Presentation to the Maroondah Business Association | 4th Sep '13
35
the shocking truth about pricing
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This is a copy of a presentation I gave to the Maroondah Business Association on Wednesday 4th September 2013
Transcript of Presentation to the Maroondah Business Association | 4th Sep '13
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
+61 (0) 405 629-141
@SansPrix | @PricingProphets facebook.com/PricingProphets
http://www.SansPrix.BlogSpot.com
SlideShare.net/SansPrix
Slide 35
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