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Strategic and Tactical PricingStrategic and Tactical Pricing
Strategic and Tactical PricingStrategic and Tactical PricingTrainingTraining Sample MaterialSample Material
TrainingTraining Sample MaterialSample Material
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Price is a Part of the Value PropositionPrice is a Part of the Value Proposition
Pricing identifies the part of the value generated for thecustomer that we can capture, given competitive considerations
Support
Promise Differentiation
Effort Risk
Price
Value Proposition can be Adjusted with
Benefits and/or Price
2010 EMM Group
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3
Three-way Perspective to PricingThree-way Perspective to Pricing
How do weprovide goodvalue to customerat an attractive
price.
CustomerCustomer
that is better thanthe competition.
CompetitionCompetition
and meets ourprofitability goals
CompanyCompany
How do we usepricing to establishand keepcustomerrelationships.
anticipatingcompetitiveresponses.
while building oneof the mostvaluable assets forour business
What aspect ofprice is mycustomerparticularlysensitive to .
knowledge ofwhich gives acompetitive edge
enabling us toleverage that toour advantage
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4
Why is Pricing Important?Why is Pricing Important?
The biggest driver of profitability
Central to competitiveness
Key to penetrating markets and segments
Directly linked to brand equity
Pricing is Critical for Growth
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Fundamental to SuccessFundamental to Success
Pricing is
The biggest driver of profitability
Central to competitiveness
Key to penetrating markets and segments
Directly linked to brand equity
0 4 8 12
Fixed cost
Volume
Variable cost
Price
2.7
3.7
7.3
11.0
Pricing is the #1 Lever to Drive Margins
Improve 1% Profit improvement (%)
-10%
0%
10%
20%
Price decrease Break-evenvolume increase
-5.0%
17.5%
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Fundamental to Success (contd)Fundamental to Success (contd)
Pricing is
The biggest driver of profitability
Central to competitiveness
Key to penetrating markets and segments
Directly linked to brand equity
Leveraging price psychology to beat larger
and experienced competitors
15 minutes could save you 15% or
more on your car insurance.
ost
reliable
brand
(1 years)
4th largest
global
luxury
brand
Top-seller
in US
ahead
of
2010 E Group
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Fundamental to Success (contd)Fundamental to Success (contd)
Pricing is
The biggest driver of profitability
Central to competitiveness
Key to penetrating markets and segments
Directly linked to brand equity
Value pricing to successfully penetrate luxury car market
Most
reliable
brand
(12 years)
4th largest
global
luxury
brand
op-seller
in
ahead
of
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Fundamental to Success (contd)Fundamental to Success (contd)
Pricing is
The biggest driver of profitability
Central to competitiveness
Key to penetrating markets and segments
Directly linked to brand equity
Hurt brand equity through ill-conceived promotion strategy
Europe1992
Tanked sales
Customer perception suffered
Took 5 years to recuperate
=
Retailers insist on matching
Buy 1, Get 1 Free promotion
Free
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Common Issues With PricingCommon Issues With Pricing
Usi r ls f t ,ssumpti s lf-trut s
Diff r t i t r l perspecti es
MistakeMistake LessonLesson
Response by established brokeragehouses to discount brokerage
Hurt entire business in knee-jerk
response to day-trader segment
Dont use as first responseor lever to competitiveactions
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Common Issues With PricingCommon Issues With Pricing
Cost-plusprici
ricechangeuncorrelated
ithcustomerehavior
MistakeMistake LessonLesson
Dont use as first response orlever to competitive actions
Pricing should includeexternal view (not justinternal)
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Common Issues With PricingCommon Issues With Pricing
Pricechange ithout
consideringcustomerperceptions
Overuseofpricepromotions
Dont useas first responseor lever tocompetitiveactions
Pricingshould includeexternal view (not justinternal)
MistakeMistake LessonLesson
Not relating price to brandequity
successfullyprotected blue-chipimage in face of stillprice competition
failed attempt atintroducingpremium apparelline
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Common Issues With PricingCommon Issues With Pricing
Focusonchannel orproduct,not customer
Noconsideration forelasticit
orcost toserve
Dont useas first responseor lever tocompetitiveactions
Pricing should includeexternal view (not justinternal)
Not relating price to brandequit
MistakeMistake LessonLesson
Consider customer
segmentation & elasticity
Through the & much of
9 s the creditcard industry
offered one flatprice to allcustomer
80s
2010 EMM Group