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M-Price

M- Price®
Background

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Price is not just a number on a tag

Price comes in many forms. Rent, tuition, fares, fees,

rates, tolls, retainers, wages, and commissions are forms
of price customer pays.

M- Price®
Price is made up of many parts

When you buy a new car, the sticker price may be adjusted
for

• Rebates
• Dealer discounts
• Add on accessories
• Insurance
• Finance fees
• Taxes

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Price Matters

Traditionally, price has been the major determinant

of a buyer’s choice. And this is still the case with
large segments of buyers across the globe.

M- Price®
Price Matters

Competitive pressures together with dynamic consumer

behavior and changing structure of channel members
have resulted in a market place that is characterized by
heavy discounting and sales promotion.

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Pricing is a Headache!

Executives complain that pricing is a big headache –

and one that is getting worse by the day. Many
companies do not handle pricing well and throw up
their hands with ‘strategies’ such as this: “We
determine our costs and take our Industry’s
traditional margins.”

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M-
Price

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Pricing is it is practiced

A linear single dimensional approach to pricing is

inadequate and risky. Such an approach models a
complex and dynamic real life situation through
static and simplistic analogues.
Almost all existing models for pricing are uni-
dimensional and linear

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 Pricing : What we do different

M-Price is a multi dimensional dynamic

approach which creatively combines four
different well established analytical tools to
yield advice on price, which is, objective linked
and risk optimized.

M- Price®
The key approaches and proven techniques

Technique of Conjoint Analysis is used to find what

features and price combination will be most desirable
for the target market. What should be the price range
within which, optimal price should be explored?

M- Price®
The key approaches and proven techniques
Purchase decisions are often based on what consumers
consider the current actual price to be – not the
marketer’s stated price.

Customers may have a lower price threshold below

which prices signal Inferior or unacceptable quality, as
well as in upper price threshold above which prices are
prohibitive and seen as not worth the money.

This paradigm is explored through the well established

Van Westendorp methodology

M- Price®
The key approaches and proven techniques

Competitive pressures make it mandatory that

our offering is viewed as delivering the best,
value- price pay off in the competitive scenario.
Metric’s proprietary MOSTER system,
advances on the core analysis developed by
Researchers at GE.

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The key is in synthesis
The data collected from primary and secondary sources and
collated through
conjoint analysis,
Van Westendorp curves and
Relative Value Maps
is then integrated in econometric models based on
Hedonic pricing models and
Almost Ideal Demand System (AIDS)
to arrive at dynamic demand curves.
The demand curves are mathematically analyzed to arrive at
profit maximizing price, sales value maximizing price, sales
quantity maximizing price for each market segment

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 Feature Price Upper & Lower Competitive
Combination price thresholds Positioning
Conjoint Analysis Van Westendorp Relative Value Map

Price Range for Narrowed Optimal Price policy to gain

further exploration Price Range competitive edge.

Econometric Models
Glamorous Models
Just Ideal Price Models

Dynamic Demand Curves

Quantity Sold Sales Value Profit Maximizing

Maximizing Price Maximising Price Price
M- Price®
Applicable for all products and services which are
branded and differentiated
For Example
• Automobile – (Cars, Buses,)
• White Goods (Air Conditioners, Refrigerators)
• Electronic entertainment products (Radio, TV,)
• Mobile telephony service
• Insurance service
• Newspaper
• Food products (Jams, Cheese)
• Shoes & apparels
• Hand sets
Not applicable for:
• Investment goods
• Unbranded commodities
• Very small value products with very small interval between repeat
purchase (e.g. Soft Drinks)
• Addictive products (e.g. Tobacco)
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Conjoint Analysis to find desirable price range for
a desirable feature combination for each market
segment

