the shocking truth about

pricing

Today’s Webinar…

Todays Talk:

► Why pricing is getting really scary?

► Why is pricing so important?

► Ten Ways to Better Frame Your Pricing

Number 10

Power to the Customer

The Marketer The Customer

Customers know more about marketers,

than marketers know about customers

Number 9

Comparisons are easy

Number 8

Scan & Scram

Number 7

Everyone’s going to know about this

Number 7

Premium Pricing…

Number 7

…or Commodity Pricing?

Number 6

Automatic Refunds

Number 5

Err at your peril

Number 4

Outsourced Pricing

Number 3

I’m not buying your time

Number 2

Just give me your quote!

Number 1

Beaten to a Pulp

pricing

why is it important?

You have a product with a 30% margin, and you are planning on reducing

prices by 5%. What sort of volume uplift is required to maintain existing revenue?

You have a product with a 20% margin, and you are planning on increasing

prices by 8%. What sort of volume are you putting at risk?

20% Volume Uplift

10% Volume Uplift

5% Volume Uplift

8.2% of volumes

28.6% of volumes

38.7% of volumes

Quiz Time Decreasing & Increasing Prices

Why is Pricing so Important? Impact on Operating Profit of a 1% improvement in…

2.3%

3.3%

7.8%

11.1%

Fixed Costs Volume VariableCosts

Price

2.6%

3.6%

8.7%

12.3%

Fixed Costs Volume VariableCosts

Price

…Regardless of the Industry Impact on Operating Profit of a 1% improvement in Price

22.0%

13.5%

12.7%

12.3%

11.4%

11.1%

10.4%

10.1%

9.8%

9.3%

8.6%

6.8%

6.1%

3.0%

1.8%

Automotive

Transportation

Metals & Mining

Chemicals

High Tech &Electronics

Aurospace & Defense

Paper

Insurance

Healthcare

Oil & Gas

Communications

Consumer Products

Pharmaceuticals

Banking

Investment

Impact of a 1% Price Improvement on Operating Profit

For The Kroger Retail Food Chain… ► If prices were increased 1%...?

For Coca Cola… ► If prices were reduced 1%...?

For Continental Airlines ► 44mill passengers x Average fare

of $193 = Loss

Slide 18

Slide 19

50.0%

40.0%

32.0%

28.0% 26.0%

18.0%

8.0%

2.0%

Packard Other Compaq HP IBM Gateway Dell Apple

Source: Docters, R et al (2004) Winning the Profit Game: Smarter Branding, Smarter Pricing, McGraw-Hill, p40

The Importance of Price As the Primary Selection Criteria, by brand – PC Industry

How Important is Price? In the Personal Computer Industry

The Wheel of Fortune A Catalogue of Pricing Models, Strategies & Tactics

Misc Pricing

Models II

Misc Pricing

Models I

Digital

Pricing

Models

Digital

Advertising

Models

Legal &

Professional

Service

Software

Pricing

Models

Time-based

Pricing

Value-based

Models

Traditional

Pricing

Models

Pricing

Models,

Strategies &

Tactics

User-based

Usage-based

Time-based

Location-based

Input -related

Hybrids (Input / Output –related)

Output -related

1G: Sponsorship

2G: Cost-per-Thousand

3G; Cost-per-Click

4G: Cost-per-Action

Freemium

Pay-What-You-Want

Direct Cross Subsidy

Indirect Cross Subsidy

Paired Products

Second-hand Products

Unbundling

Pay-As-You-Go

Gimmicks

Choices

Price Experiments

Buy Now / Upsell Later

Buy Now / Compliment Now

A Product is for Life…

Free Today, not Tomorrow

Start the Clock

Cost-Plus Pricing

Market / Competition Pricing

Non-Linear / Two-Part Pricing

Dynamic Pricing / Revenue or Yield Management

Customer Value Analysis

Economic Value Analysis

Auctions

English

Dutch

Yankee

Vickery

Reverse

Words of Pricing Wisdom

“…if you have to have a

prayer session before

raising…prices…then

you’ve got a terrible

business”

“Price is what you

pay…value is what you get”

“The single most important

decision in evaluating a

business is pricing power”

But What is “Pricing Power”?

“The ability of

you to get the

price you

deserve for

the value you

provide”

10 ways to better frame your

pricing

Number 10

Don’t over-complicate your Pricing

Slide 25

Number 9

Don’t Talk About Costs…

Slide 26

Number 8

…talk About Value Instead!

The Hallmarks of a good Value Proposition:

► What value does your product or service provide to customers

► Quantify the Magnitude of the Value provided

► Illustrate that value is superior to the competition

Number 7

Know Your Competition & Customer

0

2

4

6

8

10Adhesion

Appearance

Strength

Rheology

Durability

Resistance

EnvironmentallyFriendly

Low Odour

Us The Competition

Understand the Customer

How important are

these value attributes to them?

Understand the

Competition

Points of parity, points of difference, points of contention

Number 6

Link Prices to a Customer Value Metric

Number 5

Do you really want half price?

Number 4

What happened to Boxing Day?

Number 3

Sell Goods As Services

Number 2

Understand Behavioural Economics

Number 1

If You’re Negotiating with a Pitbull…

Any

Questions?

Jon Manning Founder & Director, Sans-Prix.com

Founder & Managing Director, PricingProphets.com

PO Box 533, Ascot Vale, Vic 3032 Australia

foursquare.com/sansprix

youtube.com/user/PricingProphets

linkedin.com/company/Pricing-Prophets

jon@sans-prix.com

+61 (0) 405 629-141

@SansPrix | @PricingProphets facebook.com/PricingProphets

http://www.SansPrix.BlogSpot.com

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Slide 35

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