Prior to the Launch of the iPad

7/17/2019 Prior to the Launch of the iPad

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How much would you pay

for the new Apple iPad?

$900

More than $800

41%

iPad Product Line Positioning

$800 $829Mac

UsersLess than $600

3%$600–$800

!% $700 $729

$699

$600 $629$599

More than

$800

"%

$600–$800

1#% $500$499

P$

Users$400

Less than $600

#4%$300

16 GB 32 GB

Performance

64 GB

prior to the launch of the ia!" the

tech# nolo% &lo 'etre(o con!ucte!

a price sur(e% to !eter)ine ho*

)uch &u%ers *oul! pa% for an +pple

ta&let,2 +s sho*n in the pie chart

a&o(e" 41 percent of Macintosh

o*ners &ut onl% 20 percent of -

o*ners reporte! that the% *oul! pa%

o(er $800, +t the other e.tre)e" onl%

32 percent of Mac o*ners &ut 64

percent of - o*ners *oul! not pa%

)ore than $600,

P



Chapter 8 /alue#Base! ricin$ an! ricin$ 0trate$ies

+pple launche! the ia! *ith a *i!e

rane of custo)er choices, he

entr% price of $499 pro# (i!e! a

&ase le(el of perfor)ance 16

ia&%tes *ith i#i &ut lacin a3G &enet, his option *oul! appeal

to 32 percent of the Mac o*ners an!

64 percent of the - o*ners

sur(e%e!, But those *ho *ere

*illin to pa% )ore to et )ore

coul! tra!e up to 3G $629" 32 GB

$599" or &oth $729" as sho*n in

the ure, -usto)ers also ha! t*o

other options price! at $699 an!

$829,

n 2010" +pple sol! 7,46 )illion ia!s

at an esti)ate! a(erae net price of

$665 the price +pple o&tains after

retailer !iscounts *hich resulte! in

$4,96 &illion in rst#%ear sales,

APPL&'( P)*$*+, (-)A-&,*&(

+pples launch strate% for the ia! *as a reat )arin )anae)ent price

strate% &ecause the )arin *as liel% to &e )ore for the hiher price!

ia!s, :;erin onl% one or t*o hih#price options at launch *oul! ha(e

allo*e! +pple to create a tra!itional si) pricin strate% *ith reat

)arins &ut lo*er (olu)es" as )an% taret custo)ers *oul! not &u% at a

hih price, But +pples !ecision to o;er !i;erent perfor)ance le(els at

se(eral price points un!ou&te!l% pro!uce! consi!era&l% )ore (olu)e" sales

re(enues" an! prots than a con(entional si) price often use! for a ne*

pro!uct,

B% contrast" *hen +pple launche! the io!" it !i! so at a pre)iu)" or si)"

price" as the pro!uct ha! (er% hih perfor)ance characteristics" as sho*n in

the top half of iure 8#1, he si)#pricin strate% li)ite! sales" &ut itresulte! in hiher )arins, t also a(e +pple ti)e to ra)p up pro!uction,

<(entuall% the price *as lo*ere! to attract )ore &u%ers" &ut at the sa)e

ti)e +pple o;ere! hiher price#perfor)ance io! )o!els to capture sales

fro) those *ho *ere *illin to pa% )ore for reater perfor)ance, his

pro!uct line strate% allo*e! +pple to ser(e )an% !i;erent custo)er nee!s

*hile creatin a oo! custo)er (alue for each" as sho*n in the lo*er

portion of iure 8#1, Because of !i;erin circu)# stances" +pple use! a

sinle pro!uct#price positionin strate% in launchin the io! an! )ultiple

pro!uct#price positions in launchin the ia!" an! &oth *ere successful,




$.(-/0A(& P)*$*+, 2&)(U( MA)&-/0A(& P)*$*+,

-ost#&ase! pricin is loical fro) a nancial perspecti(e an! is eas% to !o"

&ut it has nothin to !o *ith *hat custo)ers *ill pa% for a pro!uct,=nfortunatel%" cost#&ase! pricin is the )ost co))onl% use! approach to

pricin,3 :ne stu!% foun! that o(er 60 percent of the &usinesses sur(e%e!

use! cost#&ase! pricin as their pri)ar% &asis for settin price,4 his n!in

is consistent *ith another stu!% of 50"000 )anaers fro) o(er 100

countries in *hich 64 percent use! cost#&ase! pricin to set price,5

+s sho*n in iure 8#2" the cost of )ain a pro!uct an! the !esire! prot

)arin are the t*o pri)ar% !eter)inants in settin a cost#&ase! price, he

price is then )are! up &% channel inter)e!iaries to arri(e at the purchaseprice that custo)ers are ase! to pa%, But custo)ers an! co)petitors are

)issin fro) this approach to pricin, irst" cost# &ase! pricin inores

custo)er perfor)ance nee!s an! *hat the% *ill pa% for a !esire! le(el of

pro!uct perfor)ance, econ!" this approach to pricin o(erloos &oth

co)peti# tors o;erins relati(e to custo)er nee!s an! price sensiti(it%,

/alue#&ase! pricin" in contrast" starts *ith custo)er nee!s" co)petitors

pro!uct# price positionin" an! co)pan% pro!uct#price positionin,6 ain

into consi!eration



2alue Map

io!

emand 5olume6 Performance

2alue Map

ouch $299–$399

-lassic $249–$349

>ano $149–$199

hu?e $79


7*,U)& 8/1 APPL&9*P.'( P).U$-/P)*$& P.(*-*.+*+,: 0)A+*+,

A+ $U(-.M&) 2ALU&

P r i c e

P r i c e

P r i c e

P r i c e



custo)er nee!s" custo)ers price sensiti(it%" an! co)petin pro!ucts" aco)pan% !e(el# ops its price aroun! a pro!ucts relati(e strenths to create

reater (alue than co)petin pro!ucts o;er, +lthouh pricin nee!s (ar%" the

are certain &asic factors that ten! to pla% into )ost (alue#pricin strateies,

he (alue !ri(ers that see) to co)e to the surface are pro!uct perfor)ance"

@ualit% of cus# to)er ser(ice" &ran! reputation" an! price,7

$ost/0ased Pricing; Underpricing and Lower Pro<ts

Lets loo at an e.a)ple of ho* cost#&ase! pricin can lea! to un!erpricin a

lo*er prots, iure 8#3 !epicts a t%pical price#custo)er purchase cur(e, he

cur(e *as !eri(e!



'etail rice to -usto)

$940

$.(-/0A(& P)*$*+,

urchases

La&or

-ost to

Manufacture -o)puter

$600

Aesire!

Marin 25

$200

holesale

rice

$800

'etailers

Marin 15

$140

<@uip)ent

MA)&-/0A(& P)*$*+,

-ost to

Manufacture -o)puter

$600

holesale

rice

$850

'etailers

Marin 15

$150

'etail

rice to -usto)ers

$1"000

rot Marin 29,4

$250

7*,U)& 8/ $.(-/0A(& P)*$*+, 2&)(U( MA)&-/0A(& P)*$*+,

-usto)

-o)pet

-o)pa

&% asin a sa)ple of custo)ers *ho *ere intereste! in &u%in a !iitalca)era the sa)e @uestion that *as pose! for potential &u%ers of the +pple

ia!, +fter seein a !escription of the pro!ucts features" functions" an! ease

of use" sa)ple participants *ere ase!C Dhat is the )ost %ou *oul! pa% for

this !iital ca)eraEF he raph *as then create! &% plottin the percentae

of custo)ers *ho *oul! pa% at !i;erent price points, or e.a)ple" a&out 10

percent of people *oul! pa% $500 or )ore for the !iital ca)era" *hereas

appro.i)atel% 50 percent *oul! &u% the ca)era for $300, he raph

inclu!e! prices !o*n to $50" *hich *as the a)ount e(er%one in the

custo)er sa)ple *oul! pa% for the ca)era, n iure 8#3 *e assu)e! a)aret potential of 2,5 )illion units" the nu)&er of units that *oul! &e sol!

at a price of $50, But &ecause each ca)era costs $125 to )anufacture"

sellin it for $50 *oul! not &e a prota&le pricin strate%, nstea!" a

co)pan% usin cost#&ase! pric# in that *ants a 50 percent )arin nee!s to

price the ca)era at $250" t*ice the unit cost, +s sho*n in iure 8#3" this

price pro!uces $375 )illion in sales an! $187,5 )illion in ross

prot, t appears to &e a soun! pricin strate% that *ill pro!uce a (er%

oo! ross prot,



=sin the custo)er#!eri(e! price#purchase cur(e" ho*e(er" *e n! that the

ca)era *oul! &e un!erprice! at the cost#&ase! price of $250, +t a )aret#

&ase! price of $350" the co)pan% *oul! sell 500"000 fe*er ca)eras an!

ha(e $25 )illion less in sales" &ut the ross prot *oul! &e $225 )illion,

his is no s)all !i;erence" as the ross prot *oul! &e $37,5 )illion )ore,

er(in fe*er custo)ers *ho (alue the pro!uct at the hiher price of $350

is )uch )ore prota&le" *ith a ross prot )arin of 64,3 percent" than

sellin the !iital ca)era at the cost#&ase! price of $250 *ith a 50 percent

)arin,

$ost/0ased Pricing; .5erpricing and Lower Pro<ts

-ost#&ase! pricin can also lea! to lo*er prots !ue to o(erpricin, iure 8#

4 sho*s the sa)e !iital ca)era price#purchase cur(e an! the sa)e )aret

potential of 2,5 )il# lion units, o*e(er" in this e.a)ple the unit cost is

$250, =sin cost#&ase! pricin loic an! !esirin a )arin of 50 percent

*oul! lea! the co)pan% to price its !iital ca)era at $500, +lthouh this

pricin strate% pro(i!es a oo! )arin" onl% 10 percent of the potential

)aret *oul! &u% the !iital ca)era at that price, +t a price of $500"



