Beruflich Dokumente
Kultur Dokumente
PRICING IT RIGHT
AGENDA
Product Pricing Why? Pricing & Product Value Pricing & Place (Margins, MDF, Incentives, Landing Price)
PRICING BASICS
merely a low price, you either keep an eye for a new job (or) ensure all other parameters are tuned to deliver price leadership.
WHY PRICING?
How much? in exchange of Need satisfying
Product
Product
Either has a Utility (or) kindles a Desire Finished to Buy (or) to Resell Solutions Packaged
Innovative products
High
Prod 10
Prod 6 Prod 2 Prod 3 Low Prod 11 Low Performance Index High Prod 8
Cost Plus
High
JetLite
Prod 10
Prod 6 Prod 2 Prod 3 Low Prod 11 Low Performance Index High Prod 8
+2% +20%
+5%
Service =
Pv
Pq [1+(+Q + D + S)]
S = Service Rating
+Q +D +S = Vendor Rating
Method
Resale Price(RSP): Price at which Product Owner can sell (to end Customer) GPM: Gross Profit Margin needed for the Reseller, to cover
OECD Prescribed
CUP RPM
Functions performed (eg., Sales/Payment period/Market Dev) Risks Undertaken (eg., Inventory Held) Assets Used
Cost Plus
Transactional Net Margin Method (TNMM) Transactional Profit Split Method (TPSM)
Organization for Economic Cooperation & Development
Channel Sequence may be 1,2,3.n (or) 1, 2, 2, 2, 3n, n Per the Channel Sequence, the Value Add differs
Functions performed (e.g., Sales/Payment period/Market Dev) Risks Undertaken (e.g., Inventory Held) Assets Used Feeder to next Channel Levels
Maintain the Price Levels ~ Channel Sequence (unless market dynamics change)
http://www.scribd.com/doc/28578846/Pepsi-Distribution-Channel
US$ 27,000
Knowing what your target customer perceives as valuable is essential to setting a price
Buyers)
Premium Provider (High Price & Quality strategy to attract cream)
Me-Too Pricing (across all segments spreads thin)
Process) &
Pricing
Stage 1: Want to use/know before buying Stage 2: Cost of Pirating ~ Price of Product
PRICING STRATEGIES
Penetration Pricing Loss-Leader Pricing Price Skimming (Generate
Customers will buy at Price (P) if their utility is non-negative Customer has 2 choice: Pirate (or) Use Legal Samples Free/Low cost Samples to get them taste the utility (Freemium Model) Customer save on Moral Cost of Pirating (internal cost of committing an illegal activity Chellappa & Shivendu 2003a) Sampling cost < Cost of difficulty of pirating (tech & legal factors)
consumer satisfaction
Helps Consumer to not to
Premium before Counterfeit hits release next product version at high price reduce the prices for earlier version)
volume
Passing Economies of Scale benefits to
24
BahnCard is sold for a flat fee of $220
User gets a 50% discount in all trains for 1 yr Breakeven point (total savings = $220 card fee) is 1833 miles
cost and there is a strong incentive to maximize its use as this means saving more money
3.1million cards are sold per year, revenues
http://www.buildingkeystones.com//
While enticing the customer to buy 10 instead of nine, it actually results in you making less money
Advantages There are no step-down points. where you are selling more, but less revenue
All-Units Volume Discount - Per Unit Price Incremental Volume Pricing - Price Per Unit
Disadvantages The pricing logic is more difficult for customers to understand The per-unit price displayed to customers will not be a marketingfriendly price.
PRICING IS ALMOST NEVER ABOUT THE NUMBER. ITS ABOUT THE MODEL
What is the Customer Value? How did you validate Customer Value?
Who is your competition? What relative value your product has more than competition? Specify & Justify your Product Price (quantitative) Explain your Organizations business model & pricing alignment (Discounting / Promotions / Budling)
SUMMARY
Product Value Map helps setting the right price Channel Pricing to scale your Product Adoption Multi-Channel Pricing enables channel layers to feed Opportunities to other layers Pricing aligns and confirms Product Positioning Right Product Strategies & Pricing effectively counters Piracy Volume Pricing and discounting retains Customers and boosts revenue
THANK YOU
SHIV.M@MICROSOFT.COM
All information contained in this presentation are based on the personal research & experience of the presenter. The deck is prepared for presenting at IPMA, Bangalore for its members, solely for knowledge purposes only.