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Typical attributes of a value proposition for
Industrial Product • The reputation of the supplier
Prioritize these
attributes to identify
the key Value
Drivers
• Reasonable credit control
• Professional knowledge of the sale person
• Initiative of the sale person
• Creditability of the sale person
• Professional manner of the sale person
• The consistent quality of the product
• The economy of the product
• Operational Training
• Quality/price ratio of the product
• Warranty period
•
•
The quality of the parts &service products
The unification of the parts
• The price of the parts &service products
•
•
The service fee
The ability to solve problem
• The response time of the service
• The service attitude of the engineers
• The network/area coverage of service
• The delivery time of the product
• The delivery time of the parts
• Logistical flexibility of the product
• Logistical guarantee for parts
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Thinking about next time you buy this brand, select the
option that describes the option you would most likely to
buy
Spare part Spare part Spare part
availability availability availability
Modest within 36 hours within 8 hours
Application Reasonable Excellent
support not Application Application
available support support
available available
Warranty Warranty Warranty I would
Period 36 Period 24 Period 12 not buy
months months months any of
these
Product Product Product
Delivery Ex Delivery 15 Delivery one
stock days month
Price Eu Price Eu Price Eu
5400 6,000 6,400

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Relative Value Map (RVM)

RVM takes a ratio of price satisfaction and

quality satisfaction and analyzes relative
competitive strength of each player in the
market segment. This is based on Metric’s
internationally popular Moster® system

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Theoretical basis
A Delight Attribute

Higher performance of
these attributes generates
delight for the stakeholder

For example

Value Added Service

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Threshold Analysis
based on Moster System

Performance

Delight
Loyal
Delight Volunteers positive word

Threshold
Critical
zones Satisfaction
Dissatisfaction
Threshold
Dissatisfaction
Will never BUY again
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Relative Value
Map
Price Satisfaction

B
Equal Value
D
Line

C
A

Quality Satisfaction
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Econometric Models

The Econometric models, estimated through maximum

likelihood ratio method yield demand curves combining
different class of inputs. We use the state of Art
Hedonistic Price Models (HPM) & Almost Ideal
Demand Systems (AIDS)

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Hedonic pricing model

A hedonic model of prices is one that decomposes

the price of an item into separate components that
determine the price.

A hedonic model does not necessarily separate all

the factors that could be separated, only those that
affect the usefulness to a buyer of what is being
sold.

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 Hedonic pricing model

One use of Hedonic Models is to adjust measures of

inflation. The difference this makes is most significant for
products that are not directly comparable with those that
were sold in the past because technology has improved.

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Consider an entry level personal computer bought today
compared with one bought ten years ago: the price is not
greatly different, but it is much cheaper than the price of a
similar computer bought ten years ago.

The adjustment that is needed is more complex than it

may appear, as it should reflect the increase in usefulness
(strictly speaking utility) of a product to customers. A
computer that is ten times more faster with ten times as
much memory etc. is not necessarily ten times more
useful to a customer, and it is the increase in usefulness
that is being measured.

The actual Hedonic Modelling can be quite complex, as

shown by the description witch follows

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Hedonistic Price Models
(HPM)

Uh = g (x) + ∑ aih (cn) g(zi) + 0.5 ∑ ∑ bij .g(zi)

Uh is Utility
x is Expenditure
zi is Product Features
cn are Market segment Characteristics
g, a, b are system characters

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An Almost Ideal Demand
System Model (AIDS)

The Almost Ideal Demand System (AIDS) model of

Deaton and Muellbauer has enjoyed great
popularity in applied demand analysis. Starting from
a specific cost function, the AIDS model gives the
share equations in an n-good system as

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where wi is the share associated with the ith
good, is the constant coefficient in the ith share
equation, is the slope coefficient associated with
the jth good in the ith share equation, pj is the
price on the jth good.

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X is the total expenditure on the system of
goods given by

in which qi is the quantity demanded for the ith

good.

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P is the price index defined by

that gives rise to the linear approximate AIDS (LA-AIDS)

model. In practice, the LA-AIDS model is more frequently
estimated than the nonlinear AIDS model.

M- Price®
 Thank you for your time

CALL US FOR A COMPREHENSIVE PRESENTATION !

METRIC
METRIC Consultancy (UK) Limited
211, Tollgate Road, Beckton, New Ham , London, E6 5XW

Phone :020 7474 7886 Email: metricuk@btinternet.com

M- Price®