$600

$550

$500

$ost/0ased Underpricing

$450

$400

$350

$300

$250

$200

Maret#Base! rice

-ost#Base! rice

$150

$100

$50

020 40 60 80 100

(ample $ustomer Purchase

Maret otential H 2,5 )illion units

=nit -ost H $125Maret#Base! ricin

-ost#Base! ricin

7*,U)& 8/3 *,*-AL $AM&)A9$.(-/0A(& U+&)P)*$*+,

Product =ould 2olume

(ales Percent ,ross Pro<t Price$500 10 0,25 $125 75,0 $93,8

$450 20 0,50 $225 72,2 $162,$400 30 0,75 $300 68,8 $206,

P r o d u c t P r i c e



>3" 4"% 1@"" >3" #4@3 >@$300 50 1,25 $375 58,3 $218,>" #"% 1@" >3! "@" >18!@$200 70 1,75 $350 37,5 $131,$150 80 2,00 $300 16,7 $50,0$100 90 2,25 $225 – –

$50 100 2,50 $125 – –

the co)pan% *oul! achie(e $125 )illion in sales an! a ross prot of $62,5

)illion, But usin our )aret no*le!e of ho* custo)ers (alue this ca)era

the !i;erent price le(els sho*n in iure 8#4" *e can see that a price *hich is

$100 lo*er $400 *ith a )arin of 37,5 percent %iel!s sinicantl% hiher le

of sales an! ross prot, ales of $300 )illion *oul! earn the co)pan% $175

)illion )ore" an! the ross prot of $113 )illion is al)ost !ou&le that earne!

fro) usin the $500 cost#&ase! price,

n co)panies *here the nance function sets price" the custo)er#!eri(e! pric

purchase cur(e is essential to *innin the aru)ent that a )aret#&ase! pric

*oul! &e )uch )ore prota&le than a co)pan% polic% of pricin to achie(e a

percent )arin,



$600

$550 $ost/0ased .5erpricing

$500 -ost#Base! rice

$450

$400Maret#Base! rice

$350

$300

$250

$200

$150

$100

$50

020406080100(ample $ustomer Purchase

Maret otential H 2,5 )illion units

=nit -ost H $250-ost#Base! ricin

Maret#Base! ricin

7*,U)& 8/4 *,*-AL $AM&)A9$.(-/0A(& .2&)P)*$*+,

Product =ould 2olume

>"" 1"% "@ >1 "@" >#3$450 20 0,50 $225 44,4 $100>4"" 3"% "@! >3"" 3!@ >113

P r o d u c t P r i c e



$350 40 1,00 $350 28,6 $100$300 50 1,25 $375 16,7 $63$250 60 1,50 $375 0,0 $0$200 70 1,75 $350 – –$88$150 80 2,00 $300 – –$200$100 90 2,25 $225 – –$338

$50 100 2,50 $125 – –$500

2ALU& P)*$*+,

Maret#&ase! pricin re@uires e.tensi(e custo)er an! co)petitor intellience

ithout ha(in hih le(els of &oth" it is si)pl% not possi&le to i)ple)ent this

of pricin, Maret#&ase! pricin starts *ith a oo! un!erstan!in of custo)e

nee!s an! the &enets that a pro!uct o;ers relati(e to co)petitors pro!ucts

:n the &asis of pro!uct perfor)ance &enets" the price is set relati(e toco)petition to create a superior (alue, n this *a%" the price



is !eter)ine! in the )aret" not at the factor% or in the nance

!epart)ent, his section !iscusses (e in!s of (alue pricinC

1, 2alue/in/Use Pricing9rice is set to pro(i!e custo)ers *ith anattracti(e sa(ins after consi!erin the life#c%cle costs of

ac@uirin" o*nin" usin" )aintainin" an! !isposin of a pro!uct,

2, Life/$ycle 2alue Pricing9rice is set *ith respect to the total

cost of o*nership o(er the life c%cle of a pro!uct on the &asis of

the net present (alue of the !i;erence &et*een the co)pan%s

an! a co)petitors life#c%cle o*nership costs,

3,Percei5ed/2alue Pricing9

rice is set on the &asis of the (alue

that custo)ers realiIe *hen the% co)pare the price an! &enets

of the co)pan%s pro!uct *ith those of a e% co)petitors

pro!uct,

4, Performance/0ased Pricing9rice is set on the &asis of

custo)er preferences for !if# ferent le(els of price an!

perfor)ance an! tain into consi!eration ho* the co)pan% an!

co)petitors are positione! *ith respect to !eli(erin &oth price

an! perfor)ance,

5, $ustomeriation 2alue Pricing9rice is set &% un&un!lin a

pro!ucts features or perfor)ance le(els" placin a price on each"

an! then allo*in custo)ers to select the features an!

perfor)ance that the% *ant at a price that the% are *illin to pa%,

he price of the top#perfor)in pro!uct that has all features

ser(es as the reference price, -usto)ers *ho &u% the pro!uct

*ith onl% the features an! perfor)ance le(el the% !esire ha(e an

inferre! sa(ins (alue relati(e to reference price,

Understanding -otal $ost of .wnership

rice is the )ost (isi&le cost of an% purchase" *hether it is a ne* car"

co)puter" insurance polic%" (acation trip" or si)ple househol!

cleanser, +ll custo)ers are price sensiti(e to so)e !eree, o)e

custo)ers" ho*e(er" are *illin to pa% )ore for e.tra &enets, hese

&enets often inclu!e re!uce! costs in other areas of pro!uct

o*nership, he other costs of o*nin a pro!uct are )uch lesso&(ious than the purchase price, +s sho*n in iure 8#5" price is onl%



the tip of the ice&erJ the other costs of o*nership are &eneath the

surface, /alue#in#use pricin consi!ers the annual cost of o*nership

for a co)petitors pro!uct an! the annual cost of o*nership for the

&usinesss pro!uct in !eter)inin the &usinesss custo)er (alue,10

his !oes not necessaril% )ean lo*erin prices, B% consi!erin the

total cost of o*nership that is incurre! &% taret custo)ers" a&usiness can use (alue#in#use pricin to o;er the) an attracti(e

sa(ins econo)ic (alue *hile )aintainin a pre)iu) price, or

e.a)ple" in iure 8#6" the price of a &usinesss pro!uct is hiher

than the price of the co)petitors pro!uct" &ut the total cost of

o*nership for the &usinesss pro!uct is lo*er than the co)petitors

pro!uct, Because of lo*er ac@uisition" use" an! other costs" the (alue

in use of the &usinesss pro!uct is hiher than that of the co)petin

pro!uct" an! the custo)er sa(es )one%,

hen a co)pan% uses (alue#in#use pricin" the price is &ase! on the

attracti(e sa(# ins that custo)ers realiIe o(er the life of the pro!uct"

not Kust on the costs of )anufac# turin an! )aretin the pro!uct,

-usto)ers are intereste! in o(erall sa(ins" or econo)ic (alue" an!

the hiher the sa(ins" the )ore attracti(e the &usinesss pro!uct,

he )ore attracti(e the pro!uct" the hiher the purchase price can

&e" rear!less of )an# ufacturin an! )aretin costs, -hapter 4

!iscusse! the (arious *a%s that a &usiness can



Price

Price

Aisposal

-osts

+c@uisition

-osts

inancin -osts

ol!in -osts

nstallation -osts

=sae -osts

'epairMaint,-osts

Aisposal -osts/alue

otal -ost

of :*nership

Chapter 8 /alue#Base! ricin$ an! ricin$ trate$ies

er the cost of o*nership an! there&% achie(e hiher price le(els *hile stillatin a superior (alue for taret custo)ers,

lue/in/Use Pricing

usiness ten!s to re)ain focuse! on price until it realiIes ho* custo)ers

@uire" nance" use" )aintain" an! !ispose of or resell its pro!uct, he &usiness

n un!erstan!s that pricin is not the onl% option it has to create a co)petiti(e

(antae, B% looin )ore !eepl% into the costs of o*nership" a &usiness can

co(er ne* opportunities for custo)er sa(ins an! (alue creation, Lets &ein

nstall

ation

inan

cin-

o

s

t

s

=

s

a

e

-

o

s

t

s

+c@uis

ition-

o

s

t

s

ol

!in

-

o

s

t

s

-

o

s

t

s

'

e

p

ai

r

-

o

s

t

s

'

es

al

e

/

a

l

u

e

Mainten

ance-

o

s

t

s

'eplace

)ent-

o

s

t

s




h iure 8#6" a total#cost#of#o*nership anal%sis of a )aterial that a co)pan%

pe! to sell in the auto)oti(e )anufacturin )aret, his )aret is hihl% price

)petiti(e" an! custo)ers si)pl% !o not pa% price pre)iu)s, o !o &usiness in

)aret" the co)pan% *as tol! it *oul! nee! to set a price &elo* the oin

ce of $2 per poun!, a! the co)pan% &een a t%pical &usiness" it *oul! then(e focuse! on *a%s to lo*er its price so its pro!uct *oul! &e attracti(e to the

o)o# ti(e in!ustr%, o*e(er" an anal%sis of the co)pan%s an! co)petitors

nership costs" as sho*n in iure 8#6" re(eals that a custo)ers total cost per

un! for the co)petitors pro!uct is $6, he $2 purchase price is onl% one thir!

he total cost of purchaseJ the other t*o thir!s are costs associate! *ith

@uirin an! usin the pro!uct,

e co)pan%s total cost of o*nership at a price e@ual to the co)petitors price

results in a $5,05 total cost of purchase, he lo*er total cost of purchase *oul!

