Pricing-Newsletter No. 72 (2023): From Pay Per Use to Pay Per Wash: An Innovative Pricing Model for the B2B Sector
Dear readers,
In various industries, innovative pricing models are also emerging in the B2B sector. For example, Heidelberger Druck offers customers a Pay Per Use model to reduce the necessary investments and thus the financial needs of customers and to create a clear calculation basis that simplifies the calculation of unit costs.
Winterhalter manufactures dishwashers for professional use in the catering industry and in large kitchens and also offers a Pay Per Use model (“Pay per Wash”). I spoke with the CEO and shareholder Ralph Winterhalter about this. You can expect some exciting insights into the transformation of a business model.
Enjoy the following reading
Your Prof. Dr. Hans-Christian Riekhof
An Interview with Ralph Winterhalter, CEO of Winterhalter GmbH.
Prof. Riekhof: Mr. Winterhalter, you introduced a Pay Per Use Pricing Model some time ago. Before we go into detail: can you give us a few keywords about yourself and Winterhalter GmbH?
Ralph Winterhalter: With pleasure. I took over the role of CEO in 2008 and now run the company founded by my grandfather in the third generation. I was born into the company, so to speak, the factory premises were my playground. My father took it over, successfully internationalizing the business. With 44 subsidiaries, we are now serving the global market. In 5 factories, we produce about 45,000 dishwashers a year with around 2,000 employees. This corresponds to a turnover of about 370 million €.
Prof. Riekhof: What is special about Winterhalter dishwashers? What special requirements does the professional from the commercial sector have for professional washing?
Ralph Winterhalter: The decisive factor is the washing performance of the system: a clean wine glass for top gastronomy in 90 seconds, that is the challenge. And there are huge differences in the global markets: the kitchen in Asia is much more oily, in Europe rather starchy. This has consequences for the parameterization of the dishwashers.
“A clean wine glass for top gastronomy in 90 seconds, that is the challenge.”
Ralph Winterhalter
There are solutions and financing models for Winterhalter dishwashers for various industries. Source: © Winterhalter GmbH
We test the conditions in our laboratory in Meckenbeuren. We also have to take into account parameters such as water hardness or relative humidity. We need completely different parameters on the Amazon than on the Zugspitze or here on Lake Constance.
Prof. Riekhof: That already sounds like technically demanding solutions. What general price positioning does this result in for Winterhalter?
Ralph Winterhalter: We clearly have a premium positioning. You can also buy significantly cheaper dishwashers, there are providers whose devices cost half of our machines. But whether that pays off for the customer, I have my serious doubts. Over a deployment period of 10 years, the investment only accounts for about 20% of the total expenditure. The total costs over the life cycle are crucial.
“In the Amazon, we need completely different parameters for the washing process than on the Zugspitze or here at Lake Constance.”
Ralph Winterhalter
Prof. Riekhof: How do you deal with different purchasing power and different customer requirements in international markets?
Ralph Winterhalter: A few years ago we took over a manufacturer in the UK, whose products we distribute in certain countries with lower requirements. And in our factory set up in Thailand in 2015, we produce a Winterhalter product line with simpler devices and fewer functions that can be offered at a lower price. In this respect, we are well positioned for various international market segments because we serve three price segments in total.
The decisive factor is not to sell the customer a technical device, but to offer him a very high-quality washing performance in a short time (in 90 seconds) with extremely high reliability. This includes not only the hardware, but also the consumables and the service. Over the life of a dishwasher, the investment, as I said, only accounts for about 20% of the total costs.
Prof. Riekhof: How is pricing organized internally with you? Where is the international pricing strategy determined, and who is responsible for its operational implementation?
Ralph Winterhalter: We have numerous Product Managers who are responsible for the long-term pricing strategy of their segment. We have moved away from the classic Cost Plus approach and focus the strategic pricing more on the Customer Value. We bundle particularly value-adding features of our devices into equipment packages that are attractive for certain customer groups. We learn to think consistently from the customer’s perspective.
The pricing strategy is implemented in the 44 subsidiaries, and very much in line with the respective market requirements. The respective managing directors have relatively large leeway to develop the right pricing for the market.
Prof. Riekhof: You have introduced a Pay Per Use model at Winterhalter. When was that, and what was the trigger? Were there specific expectations from customers and the market?
Ralph Winterhalter: The considerations began in 2017. The trigger was what I call “constructive dissatisfaction”. I am always looking for the limitations of our business model, and I want to ensure that the next generation can continue to develop the company successfully.
Winterhalter advertising for the Pay Per Wash offer.
Source: © Winterhalter GmbH
You should know that in Asia 70% of professional dishwashers are rented. Think of seasonal businesses: if it rains in May, then the beer gardens have a capacity problem, and they shy away from high fixed costs. We were the first to offer a solution here: you only pay for washing when you need it.
“The respective managing directors have relatively large leeway to develop the right pricing for the local market.”
Ralph Winterhalter
Pay Per Wash as an offer for the beer garden and seasonal gastronomy.
Photo: iStockphoto
Prof. Riekhof: How easy was it to implement a “Pay per Wash” model in the company?
Ralph Winterhalter: It was a tough and rocky road. Because it affects the entire value chain of the company – from the hardware, which must capture certain data and be networked, to marketing, sales, pricing, quotation creation and service. But we are structured as a medium-sized company, implementing such a model in a corporation would have been much more difficult.
Prof. Riekhof: What are your experiences with the “Pay per Wash” model? How do your customers react, how is the acceptance?
Ralph Winterhalter: The model is well received by customers, and it already pays off for us. Because customers ultimately do not ask for the purchase price of a dishwasher, but they want excellent washing performance and an excellent washing result. They can’t afford to make any compromises here.
But the Pay Per Wash model can only be implemented in markets where we can provide the necessary infrastructure with our own subsidiaries and a service organization. But there the value creation is of course also significantly higher. For us it is important that we can open up new customer groups with this model – such as the mentioned seasonal businesses.
An interesting side effect is the transparency, for example in the case of our customers’ branch operations, which we generate almost incidentally. If we install dishwashers in 50 bakery branches and relate the washing performance used to the cash register data and sales, we find considerable inefficiencies in the use of personnel in some of the branches: the organization of the washing processes offers considerable optimization potential.
“The Pay Per Wash model can only be implemented in markets where we can provide the necessary infrastructure with our own subsidiaries and a service organization. But there the value creation is of course also significantly higher.”
Ralph Winterhalter
What surprised us most: Our Pay per Wash model has made a very strong contribution to the Winterhalter brand. We did not expect this. And so far no competitor has been able to imitate us.
“The whole project has caused a turbo effect for the digitization of our internal processes for our company.”
Ralph Winterhalter
Prof. Riekhof: Can Fa. Winterhalter gain insights from the data exchange about the usage behavior of the customers?
Ralph Winterhalter: Definitely. We learn a lot about the specific conditions of use, especially in benchmarking different branches of a company. Derivations regarding the maintenance requirements of our devices become possible, and data for the construction of a predictive maintenance are obtained.
What was almost the most important effect for me: the whole project has caused a turbo effect for the digitization of our internal processes for our company.
Prof. Riekhof: This last aspect in particular seems extremely important to me: many companies talk about digital transformation. This is obviously most successful when concrete strategic initiatives are implemented and the business processes are digitized, instead of starting a highly complex transformation process in the company that takes place detached from everyday business. Mr. Winterhalter – thank you very much for the interview and for sharing your experiences.
Until the next Pricing-Newsletter, which will be about Dynamic Pricing.
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