of the present invention.
While the system and methods has been described in functional terms, embodiments of the present invention may include entirely hardware, entirely software or some combination of the two. Additionally, manual performance of any of the methods disclosed is considered as disclosed by the present invention.
While this invention has been described in terms of several preferred embodiments, there are alterations, permutations, modifications and various substitute equivalents, which fall within the scope of this invention. It should also be noted that there are many alternative ways of implementing the methods and systems of the present invention. It is therefore intended that the following appended claims be interpreted as including all such alterations, permutations, modifications, and various substitute equivalents as fall within the true spirit and scope of the present invention.
This application is a continuation-in-part of U.S. patent application Ser. No. 11/193,313 filed on Jul. 30, 2005 by Shannon Y. Zhang, Simon C. Lee and Sri Raghupathy, entitled “Systems and Methods for Tiered-Pricing in a Price Management System”. The content of that application is incorporated herein by reference. This application is related to co-pending and concurrently filed application Ser. No. 12/726,235, filed Mar. 17, 2010, by Sri Raghupathy, Derrick Keller Herbst, and Yvonne K. Baur, entitled “System and Methods for Multi-Dimension Top Down Negotiation” which application is incorporated herein in its entirety by this reference.
| Number | Date | Country | |
|---|---|---|---|
| Parent | 11193313 | Jul 2005 | US |
| Child | 12726251 | US |