(e custo)ers 95 cents per poun! o(er the co)petitors pro!uct, he (alue#

cin @uestion isC D-an the co)pan% capture a price pre)iu) an! still !eli(er a

aninful econo)ic (alue to custo)ersEF

ce pre)iu)s can &e !icult to e.plain *hen custo)ers loo onl% at the

rchase price" &ut the co)pan% set its price at $2,20" a 10 percent price

)iu)" in the &elief that custo)ers in its )aret *oul! rea!il% see the

&stantial sa(ins the% *oul! realiIe in a



ue/Pricing (trategyis e.a)ple" the co)pan% felt it coul! price its pro!uct 10 hiher" at $2,20 per poun!" an! still sa(e the cust

7*,U)& 8/# 2ALU&/*+/U(& P)*$*+,

Ownership Competit Compa Savin

rice $2,00 $2,20 $0,2

hippin$ $0,07 $0,05 –

Gan!lin$ $0,10 $0,13 $0,0

n(entor% $0,05 $0,01 –

inancin$ $0,00 $0,00 $0,0

=sa$e $3,50 $2,80 –

Nualit% $0,03 $0,01 –

aste $0,10 $0,02 –

Aisposal $0,15 $0,03 –

!ota" Costs $#.00 $.2 –

Ownership

Costs

hippin$

Gan!lin$

n(entor%

Price

$2.20

/-o) an rice $2,0 $2,1 $2,2 $2,3 $2,4 $2,5-o) etitor rice $2,0 $2,0 $2,0 $2,0 $2,0 $2,0rice re)iu) 0,0 0,1 0,2 0,3 0,4 0,5$ustomer 2alue "@ "@ "@ "@ "@ "@4Percent 2alue 1#% 14% 13% 11% % 8%

pro!uct that cut o(erall costs &% 75 cents per poun!,11 f a custo)er use! 10

poun!s of the pro!uct per )onth" the custo)ers )onthl% sa(ins *oul! &e$7"500Oor $90"000 annuall%, f the custo)er use! 100"000 poun!s per )ont

the %earl% sa(ins *oul! &e

$900"000, ith sa(ins at that le(el" an% supplier &usiness *oul! strateiIe t

the hiher price is Kustie! !ue to the custo)er (alue it pro(i!es, <(en at a p

of $2,30" *hich *oul! sa(e 65 cents per poun!" a custo)er *ith )onthl% (ol

of 100"000 *oul! still sa(e $780"000 annuall%,

Life/$ycle 2alue Pricing

! o t a " C o s t p e r % p p " i c a t i o n



e can tae the (alue#in#use pricin presente! in iure 8#6 one step further

!e)on# strate percei(e! (alue for pro!ucts that ha(e a usae life of se(eral

%ears, iure 8#7 presents the net present (alue an! cost of o*nership for a

)e!ical apparatus sol! &% Bioronics at a price of $60"000" *hich is $10"000

than the )aKor co)petitors price, Both pro!ucts ha(e an e.pecte! 5#%ear life

urel% on a price &asis" the custo)er *oul! &e incline! to &u% the co)petitorpro!uct" sa(in $10"000, Aoin so" ho*e(er" *oul! en! up costin the custo)

)ore &ecause of the reater cost of operatin the e@uip)ent o(er 5 %ears,



! Part III Maretin Mi.

7*,U)& 8/! L*7&/$B$L&

$ompetito Bear " Bear Bear Bear Bear Bear

rice $50"00

:peratin $15"0 $15"0 $15"0 $15"0 $15"00

0io-ronics Bear " Bear Bear Bear Bear Bear

rice $60"00

:peratin $8"00 $8"00 $8"00 $8"00 $8"000

$ost D >!:"" >!:"" >!:"" >!:"" >!:""

Aiscount 1,000 0,833 0,694 0,579 0,482 0,402resent – $5"83 $4"85 $4"05 $3"37 $2"814+et >1":3Aiscount 20



$60"000

Annual Usage $osts$4"500

$1"000

$1"250

$500

$750

-otal Annual Usage $ost>8:""" >1:"""

$ost of .wnershiprice

0io-ronics$ompetitor$50"000

$25"000$20"930

$20"000

$15"930$15"000+nal%sis -ost

<@uip)ent =pti)e Nualit% -ontrol

'e#or

Aocu)entation

$8"000

$2"000

$2"000

$1"500

$1"500

$10"930

$10"000$5"930

$5"000

$0$0$5"000 $10"000 $15"000

Price Premium

! Part III Maretin Mi.

7*,U)& 8/! L*7&/$B$L&

+s sho*n in iure 8#7" the co)petitors pro!uct costs $15"000 a %ear on

the &asis of the (e usae costs consi!ere!, he Bioronics pro!uct has an

annual operatin cost of

$8"000, hen *e loo at the net present (alue of the total cost of o*nershipfor the Bio# ronics pro!uct usin a 20 percent !iscount rate for the $7"000

!i;erence in annual usae costs for 5 %ears" *e see that the net present

(alue is $10"930, his is the econo)ic (alue that the Bioronics pro!uct

o;ers, :(er 5 %ears" a custo)er *oul! sa(e $10"930 e(en thouh the

purchase price of the Bioronics pro!uct is $10"000 )ore, he &ar raph

sho*s the econo)ic (alue net present (alue that the co)pan% creates at

three other le(els of price pre)iu), Bioronics has a clear opportunit% to

capture a hiher )arin *ith a price pre)iu) *hile still o;erin a (er%

co)pellin (alue proposition,

Percei5ed/2alue Pricing

o)e custo)er &enets are )ore !icult to @uantif% in ter)s of econo)ic

(alue" %et the% ha(e an i)portant percei(e! (alue,12 hese percei(e!

custo)er &enets i(e us

E c o n o m i c V



7*,U)& 8/8 $.MP&-*-*2& A2A+-A,& *( -H& &B -. 2ALU&

P)*$*+,

Product

Performance

)elati5e

*mporta

.ur

0usin

$ompetit

ors A 0

Product

Ad5anta

'elia&le 50 7,3 7,5 5,4 17<ase of =se 30 5,6 5,1 7,7 P10

ro!uct Life 20 6,6 5,2 5,2 13

100 120

(er5ice Euality

2oice of the

)elati5e

*mporta

.ur

0usin

$ompetit

ors A 0

(er5ice

Ad5anta

arts +(aila&ilit 60 7,2 6,3 4,3 20-o)petent 20 6,5 6,8 6,6 0

'esponse to 20 7,2 6,3 5,2 7

100 127

0rand

)eputation

)elati5e

*mporta

.ur

0usin

$ompetit

ors A 0

0rand

Ad5anta

Most 'especte! 50 7,7 7,5 5,4 17Qno*n for Nualit% 50 7,5 6,7 6,6 17

100 134

another approach to (alue pricin" no*n as perceived-value pricing, n

-hapter 4" *e learne! to calculate an! interpret the in!e.es for pro!uct

perfor)ance" ser(ice @ualit%" an! &ran! reputation, or the &usiness in

iure 8#8" the percei(e! &enets !eri(e! fro) pro!uct perfor)ance 120"ser(ice @ualit% 127" an! &ran! reputation 134 each out# perfor) the

co)petition, n this case" each area of percei(e! &enets is a source of

co)petiti(e a!(antae, hen the a)ounts are *eihte! &% the relati(e

i)portance of each source of &enets" as in iure 8#9" the o(erall custo)er

&enets (alue in!e. is 123" a 23 percent a!(antae o(er co)petitors *ith

respect to all percei(e! &enets, he percei(e!#(alue#pricin @uestion is

Do* )uch of a price pre)iu) can the &usiness chare an! still !eli(er a

)eaninful le(el of custo)er (alueEF



e can ans*er this @uestion &% rst consi!erin other costs of purchase

that are i)portant to the custo)er, iure 8#9 lists ser(ice an! )aintenance

costs an! the !epreci# ate! (alue ho* fast the e@uip)ent !epreciates in

(alue as t*o other co)ponents" in a!!ition to price" of the total cost of

purchase life#c%cle cost, he &usiness has so)e a!(antae in the area of

ser(ice an! )aintenance costs &ut no a!(antae in !epreciate! (alue, f the&usiness *ere to price its e@uip)ent at $5"000" it *oul! ha(e a cost a!(an#

tae relati(e to its three co)petitors 60" resultin in a (er% hih percei(e!

(alue in!e. of 64, <(en an in!e. of 25 *oul! &e oo!, he &usiness" then"

shoul! not sell at a lo*er price &ut shoul! set a price that results in a

percei(e! (alue in!e. close to 25,

+s sho*n in the ta&le at the &otto) of iure 8#9" increasin the $5"000

purchase price &% incre)ents of $250 up to $5"750 lo*ers the percei(e!

