Post on 20-Jun-2020
transcript
Pricing Strategies
Presented By:
George Dierberger Augsburg University
Minneapolis, MN
Presented at: ACLEA 55th Annual Meeting
July 27, 2019 Chicago, Illinois
George Dierberger Augsburg University
Minneapolis, MN Dr. George Dierberger is a business professor and MBA Director at Augsburg University in Minneapolis, Minnesota. He is a former 3M executive who spent 25 years in a variety of leadership roles. Dr. Dierberger started 5 businesses in 10 years for 3M and currently consults for the outdoor, organic food and consumer products industries. He has published 5 journal articles in areas covering innovation, creativity, acquisitions and entrepreneurship.
Dr. Dierberger will discuss the importance of pricing for businesses and non-profits. The presentation will include pricing approaches that include the following: demand oriented (skimming, market penetration, prestige, odd-even, target, bundle and yield pricing), cost oriented, profit oriented and competition based pricing (loss-leader). The discussion will be very hands-on with specific examples of each type of pricing strategy.
ACLEA ConferenceChicagoJuly 30th
Agenda
• Marketing background• The 4 “p’s”• Pricing strategies• Summary
Developing a Positioning Statement• To (target segment
and need) our (brand) is (concept)
that (point of difference)
Selecting an Overall Positioning Strategy• The value proposition is the full positioning of a brand—
the full mix of benefits upon which it is positioned.
6 - 4
Branding
• identifies the maker or seller of a product or service.
A brand is a name, term, sign, symbol, or design, or a combination of these, that
Internal and External Considerations Affecting Price Decision
Overall Marketing Strategy,
Objectives, and Mix
Organizational Considerations The Economy
The Government Social Concerns The Market and Demand
Cost-Based Pricing
Cost-Based PricingSetting Price Based on Costs
Cost-Plus Pricing
Breakeven Pricing
Customer Value-Based Pricing
Customer Value-Based PricingBuyer’s Perceptions of Value
Good-value pricing
Value-added pricing
Marketing Analysis
PlanningDevelop Strategic
PlansImplementation
Analysis
Control Measure results
Marketing Analysis
Developing an Integrated Marketing Mix
The Buyer Decision Process for New Business Owners
Environmental Scanning & Monitoring
• Environmental scanning involves surveillance of a firm’s external environment
• Predicts environmental changes to come• Detects changes already under way• Allows firm to be proactive
• Environmental monitoring tracks evolution of environmental trends
• Hard trends – measurable facts/events• Soft trends – estimated, probable events
2-13
Competitive Intelligence
• Competitive intelligence • Helps companies define & understand their industry• Identify rivals’ strengths & weaknesses
• Collect data on competitors• Interpret intelligence data
• Helps firms avoid surprises• Anticipate competitors’ moves• Decrease response time
• Beware of the potential for unethical behavior while gathering intelligence
2-14
The Intensity of Rivalry Among Competitors in an Industry
• Rivalry tactics include price competition, advertising battles, new product introductions, increased customer service or warranties
• Interacting factors lead to intense rivalry:• Numerous or equally balanced competitors• Slow industry growth• High fixed or shortage costs• Lack of differentiation or switching costs• Capacity augmented in large increments• High exit barriers
2-15
Three Generic Strategies
Exhibit 5.1 Three Generic StrategiesSource: Adapted and reprinted with the permission of The Free Press, a division of Simon & Schuster Inc. from Competitive Strategy: Techniques for Analyzing Industries and Competitors. Michael E Porter. Copyright © 1980, 1998 by The Free Press. All rights reserved.
5-16
Choosing the Right Competitive Advantages
Important
Distinctive
Superior
CommunicablePreemptive
Affordable
Profitable
Pricing Strategies• Skimming
• Setting a price at the highest level the market will bear, usually because there is no competition at the time.
• Prestige or premium pricing• Setting a price above that of the competition so as to indicate a
higher quality or that a product is a status symbol.• Bundling
• Combining two or more products in one unit and pricing it less than if the units were sold separately.
• Multiple or bonus pack• Combining more than one unit of the same product and pricing
it lower than if each unit were sold separately.
9-18
Pricing Strategies• Odd-even pricing
• Setting a price that ends in the number 5, 7, or 9.• Partitioned pricing
• Setting the price for a base item and then charging extra for each additional component.
• Captive pricing • Setting the price for an item relatively low and then
charging much higher prices for the expendables it uses.• Price lining
• The practice of setting (usually) three price points: good quality, better quality, best quality.
9-19
Price-Lowering Techniques• Coupons, Rebates, Loyalty and Referral Programs• Referral discount
• A discount given to a customer who refers a friend to the business
9-20
Value-Based versus Cost-Based Pricing
DANGER- PRICE ADJUSTMENTS
Responding to Price Changes
XYZ Project 2018-2020 Global Strategy Implementation
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Growth – Accelerate• Superior speed to market and coverage
Xxx sales from $ to $ million in 2019Entitlement of $ Million Chain sales from $ to $ million in 2019Key accounts from $ to $ million in 2019
• Accelerate growth of strategic power brandsMarket share of xxx from % to % in 2019
• Marketing and technology innovationDevelopment of new platform.
new launch- $ in 2019Platform entitlement of $ million
PROJECT CLUSTERS
Identify and develop new new technologies and growth opportunities
Identify new categories and products using white space analysis
Build xxx sales & profits by expanding current accounts, new channels, and OUS markets
Develop new xxx and yyy solutions to grow & increase distribution
Leadership - Demonstrate
Six Sigma projects focus on DBT, terms changes, deductions
Six Sigma control plan focus on D&E, SKU Productivity, SMI
Business team processes focus on S&OP, Parameter Mgmt.,MRP planning tools
Stretch assignments, recognition, communications, team building
Focus on EH&S leadership in our operations
Project engagement and development plans EC&DP
Implement xxx with key suppliers to achieve sourcing goal of $k
SKU Optimization
MRP Planning Tools, S&OP Process effectiveness
Improve roll-through yield for xxx to % in 2019
Costs - Streamline / Invest• Operational Excellence
Improve factory cost from % to %Invest in manufacturing scale-up for
gripping solutions
Cash - Generate• Business Process Excellence
Increase cash flowIncrease working capital turns from to
Nationwide introduction of new xxx connector in 2020
Increase sales of xxx and yyyby increasing distribution and market coverage
AFE investments for productivity and new technology platform
Utilize corporate sourcing (dual sourcing, eAuctions, SS @ suppliers, Preferred Supplier Network)
Business Conduct - Protect the Corporation• Ethical business practices
100% Six Sigma trained salaried workforce by end of 2019
Business conduct training, communications, expectations
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Acquisitions & Alliances to further strengthen market position
Measure xx Performance to Customer Expectations / Entitlement Quality
Summary
• Know your market• Follow your competitors• Understand your fixed costs and what it takes to breakeven• Find your sweet spot in the market• Network, network, network• Pivot when things are not working