Pricing Products Partly Based on Ebert & Griffin Chapter 11
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1 Pricing Products Partly Based on Ebert & Griffin Chapter 11 For My Friends in BSAD For My Friends in BSAD 101 101 By Thomas Hilton By Thomas Hilton
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Pricing Products Partly Based on Ebert & Griffin Chapter 11. For My Friends in BSAD 101 By Thomas Hilton. Key Topics. Pricing objectives Price-setting tools Pricing strategies and tactics Cost-Justifying Information Systems. Pricing to Meet Business Objectives. - PowerPoint PPT Presentation
Transcript of Pricing Products Partly Based on Ebert & Griffin Chapter 11
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Pricing ProductsPartly Based on Ebert & Griffin Chapter 11
For My Friends in BSAD 101For My Friends in BSAD 101By Thomas HiltonBy Thomas Hilton
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Key Topics• Pricing objectives
• Price-setting tools
• Pricing strategies and tactics
• Cost-Justifying Information Systems
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Pricing to Meet Business Objectives• Profit maximizing objectives• Market share objectives
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Price Setting ToolsCost Oriented PricingCost Oriented Pricing
Breakeven AnalysisBreakeven Analysisprice Sales
Markup percentage Markup
cost Variable - Pricecosts fixed Total units) (in point Breakeven
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Breakeven Analysis
Figure 11–1
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Pricing Strategies• Pricing existing products
• Pricing new products– Price skimming
– Penetration pricing
• Pricing e-commerce products– Dynamic vs. fixed
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Pricing Tactics• Price lining
• Psychological pricing– Odd-even pricing
• Discounts
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Justifying I.S. Projects
• Why Develop Information Systems
• Cost-Justification
• Non-cost Justification
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Why Develop Information Systems?
• Information is the intended output• Data is the main input• Is there a difference?
• There had better be!
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Data: Objective Measures of Traits of Real-World Objects• Objective
– Not subjective– Replicable
• Measures– Values– Quantitative– Qualitative
• Traits– Characteristics– Attributes
• Real-World Objects– Entities or Classes– Tangible– Intangible
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Information: Data Aggregated and Placed in a Useful Context• Data
– see prior
• Aggregation– Groups– Calculations– Manipulations
• Context– Titles– Labels– Rows– Columns
• Usefulness– Decision-Making– Judged by User
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Information QualitySix Traits• Accuracy• Timeliness• Relevance• Verifiability• Accessibility• Security
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Cost-Justification
• “Is the system worth its cost?”• Compare “worth” with “cost”• Various Methods
– ROI– Present Value– Cost-Benefit Analysis
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Cost-Benefit AnalysisConceptually Simple
• Quantify all Costs• Quantify all Benefits• Divide Costs by Benefits• If C/B Ratio < 1, then Proceed
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Cost-Benefit AnalysisComplex in Practice
• System Lifespan
• Tangibles vs. Intangibles
• Future Orientation
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Costs
PeopleFacilitiesSuppliesDataHardware
SoftwareTrainingProceduresOpportunitiesConfusion
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Benefits• Cost Elimination
– Worker– Process– Carrying Cost
• Cost Reduction– Efficiency– Productivity– Maintenance
• Cost Shifting– Inventory– Labor– Debt
• Profit Generation– Product– Service
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Cost-Benefit Analysis TableCosts Benefits
Tangible Intangible Tangible IntangibleName Quantity Name Quantity Name Quantity Name Quantity
Tangible Cost Subtotal
Intangible Cost Subtotal
Tangible Benefit Subtotal
Intangible Benefit Subtotal
Cost Subtotal Benefit Subtotal
Cost-Benefit Ratio:
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Non-Cost Justifications• Cost-benefit analysis is not iron-clad• Often, detractors can discredit it• Therefore, it must be accompanied by
non-cost justifications– Organizational culture– Strategic direction– Potential competitive advantage– Environmental Imperatives– Top Management Support
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Review• Putting a Price on Information involves
• Objectives: Profit? Market share?
• Strategies: Existing? New? E-Commerce?
• Tactics: Price-lining? Psychological? Discounts?
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Now You Do It!
• Cost-justify an information system of your choice using the CBA table in this presentation
• Email it to me within 10 days