(alue in!e. to 43, +t a purchase price of $6"000" the (alue in!e. !rops to

23" close to the taret in!e. of 25, he &usiness chose the price of $6"250"

as it also pro!uce! a percei(e! (alue in!e. of 23, +t this price"




$ustomer )elat

.ur

'ro!uct 6 1 72er(ice 3 1 38Bran! 1 1 13$ustomer 100 13$ost of )el@ $ompetitors

rice of 6 7 7 6, 4 20er(ice R 3 5 7 7, 5 –20Ae reciate! 1 5 4 5, 5 0$ost of 100 1""

/$om an Price "" " ! # "" # -o) an 'atin 5,0 5,5 6,0 6,5 7,0 7,5-o) etiti(e D"@" 0,0 0,0 0,0 20,0 20,0-ost of urchase 60 80 80 80 100 100

ercei(e! /alue 64 43 43 43 23 23

custo)ers rate! the price of e@uip)ent at 7,5, -o)petitor +" *ho o;ere! a

price of $6"000" *as rate! at 7,2, -o)petitor +s pro!uct ha! a lo*er price

&ut also ha! su&par custo)er &enets" as sho*n in iure 8#8, Because its

pro!uct has a hiher price than that of all three co)petitors" the &usiness



Bran! 'eputa# tion 13

er(ice Nualit% 38

urchase rice 20

er(ice an! Maintenance

–20

Aepreciation 0

lus 100

ro!uct erfor)ance 72

>u)&ers +re 'elati(e +!(antae cores

125

ercei(e! /alue n!e. 23

100

75

50

25

0$ustomer 0ene<ts $ost of Purchase

*ndeF 136*ndeF 1""6

ei5ed/2alue Pricing

this approach to (alue pricin" the &usiness set its price at

50" an! custo)ers a(e it a percei(e!#price ratin of 7,5, -usto)ers rate! co)petitor +" *ith a $6"000 price

&usinesss pro!uct has a pre)iu) price &ut the &usinesss percei(e! (alue in!e. is 23" *hich )eans the &usiness o


)ust ensure that it co))unicates the (alue of its pro!ucts &en# ets so

custo)ers *ill no* the hiher price is )ore than o;set &% &etter (alue,

Performance/0ased Pricing

f *e *ere to as a &usinesss custo)ers to na)e those thins that )ost

inSuence their purchase !ecisions" the% *oul! enerall% sa% everything, f

*e *ere to as" Ds price i)portantEF the ans*er *oul! al)ost al*a%s &e

yes, o" *hat *ill custo)ers pa% forE +n! ho* !o *e !eter)ine *hether our

pro!uct has )ore (alue than our co)petitors pro!ucts at their pricesE

-onKoint anal%sis" *hich *as intro!uce! in -hapter 4" is a )etho! that

)aretin )anaers use to a!!ress these @uestions, he nu)&er ofperfor)ance aspects that can &e



Performance and Price Le5els

$reating $ustomer/$hoice Alternati5es

$hoice A$hoice 0

7inish -rim@@@+oneG 7inish -rim@@@+one

G Paint@@@@@@@@@@@@@UnpaintedG Paint@@@@@@@@@@@@@Primed

G Price@@@@@@@@@@@@@@>1 s@ ft@G Price@@@@@@@@@@@@@> s@ ft@

$hoice $hoice &

7inish -rim@@@0asicG 7inish -rim@@@0asic

G Paint@@@@@@@@@@@@@UnpaintedG Paint@@@@@@@@@@@@@Primed

G Price@@@@@@@@@@@@@@>3 s@ ft@G Price@@@@@@@@@@@@@>1 s@ ft@

$hoice ,$hoice H

7inish -rim@@@7ullG 7inish -rim@@@7ull

G Paint@@@@@@@@@@@@@UnpaintedG Paint@@@@@@@@@@@@@PrimedG Price@@@@@@@@@@@@@@> s@ ft@G Price@@@@@@@@@@@@@>3 s@ ft@

$hoice $

7inish -rim@@@+one

G Paint@@@@@@@@@@@@@Painted

G Price@@@@@@@@@@@@@>3 s@ ft@

$hoice 7

7inish -rim@@@0asic


G Price@@@@@@@@@@@@@> s@ ft@

$hoice *

7inish -rim@@@7ull


G Price@@@@@@@@@@@@@>1 s@ ft@

7*,U)& 8/1" P&)7.)MA+$&/0A(& P)*$*+,9$U(-.M&)

P)&7&)&+$&(

=n ain ri)e! -olor>one $1 s , $2 s , $3 s ,Basic $3 s , $1 s , $2 s ,

ull $2 s@, $3 s@, $1 s@,



e(aluate! in a price#perfor)ance tra!e#o; anal%sis is li)ite!, But *e can

use a si)pli# e! !esin" *ith t*o perfor)ance !ri(ers across three le(els of

perfor)ance an! three le(els of price" to !eter)ine the (alue that

custo)ers place on !i;erent le(els of perfor)# ance an! !i;erent le(els of

price,13

iure 8#10 illustrates three le(els of perfor)ance for t*o areas of pro!uct

perfor)# ance an! three le(els of price for &er#ce)ent construction si!in,

-usto)ers can pur# chase the si!in *ithout the nish tri)" *ith &asic tri)"

or *ith full tri)" an! the% can &u% the si!in unpainte!" pri)e!" or painte!,

he three price le(els that the custo)ers are ase! to consi!er are $1" $2"an! $3 per s@uare foot, +lthouh there are 27 possi&le co)&inations" the

ta&le in iure 8#10 fairl% represents these co)&inations *ith nine

alternati(es, >ote that no perfor)ance le(el or price is repeate! in an%

colu)n or ro*, =sin this set of h%pothetical choices" the &usiness ass a

sa)plin of taret custo)ers to ran the nine alternati(es fro) most

preferred to least preferred, =sin the conKoint )easure)ent process

e.plaine! in +ppen!i. 4,1" *e can !eri(e the perfor)ance cur(es that are

presente! in iure 8#11,

n this e.a)ple" a sa)ple of @ualit%#conscious custo)ers place! )ost (alue

on tri) 50" secon!#)ost (alue on the si!ins nish 43" an! least

i)portance on price 7,




7*,U)& 8/11 P&)7.)MA+$&/0A(& P)*$*+,; EUAL*-B/$.+($*.U(

$U(-.M&)(

1

-rim 7inish Paint 7inish Price per (uare 7oot

Performance/

0ased 2alue2,50

2,00

1,50

/alue +!(antae

P r e & e r e n c e

.0

.

Finish Trim (50%).

Finish (43%) 1.0

Price(7%)

. .6 .

. .4 .

. .2 .

0 0 0

None F Unpaint Prime !1.0 !2.00 !3

Product 'inish Paint(a"ue Positioning ) !rim

"ompetito #asic Prime !1.50

$aue& 0.5 0.6 0.55 .#

"ompan Fu Paint !3.00

$aue& 1 0. 0.4 2.*0

! o t a " ( a " u e




2alue/Pricing (trategy

=sin this approach to (alue pricin"

the &usiness set its price at $3 per

s@uare foot, +lthouh this price ist*ice that of a e% co)petitors" the

co)petitors pro!uct !oes not o;er

the hih perfor)ance for *hich

@ualit%#conscious custo)ers are

*illin to pa%, n this e.a)ple"

perfor)ance" not price" is the (alue

!ri(er,

1,00

,50

$ompan

y @3"6

$ompetitor 1@#6

2alue/Pricin (trate ies 2P1 2P 2P3 2P4 2P$om an Price $1,00 $1,50 $2,00 $2,50 $3,00-o) etitor rice $1,50 $1,50 $1,50 $1,50 $1,50rice re)iu) D 0,00 0,50 1,00 1,50 otal /alue 2,50 2,45 2,40 2,35 2,30/alue +!(anta e 0,85 0,80 0,75 0,70 0,65Percent 2alue % 48% 4% 4% 3%

=sin these results" the co)pan% can co)pare its co)petiti(e position *ith t

of a e% co)petitor, -urrentl% the &usiness o;ers full tri) 1,0" a painte! ni

for the si!in 0,9" an! a price at $3 per s@uare foot 0,4, he &usinesss (a

score is 2,30, ts e% co)petitor o;ers a pro!uct *ith &asic tri) 0,5" pri)e!

si!in 0,6" an! a price of

$1,50 per s@uare foot 0,55" resultin in a (alue score of 1,65, he !i;erence

0,65 is the (alue a!(antae that the &usiness has o(er its co)petitor,



7*,U)& 8/1 P&)7.)MA+$&/0A(& P)*$*+,; P)*$&/(&+(*-*2&

$U(-.M&)(

1

-rim 7inish

Paint 7inish Price per (uare 7oot

Preference/0ased

2alue2,50

2,00

1,50

1,00

,50

/alue Aecienc%

P r e & e r e n c e

. Finish Trim.

Finish (15%) Price

. .* .

. .6 .

. .4 .

. .2 .

0 0 0None #asic F Unpaint Prime !1.0 !2.00 !3

Product 'inish Paint(a"ue Positioning ) !rim

"ompetito #asic Prime !1.50

$aue& 0.5 0.5 0.75 .7

"ompan Fu Paint !3.00

$aue& 0.6 0.6 0 .20

! o t a "

( a " u e

(a"ue+Pricing Strategy

The compan+ ,ith the per-ormance -eatures it

o--ers an its hiher price+ rea cannot compete-or customers in the price&sensiti/e maret sement. The /aue ri/er is price+ notper-ormance. "ustomers pace some /aue onper-ormance 1ut are un,iin to pa e2tra -or it. 's a resut+ the compan has a /aue e-iciencan ,ou 1e ,astin maretin resources 1trin to attract customers in the price&sensiti/e



$ompany 1@"6 $ompetitor 1@!

2alue/Pricin (trate ies 2P1 2P 2P3 2P4 2P$om an Price $1,00 $1,50 $2,00 $2,50 $3,00 $3,50-o) etitor rice 1,50 1,50 1,50 1,50 1,50 1,50

rice re)iu) D $0,00 $0,50 $1,00 $1,50 $2,00 otal /alue 2,20 1,95 1,70 1,45 1,20 0,95/alue 0,45 0,20 D0,05 D"@3" D"@ D0,80Percent 2alue #% 11% D3% D1!% D31% D4#%

or custo)ers in the @ualit%#conscious se)ent of the si!in )aret" the curr

pro!uct has )ore (alue than the co)petitors pro!uct e(en thouh it costs 65

cents )ore" on the &asis of the custo)ers perfor)ance preferences an! thecusto)ers lo* le(el of price sensiti(it%, But in iure 8#12" a !i;erent set of

custo)er price#perfor)ance preferences %iel!s a !i;erent set of perfor)ance

cur(es for the )arets price#sensiti(e



se)ent, n this case" the custo)er is hihl% price sensiti(e 70 an!

places less i)por# tance 30 on perfor)ance, he co)pan%s (alue for

these custo)ers is onl% 1,20" *hereas the co)petitor o;ers a (alue of 1,75,

he co)pan%s (alue !ecienc% is larel% !ue to the hiher price" *hich

)aes the pro!uct unattracti(e to custo)ers !espite its &etter perfor)ance, he co)pan% coul! elect to create a )ore &asic pro!uct at a )ore

co)petiti(e price to lessen its (alue !ecienc%" or it coul! si)pl% !eci!e not

to co)pete in the )arets price#sensiti(e se)ent,

=sin sophisticate! conKoint anal%sis soft*are prora)s" *e can a!! )ore

!i)en# sions of perfor)ance" an! *e can inclu!e )ore le(els of

perfor)ance in an% i(en !i)ension,14 -onKoint anal%sis prora)s allo* a

&usiness to test price#perfor)ance pref# erences an! to e(aluate its

pro!ucts (alue on the &asis of the &usinesss co)petiti(e position,

or a &usiness *ith a co)petiti(e price an! a lare (alue a!(antae" such

an anal%# sis *oul! suest that the &usiness coul! chare )ore for its

pro!uct an! still o;er a oo! (alue, :n the other han!" a &usiness *ith a

co)petiti(e price an! a lare (alue !ecienc% *oul! realiIe that its price is

hih relati(e to the (alue it o;ers, n this case" a &usiness has three optionsC

1 lo*er its price to create a co)para&le (alue on the &asis of positioninJ

2 i)pro(e perfor)ance on the &asis of custo)er price#perfor)ance

preferences to a le(el that creates )eaninful custo)er (alueJ or 3 choose

not to co)# pete in this se)ent of the )aret,

$U(-.M&)*IA-*.+ 2ALU& P)*$*+,

-usto)eriIation (alue pricin re@uires un&un!lin price an! perfor)ance

features to le(els of perfor)ance an! price for the )aKor aspects of

perfor)ance, n iure 8#13" a ne* laptop is a(aila&le *ith the stan!ar!

processor spee!" a spee! that is 1,5 ti)es faster" or a spee! that is t*ice as

fast, he stan!ar! spee! is o;ere! at the co)puters &ase price of $500, f

thats all a particular custo)er *ants to pa%" no perfor)ance upra!es

*oul! &e a!!e! to the sale price,

n the e.a)ple in iure 8#13" the custo)er nee!e! &etter perfor)ance

than the &ase#price! co)puter o;ere! an! *as *illin to pa% e.tra for

certain upra!es, he upra!es the custo)er chose resulte! in a purchaseprice of $1"000, he reference price is the price chare! for the Saship



)o!el" the laptop *ith all the perfor)ance upra!es the co)pan% o;ers,

he reference price in this case is $1"500, he custo)er *ho pa%s

$1"000 for the co)puter *ith Kust the nee!e! upra!es )a% infer a sa(ins

of $500" rela# ti(e to the reference price of $1"500,

iure 8#14 presents (e of the 6"561 possi&le price#perfor)ance laptops,-usto)eriIation (alue pricin allo*s custo)ers to select the perfor)ance

conu# rations that t their nee!s an! price &u!ets, e *oul! e.pect (er%

fe* custo)ers to &u% the Saship pro!uct, o *h% sho* itE t needs to &e

sho*n" &ecause the full# feature! pro!uct sets the reference price, ithout

it" custo)ers *oul! not see their sa(ins, +n% price#perfor)ance

conuration that is purchase! at a lo*er price has an inferre! sa(ins

&ase! on the !i;erence &et*een the reference price an! the price pai!,

f *e use! the &asic laptop at $500 as the reference price" then the

custo)er *oul! see an% perfor)ance upra!es as an added e.pense, or

our e.a)ple in iure 8#13"



7*,U)& 8/13 $U(-.M&)*IA-*.+ P)*$& 0A(& .+ P&)7.)MA+$&

$ustomer

Preferenc

)efer

ence

Purc

haseBase rice $500 $500

rocessor $300 $150

Me)or% $200 $100

ar! Ari(e $100 $50

Me!ia $150 $100

:peratin $100 $50

-arr%in $100 $0

arrant% $50 $50

-otal >1:" >1:"

$ustomer >" >""

the custo)ers *oul! infer that the% ha! to pa% $500 )ore o(er the &asic

laptop to et the perfor)ance the% *ante!, >u)erous stu!ies ha(e

researche! the price i)pact of a top#!o*n (ersus &otto)#up price

presentation,15 hen prices are presente! to custo)# ers fro) the top!o*n" the% ten! to &u% at a hiher price point than *hen the price



Product 7eatures 0asic PlusAd5anced

cessor (peedJ1@J+!Kust)ent$0$150

mory ,06JJ+!Kust)ent$0$100

d ri5e ,06JJ+!Kust)ent$0$50 Media ri5e$/).M 2 -ost +!Kust)ent$0$100 .perating (ystem0asicPlus -

rying $ase+one +ylon

+! Kust)ent$0$50

ranty" ays 1 Bear+!Kust)ent$0$25

J$300

4J$200

3J$100

2K)=

$150

Pro$100

Leather$100

3 Bears$50

-usto)er a(ins H 'eference rice P riceH $1"500 P $1"000

H $500

presentation is fro) the &otto) up, he ps%choloical reason is si)pleC the

custo)er percei(es one presentation in ter)s of sa(ins top !o*n an! the

other in ter)s of e.tra cost &otto) up,

P).U$- L*7&/$B$L& P)*$*+, (-)A-&,*&(

ricin fro) a )aret point of (ie* is the pri)ar% pricin orientation of a

)aret#&ase! &usiness, Ai;erent phases of the pro!uct life c%cle" ho*e(er"

call for !i;erent pricin strateies, he sa)e is true as a co)pan%s

positionin e(ol(es or &usiness con!itions chane,16 iure 8#15 sho*s

eiht pricin strateies an! the phases of the pro!uct life c%cle *hen

&usinesses are liel% to i)ple)ent the), <ach pricin strate% has its o*n

positionin strate% an! (alue proposition" an! each pricin strate% a;ectsprots in a !i;erent *a%, his section e.a)ines these pricin strateiesO

*hen an! *h% to appl% the)" an! ho* the% i)pact prots,



$2"000

$1"800

$1"600

>1:"

(a5ings

>"

7*,U)& 8/14 7ULL/7&A-U)& )&7&)&+$& P)*$& A+ $U(-.M&) 2ALU

P

ai

$1,000

$1,200

$800

$600 >?"

(a5ing

>!?

(a5ing>!?

>1:""

(a5ing>?"

0ottom/Up

Presentation(tarts with 0asic

Product

$1,400 >1:?"

(a5ing>

-op/own

Presentation(tarts with 7lagship

Product



lus#:ne ricin'e!uce#ocus ricin

ar(est ricin

Multi#e)ent ricin

Lo*#-ost#Lea!er ricin

enetration ricin inle#e)ent ricin

i) ricin

-ime

&arly Maret,rowthLate ,rowthMaturityecline

7*,U)& 8/1 P).U$- L*7&/$B$L& P)*$*+, (-)A-&,*&(

2000400 Minimal>1:"" eeatuPerformance redull FeatuFMid-Range

M a r L e t 1 e m a n d



(im Pricing

rice

-ost

7a5orale $onditions-onsi!era&le Ai;erentiation Nualit%#ensiti(e -usto)ers ustaina&le +!(

e* -o)petitors e* u&stitutes

Aicult -o)petitor <ntr%

-ime


7*,U)& 8/1# (*M P)*$*+,

(im Pricing

Skim pricing is the strate% that &usinesses often i)ple)ent !urin the earl%

staes of the pro!uct life c%cle" as illustrate! in iure 8#15, his is the phase

*hen con!itions can &e &est for a si)#pricin strate%, +s su))ariIe! in i

8#16" *hen a &usiness has a consi!era&le an! sustaina&le !i;erentiationa!(antae in a @ualit%#sensiti(e )aret *ith fe* co)petitors" an! entr% to th

D o l l a r s p e r U n i t




)aret is !icult" si) pricin is a (ia&le pricin strate%, hen it is feasi&le"

si) pricin allo*s a &usiness to penetrate a )aret s%ste)aticall% as the

&usiness &uil!s pro!uction capacit%, +s !e)an! in the hih#price! se)ent

&eco)es saturate!" the price )a% &e ra!uall% lo*ere! to attract )ore

custo)ers" e(entuall% reachin a le(el that is a;or!a&le to )ost potential

custo)ers,

:ften a &usiness has a proprietar%#pro!uct a!(antae relati(e to co)petition

&ecause it hol!s a patent for its pro!uct or &ecause the pro!ucts capa&ilit%

cannot &e !uplicate! for other reasons, n such cases" a &usiness usuall% purs

a si)#pricin strate% *ell into the )arets ro*th stae, he si)#pricin

strate%" *hich is reall% a te)porar% pre)iu)#pricin strate%" can &e hihl%

prota&le as lon as it !eli(ers superior cus# to)er (alue, + &usiness can use

si)#pricin strate% until its co)petitors are a&le to )atch the &usinesss so

of co)petiti(e a!(antae, Man% prescription !rus" for e.a)ple" are protecte

un!er patents" an! the patent hol!ers chare pre)iu) prices, Aur# in the paperio!" the phar)aceutical co)pan% has a price u)&rella, t is protecte! fro)

price ri(alr% &ecause an% *oul!#&e co)petitors cannot )atch the &usinesss

ti(e a!(antae,

(ingle/(egment Pricing

+s its pro!uct )o(es into the ro*th stae of its life c%cle" a &usiness *ill nee

n! a *a% to lo*er the cost to potential custo)ers in or!er to attract theirpurchase (olu)e, But



Penetration Pricing

7a5orale $onditions

rice

-ost

>oLi)ite! Ai;erentiation

rice#ensiti(e -usto)ers >o ustaina&le +!(antae Man% -o)

Man% u&stitutes

<as% -o)petitor <ntr%

this !oes not necessaril% )ean lo*erin prices, B% consi!erin the total cost

of o*ner# ship that is incurre! &% taret custo)ers" a &usiness can utiliIe

single-segment pricing" *hich is a (alue#&ase! pricin strate%" to pro!uce

an attracti(e sa(ins econo)ic (alue *hile )aintainin a pre)iu) price,

or e.a)ple" in iure 8#7" the price of Bioronics pro!uct is hiher than the

price of its co)petitors pro!uct" &ut the custo)ers total cost of purchase"

or cost of o*nership" is )uch lo*er than for the co)petitors pro!uct,

Because of lo*er usae costs o(er the life of the pro!uct" its (alue in use is

hiher than that of the co)petin pro!uct" an! the custo)er sa(es )one%,

n other *or!s" to use sinle#se)ent pricin" the co)pan% &ases the price

of a pro!# uct on the attracti(e sa(ins that custo)ers realiIe o(er the life of

the pro!uct" not Kust the costs of )anufacturin an! )aretin the pro!uct,

-usto)ers are intereste! in o(erall sa(ins" or econo)ic (alue" an! thehiher the sa(ins the% realiIe" the hiher the co)# pan% )a% set the

purchase price" rear!less of )anufacturin an! )aretin costs, n -hapter

4" *e e.a)ine! (arious *a%s that a &usiness can lo*er the cost of

o*nership an! achie(e hiher price le(els *hile still creatin a superior

(alue for taret custo)ers, e nee! to eep in )in!" too" that sinle#

se)ent pricin" &ecause it is &ase! on (alue# in#use pricin" is onl%

possi&le *hen the co)pan% has a oo! un!erstan!in of custo)er nee!s

an! co)petitors positions, -usto)er an! co)petitor no*le!e alon *ith

a co)pan%s positionin" is *here all (alue#&ase! pricin starts,

Penetration Pricing

Businesses that are focuse! on &uil!in (olu)e )a% use a penetration-

pricing strate%, +s illustrate! in iure 8#15" this pricin strate% is )ost

liel% to &e e)plo%e! !urin the )arets ro*th stae *hen (olu)es are

rapi!l% increasin in response to lo*er prices, he pri)ar% o&Kecti(e of

penetration pricin is to &uil! (olu)e to !ri(e !o*n cost" as illustrate! iniure 8#17,

enetration pricin is a )ass#)aret strate%, t is )ost e;ecti(e in the

ro*th stae of the pro!uct life c%cle &ecause this is *hen pro!uct

!i;erentiation is !i)inishin" poten# tial custo)ers are price sensiti(e" )an%

co)petitors or su&stitutes e.ist" an! co)petitor

7*,U)& 8/1! P&+&-)A-*.+ P)*$*+, D o l l a r s p e r U n i t



1,000

1990

19911993 199419921995

0,100 1996

istorical 70 rice lope1997

19980,010 1999 2001

2000

2002

2003

0,001

1"000 10"000 100"000 1"000"000 10"000"000

$umulati5e 0it 2olume 0its 1"16

7*,U)& 8/18 )AM P)*$& $U)2&

entr% is eas%, he (olu)e lea!er often can ain a cost a!(antae an! continu

lo*er prices" !iscourain co)petitor entr% an! encourain co)petitor e.it

(olu)e lea!er# ship position" then" ena&les a &usiness to use penetration pric

to &uil! )aret share,

he price of !%na)ic ran!o) access )e)or% A'+M chips is a oo! e.a)pl

(olu)e#sensiti(e pricin" as illustrate! in iure 8#18, n this pro!uct#)aret"

prices !ecrease &% 30 percent e(er% ti)e cu)ulati(e (olu)e !ou&les,17 he

P r i c e p e r B i t ( m i l l i c e n t s )



A'+M chip )aer that is lo*est on the cost cur(e" &ecause it has the hihest

(olu)e" can price its pro!uct lo*er than co)petitors !o an! still )aintain a

!esira&le )arin, n an% )aret *here cost re!uction is (olu)e sensiti(e an!

pro!uct !i;erentiation is )ini)al" a pen# etration pricin strate% can &e a (i

path to )aret lea!ership an! prota&le ro*th,

Low/$ost/Leader Pricing

he )aer of B- pens an! lihters has al*a%s trie! to eep its costs as lo* a

possi&le an! to o;er a price that no co)petitor can &eat, Lie*ise" fro) its

&einnins al#Mart has souht to esta&lish itself as the lo*#cost lea!er in re

&% usin a (ariet% of )anae)ent s%ste)s for re!ucin its cost for the oo!s

sells an! for )ini)iIin operatin e.penses, Both B- an! al#Mart ha(e a

(olu)e a!(antae that contri&utes to their cost#re!uction e;orts" &ut a )arlo*#cost lea!er !oes not nee! to &e the )arets (olu)e lea!er, -o)# panies

s)aller (olu)es can ain a cost a!(antae &% ha(in hihl% ecient operatio

usin superior technolo%" ha(in hihl% )oti(ate! e)plo%ees" an! outsourc

parts of their operations, <(en a lo*#share &usiness can )o(e into the lo*#co

lea!er position,

Multi/(egment Pricing

+ pri)ar% oal of )aret se)entation is a for) of )aret#&ase! pricin no

as multi-segment pricing, -usto)ers in !i;erent se)ents of a pro!ucts )ar

enerall% ha(e !i;erent nee!s an! !i;erent price sensiti(ities, + price#sensiti

se)ent is



emand $ur5e 2alue Map

=hite =ater Heater

,& -hro)e her)ostat an! 5#Tear arrant%

o)e

:*ners *ith a Lon#er)

Nualit% ocus

>o

Maret

,&

,reen =ater Heater Metallic her)ostat an! 2#Tear arrant%

o)e

:*ners *ith a hort#er) rice ocus


7*,U)& 8/1 MUL-*/(&,M&+- P)*$*+,9,& =A-&) H&A-&)(

attracte! to a pro!uct *ith a lo* price rear!less of the pro!uct" ser(ice" or &

&enets o;ere! &% a hiher price! )o!el" *hereas custo)ers in a @ualit%#

conscious se)ent are *illin to pa% )ore for the a!!itional &enets,

G< foun! that there *as no )i!!le )aret for househol! *ater heatersOKust

se# )ents at the hih# an! lo*#price points" as sho*n in iure 8#19, he lo*

price se)ent consiste! of &u%ers looin for a lo*#cost solution, G< ser(e! t

se)ent *ith a reen *ater heater that ha! a )etallic ther)ostat an! a 2#%e

r i c e

r i c e



*arrant%, he hih#price se)ent *as ser(e! *ith a *hite *ater heater that h

chro)e ther)ostat an! a 5#%ear *arrant%, n this @ualit%#conscious se)ent"

&u%ers seein a relia&le" lon#ter) solution *ere *ill# in to pa% )ore for the

hiher @ualit% pro!uct, G< perfor)e! *ell in &oth se)ents &% pro(i!in G<#

&ran!e! *ater heaters that )et custo)er pro!uct nee!s at t*o price points,

a!e@uatel% ser(e the !iital tele(ision ca&le )aret" -o)cast has !e(elope!three se)ent#pricin strateies" as sho*n in iure 8#20, -usto)ers in the b

service segment pa% $29,99 a )onth *ith a 2#%ear aree)ent an! ha(e acc

to 80#plus !iital channels, -usto)ers in the basic-plus segment pa% $39,99

)onth *ith a 2#%ear aree# )ent an! ha(e access to 100#plus !iital channe

-usto)ers in the premium service segment pa% $84,99 for the rst 6 )onths

ha(e access to 200#plus !iital channels an! )an% a!!itional )o(ie channels

hese three -o)cast pricin strateies a!!ress custo)er price nee!s *ith th

!i;erent le(els of !iital tele(ision ca&le ser(ice, +s iure 8#15 sho*s" )ulti#

se)ent pricin is )ost liel% to &e use! !urin the ro*th

stae of the pro!uct life c%cle,

Plus/.ne Pricing

+s )arets )ature" co)petitors are a&le to e)ulate the &est features of a

&usinesss pro!uct an!" as a result" it &eco)es e(er )ore !icult for the

&usinesss pro!uct to stan! out as uni@ue, o succee! in a )ature )aret" a

&usiness nee!s so)e source of !i;erentiation in



$100 (egment 3

re)iu) er(ice

$80

$60 (egment

Basic#lus er(ice

$40(egment 1

Basic er(ice

$20

$0 80U -hannels 100U -hannels 200U -hannels plusMo(ie -hannels

igital $ale $hannels

>84@or irst 6 Months

>3@or irst Tear *ith 2#Tear +ree)ent

>@or irst Tear

*ith 2#Tear +ree)ent

7*,U)& 8/" MUL-*/(&,M&+- P)*$*+,9$.M$A(- *,*-AL $A0L&

(&)2*$&

or!er to )aintain its pro!uct position, o !o this" it can esta&lish a plus#one

pro!uct position18 in or!er to Kustif% a (alue#&ase! price *ith a sliht pre)iu

relati(e to co)petin pro!ucts,

Plus-one pricing can &e use! *hen a &usinesss pro!uct position is the a&out

sa)e as co)petitors positions in e(er% area of pro!uct an! ser(ice @ualit%"

e.cept that in one area of )eaninful perfor)ance the &usinesss pro!uct

position is clearl% superior, or e.a)ple" /ol(o rst stri(es to )eet custo)er

e.pectations in all aspects of lu.ur%#car perfor)ance, he co)pan% then use

safet% as its plus#one pro!uct#!i;erentiation strat# e% to set a (alue#&ase! p

S t a r t i n g P r i c e

( p e r m o n t h )



relati(e to co)petin lu.ur% cars, he safet% features that /ol(o has !esine!

its cars are the &usinesss source of !i;erentiation an! are cen# tral to /ol(os

pro!uct#price positionin an! (alue proposition, :n the other han!" Le.us use

perfor)ance as its plus#one pricin strate%" an! Merce!es uses its reputatio

iure 8#15 illustrates" a plus#one pricin strate% is the (alue#&ase! pricin

strate% that a &usiness is )ost liel% to use in the late staes of the pro!uctc%cle,

)educe/7ocus Pricing

+s a )aret )o(es into its )ature stae" prices an! )arins are often furthe

ero!e! &% intense co)petition, Because a &usinesss pro!uct is still prota&le

)ature )aret" it is not %et ti)e for a har(est#pricin strate%, nstea!" the

&usiness shoul! appl% a reduce- focus pricing strate% to )anae price an!

i)pro(e prots,19

+ re!uce#focus pricin strate% calls for price increases *ith the intent of re!

(olu)es an! )aret share in e.chane for hiher )arins, +fter the rst pric

increase" )an% price#sensiti(e custo)ers lea(e" an! su&se@uent price increa

further !i)inish their nu)&ers, he oal is to raise prices incre)entall% to the

point *here the &est co)# &ination of (olu)e an! )arin is achie(e!,

or e.a)ple" in iure 8#21" a che)ical co)pan%s paint !i(ision *as in a )a

)aret *ith lo* )arins,20 n this case" the a(erae for the )arins across t

pro!uct line *as 20,5 percent, Vust three of the pro!ucts pro!uce! enouh r

prot to co(er their )aretin an! sales e.penses, he re!uce#focus pricinstrate% resulte! in the co)pan%s )aret share !roppin fro) 11,7 to 8,6

percent, he share re!uction corre#



7*,U)& 8/1 )&U$&/7.$U( P)*$*+, (-)A-&,B A+ P).7*-

*MPA$-

$urrent Price (trategy and Performance

Area of (ilicon Prima (peci 0asi $olor .5er

millions6 Pigme Produ Produ $olo &nhan -otalMaret Ae)an! 100 167 154 96 556 1"073

Maret hare 10 12 13 26 9 11,7

/olu)e 10,0 20,0 20,0 25,0 50,0 125,0

rice per =nit $4,50 $2,80 $1,60 $0,8 $0,60 $1,46ales 'e(enues $45,0 $56,0 $32,0 $20, $30,0 $183,

-ost per =nit $3,50 $2,00 $1,30 $0,7 $0,54 $1,16

ercent Marin 22,2 28,6 18,8 12,5 10,0 20,5

Gross rot $10,0 $16,0 $6,0 $2,5 $3,0 $37,5

Maretin R ales $2,0 $7,0 $5,0 $3,0 $4,5 $21,5+et Mareting >8@" >@" >1@" N N>1@ >1#@

)educe/7ocus Pricing (trategy and Performance

Area of (ilicon Prima (peci 0asi $olor .5ermillions6 Pigme Produ Produ $olo &nhan -otalMaret Ae)an! 100 167 154 96 556 1"073

Maret hare 8,6 10,3 10,7 17,1 6,0 8,6

/olu)e 8,6 17,2 16,5 16,4 33,4 92,1

rice per =nit $4,95 $3,20 $1,90 $0,9 $0,75 $1,85

ales 'e(enues $42,6 $55,0 $31,3 $16, $25,0 $170,

-ost per =nit $3,50 $2,00 $1,30 $0,7 $0,54 $1,25

ercent Marin 29,3 37,5 31,6 28,6 28,0 32,1

Gross rot $12,5 $20,6 $9,9 $4,6 $7,0 $54,6

Maretin R ales $2,0 $7,0 $4,5 $2,0 $3,0 $18,5+et Mareting >1"@ >13@# >@4 >@# >4@" >3#@

spon!e! *ith a !rop in o(erall (olu)e fro) 125 )illion to 92,1 )illion units,

o*e(er" the a(erae price for the pro!uct line increase! fro) $1,46 to

$1,85 per unit, More i)por# tantl%" the a(erae )arin rose fro) 20,5 to

32,1 percent, his co)&ination of (olu)e an! )arin pro!uce! a ross

prot of $54,6 )illion" *hich *as $17,1 )illion hiher than &efore theco)pan% i)ple)ente! the re!uce#focus pricin strate%, he co)pan% also



curtaile! the )aretin an! sales e.penses for three pro!ucts" *hich further

increase! )aretin prots, +s sho*n in iure 8#21" the co)pan%s o(erall

net )aretin contri# &ution )ore than !ou&le!" fro) $16 )illion to $36,1

)illion,

Har5est Pricing

Aurin the late staes of a pro!ucts life c%cle" )arins are often lo* an!

(olu)es Sat or !eclinin, he net result is poor prots *ith little prospect for

i)pro(e)ent, Man% &usinesses in this situation are in the !ecline phase of

the pro!uct life c%cle" as illustrate! in iure 8#15,



7*,U)& 8/ HA)2&(- P)*$*+, A+ P).7*-A0*L*-B

Maret

(ituation Pric 2olu (ales

Unit

$os

Margi

n per

,ross

Pro<t

Late in life $10, 10 $100 $10, $0 $0

15 price $11, 7 $80,50 $10, $1,50 $10,5

10 price $12, 6 $75,90 $10, $2,65 $15,9

10 price $13, 6 $83,52 $10, $3,92 $23,5

:n the &asis of cost an! the nee! for hiher )arins" such a &usiness *ill

raise prices in or!er to re!uce (olu)e e(en )ore @uicl% than is t%pical of

the late stae of a pro!ucts life c%cle, u&se@uent cost#&ase! price

increases *ill result in hiher )arins as (olu)e continues to fall, he

&usiness nor)all% continues the se@uence of price increases an! (olu)e

re!uctions until it reaches a price that custo)ers si)pl% *ill not pa% an!

e.its the )aret,

Harvest pricing" ho*e(er" has an interestin t*ist, n )an% instances a

&usiness *ill raise price to i)pro(e )arins" e.pectin to lose (olu)e, his

*as true for an auto)o# &ile co)ponents )anufacturer that raise! prices 15

percent an! lost the anticipate! 30 percent of its &usiness (olu)e, +

su&se@uent price increase of 10 percent" ho*e(er" resulte! in onl% a )o!est

!ecrease in (olu)e" an! a thir! 10 percent price increase a %ear later

resulte! in no !ecrease in (olu)e, +t this co)&ination of price an! (olu)e"

the &usiness ha! unco(ere! a prota&le niche )aret an! *as a&le to

)anae price an! (ol# u)e to pro!uce an attracti(e ross prot" as

illustrate! in iure 8#22,

P)*$*+, A+ P).7*-A0*L*-B

ales ro*th is an o&session in )ost &usinesses, Maretin an! sales

)anaers" as *ell as eneral )anaers an! -<:s" enerall% &elie(e that



)ore is &etterC Df those in )aretin can !eli(er )ore (olu)e" )ore )aret

share" an! )ore sales re(enues" then *e can ro* prots,F his )a% &e true

in )an% cases" &ut )anaers nee! to &e especiall% careful *hen usin price

to achie(e this o&Kecti(e, Lets e.a)ine a fairl% co))on &usiness situation,

+ &usinesss senior )anae)ent has challene! the )aretin an! sales

tea) to ro* sales re(enues at a rate reater than 10 percent, he

&usinesss pro!uct#)arets are price sensiti(e" an! the )aretin an! sales

tea) Ku!es that a 10 percent price !ecrease *oul! result in a (olu)e ain

of 25 percent" *ith sales re(enues increasin fro) $10 )il# lion to $11,25

)illion" as sho*n in iure 8#23,

7*,U)& 8/3 P)*$&D2.LUM& (AL&( (-)A-&,B

Performance Metric $urrent (trate *mpact

Maret Ae)an! units 50"000 10 50"000

Maret hare 20,0 Aecreas 25,0/olu)e ol! units 10"000 12"500

+(erae ellin $unit $1"000 $900

+et (ales > >1":""": >11:"



7*,U)& 8/4 P)*$&D2.LUM& (-)A-&,B A+ P).7*- *MPA$-



Maret hare 20,0 Aecreas 25,0

/olu)e ol! units 10"000 12"500


+et (ales > >1":""": >11:"

=nit -ost $unit $700 $700

ercent Marin 30,0 22,2

,ross Pro<t > >3:""":" >:"":

he pro&le) *ith this sales#oriente! approach is that the strate% *oul!

lose )one%W +s the anal%sis in iure 8#24 illustrates" this lo*er#price

strate% *oul! in!ee! ro* sales re(enues" &ut it *oul! not ro* ross

prots, n fact" it *oul! lea! to a sinicant !ecline in prot, he 25 percent

increase in (olu)e *oul! not o;set a 33,3 percent re!uction in )arin, nthis e.a)ple" a pricin strate% to ro* sales 12,5 percent *oul! lo*er

ross prot &% al)ost 16,7 percent, Because all other .e! )anufacturin"

)aret# in" an! operatin e.penses *oul! not chane" the pricin strate%

*oul! lo*er o(erall prot, Maretin strateies that !eli(er superior sales

ro*th &ut fail to contri&ute to prot *ill e(entuall% &anrupt a co)pan%,21

he lesson is that the oal of a pricin strat# e% shoul! &e to increase prot

Onot to increase sales or (olu)es,

o continue *ith our e.a)ple" the rst @uestion the )aretin an! salestea) shoul! as &efore chanin the price is Do* )uch (olu)e !o *e

nee! to )aintain the current le(el of prota&ilit%EF +s illustrate! in the

calculation that follo*s an! in iure 8#25" to )aintain a ross prot of $3

)illion" a strate% that lo*ers the pro!ucts price &% 10 per# cent *oul!

re@uire a 50 percent share ain fro) 20 to 30" assu)in there *as no

chane in )aret !e)an!, + 50 percent share ain *oul! in turn pro!uce a

50 percent (olu)e ain, he re@uire! increases in share an! (olu)e are

!ou&le those proKecte! &% the )aretin an! sales tea),



7*,U)& 8/ P)*$&D2.LUM& P).7*-A0*L*-B



Maret hare 20,0 Aecreas 30,0

/olu)e ol! units 10"000 15"000


+et (ales > >1":""": >13:""

=nit -ost $unit $700 $700

ercent Marin 30,0 22,2

,ross Pro<t > >3:""":" >3:""":



Gross rot H Maret Ae)an! X Maret hare X=nit rice O =nit -ost

Gross rot Aesire!

Maret (hare

+eededMaret Ae)an! =nit rice O =nit -ost

H 3"000"000

50"000 900 O 700

H

3"000"000

50"000

200

H 3"000"000 H,3 H

3"%

10"000"000

+lthouh it is often !icult to esti)ate price elasticities" *e can accuratel%

!eter# )ine the price elasticit% that is nee!e! to pro!uce a prota&le pricin

strate%, n the e.a)ple *e ha(e &een usin" the &usiness *oul! )aintain

its current ross prot *ith a 10 percent price re!uction an! a 50 percent

(olu)e ain, he calculation that follo*s sho*s that the &usinesss pro!uct

has a price elasticit% of P5, his )eans that for e(er% 1 percent price

!ecrease" (olu)e increases 5 percent, + 10 percent price !ecrease" then"

*oul! pro!uce a 50 percent (olu)e increase,

Price &lasticity H ercentae -hane in /olu)e

ercentae -hane in rice

H 5"000 10"000

O1001000

H 0,5

O0,1

H D

rice elasticit% is al)ost al*a%s a neati(e nu)&er !ue to the in(erse

relationship &et*een price an! (olu)e, +s prices o up" (olu)es o !o*n"

an! as prices o !o*n (olu)es o up, he !eree to *hich (olu)e chanes

*hen price chanes is the pro!ucts price elasticit%" *hich is )easure! fro)

Iero no price elasticit% to –10 a (er% hih le(el of price elasticit% an!

so)eti)es larer, + fe* pro!ucts ha(e a positi(e elasticit%" such as prestie

pro!ucts that can see an increase in !e)an! *hen their prices areincrease!, rice elasticities &et*een Iero an! #1 are consi!ere! inelastic" as

=



the percent# ae chane in (olu)e is less than the percentae chane in

price, rice elasticities &et*een –1 an! –10 are elastic &ecause the

percentae chane in (olu)e is reater than the percentae chane in

price, hen the price elasticit% e@uals –1" *e ha(e unitar% elas# ticit% *here

the percentae chane in (olu)e is e@ual to the percentae chane in

price, he price elasticit% of –5 is the elasticit% that is nee!e! for the&usiness in our e.a)ple to )aintain current prots, o increase prots at a

10 percent price re!uction" the price elasticit% of the &usinesss pro!uct

*oul! nee! to &e larer than –5 –6 for e.a)ple, rice elasticities of this

)anitu!e are rare" as *oul! &e a 10#point share ain *ith onl% a 10

percent price !ecrease, + (er% hih price elasticit%" such as –5" in!icates

that &u%ers are e.tre)el% sensiti(e

to price )o(esOthe% *ill &u% far less if the price oes up an! )uch )ore if

it oes !o*n,

P)*$& &LA(-*$*-B A+ P).7*-A0*L*-B

n )ost )arets" )aret !e)an! an! )aret ro*th !epen! on price le(el,

ih prices !eter custo)ers fro) enterin a )aret" as *e sa* in -hapter

3" an! lo* prices attract custo)ers, +s prices for cell phone ser(ice" A/A

pla%ers" an! co)puters ha(e fallen"



$6,00

$5,00 &lasticity O D@

$4,00

$3,00

$2,00

$1,00 -hane in /olu)e

<lasticit% H -hane in rice

0

5 10152025

Maret emand units: millions6

7*,U)& 8/# -&L&$.MMU+*$A-*.+( (&)2*$& P)*$& &LA(-*$*-B

+t each price Price &la

!ia onal cur(e 6,00 –

a !i;erent le(el 5,00 –elasticit , 4,00 –

–&lasticit O D 2,00 –

$1,00 –

)ore custo)ers ha(e entere! those )arets, n one sense" price o(erns &ot

the siIe of a )aret an! ho* fast it *ill ro*,iure 8#26 sho*s ho* )aret !e)an! for (oice )essain (aries as a funct

of price, + teleco))unications &usiness that *ants to li)it initial !e)an! for

ser(ice until it has the capacit% to ser(e a lare nu)&er of custo)ers !eci!es

price the ser(ice at $5 per )inute, his price pro!uces an esti)ate! !e)an!

9"000 custo)ers in a par# ticular eoraphic )aret, +t this price" the price

elasticit% is –2,2 *hich )eans that for each 1 percent chane in price" !e)an

*ill chane &% appro.i)atel% 2,2 percent, + 10 percent price re!uction fro) $

$4,50 shoul! %iel! a 22 percent increase in custo)er !e)an! fro) 9"000 to

10"980,

P r i c e $ o s t p e

r M i n u t e



+ &usiness )iht continue to lo*er price to ro* !e)an!" &ut once the price

elastic# it% reaches –1" sales re(enue has reache! its )a.i)u) potential, +t t

point" a price chane either up or !o*n *oul! lo*er sales re(enue, his price

point *oul! &e i!eal for a nonprot oraniIation that con!ucts fun!raisin e(

&ecause the oraniIation *oul! &e )a.i)iIin its re(enues, + &usiness" ho*

*oul! price a&o(e or &elo* this price point in an e;ort to )a.i)iIe its prots

*nelastic Price Management

+s sho*n in iure 8#27" *hen a price is inelastic" a price increase i)pro(es a

aspects of perfor)ance, + price !ecrease" ho*e(er" hurts sales" )arins" an!

ross prot e(en thouh it increases unit (olu)e, or e.a)ple" Tello* aes

a!(ertisin is no*n to &e price inelastic" *ith an elasticit% of appro.i)atel%

hat *oul! &e the conse@uence of a Tello* aes &usiness lo*erin the price

its $100 a!s &% 10 percentE +ssu)e the &usiness nor)all% sells one )illion o

those a!s an! its (aria&le cost is $50 per a!, he results are a unit )arin of

sales re(enues of $100 )illion" an! a ross prot of $50 )illion,



'aise rice

*nelastic

0 to –0,99

Unit(alesUnit-otal

2olume)e5enueMargin Aecreasencreasencreasen

Lo*er rice

ncrease

Price

&lasticity

Unity &lasticH –1,0

AecreaseAecrea

ol! rice>o chane Ma.i)u) >o cha

&lastic

–1,01 an! Larer

'aise riceAecreaseAecreasencrease

Lo*er ricencreasencreaseAecreasen

Y he ross prot coul! increase or !ecrease" !epen!in on the le(el of elasticit%" unit )arin" an! cost

7*,U)& 8/! P)*$& &LA(-*$*-B92.LUM&: (AL&(: A+

P).7*-A0*L*-B

$urrent Price (ituation

rice per +! H $100 /aria&le -ost per +! H $50 +! /olu)e H 1 )illion

a!s Marin per +! H $50

ales 'e(enue H $100 )illion Gross rot H $50 )illion



+ !ecision to lo*er prices &% 10 percent *hen the price elasticit% is e@ual to

–0,7 *oul! pro!uce the follo*in perfor)anceC

Lower/Price (trategy

rice per +! H $90 /aria&le -ost per +! H $50 +! /olu)e H 1,07 )illion a!s

Marin per +! H $40

ales 'e(enue H $96,3 )illion Gross rot H $42,8 )illion

he !ecision to lo*er price &% 10 percent *hen prices are inelastic *oul!

lo*er )ar# ins &% $10 per a!" lo*er sales &% $3,7 )illion" an! lo*er ross

prot &% $7,2 )illion" e(en thouh (olu)e *oul! increase, his *oul! &e a

!isastrous pricin !ecision, + &usi# ness that !oes not no* that its price is

inelastic coul! easil% follo* a strate% of lo*er# in prices in response to

co)petitor )o(es or custo)er concerns a&out price, he correct strate% in this case *oul! &e to raise price" &ecause the price is

inelastic, + strate% to raise price &% 10 percent *hen the price elasticit% is –

0,7 *oul! pro!uce the follo*in esti)ate of perfor)anceC

)aise/Price (trategy

rice per +! H $110 /aria&le -ost per +! H $50 +! /olu)e H 0,93

)illion a!s Marin per +! H $60

ales 'e(enue H $102,3 )illionotal -ontri&ution H $55,8 )illion



his strate% *oul! increase )arins &% $10 per a!" sales &% $2,3 )illion"

an! ross prot &% $5,8 )illion, Qno*in the correct !irection to )o(e the

price i)pro(e! this &usinesss ross prot &% 10 percent" althouh it )eant

i(in up 70"000 a!s, +lthouh there *as a loss of unit )aret share

nu)&er of a!s sol!" !ollar )aret share i)pro(e! sinicantl%,

&lastic Price Management

iure 8#27 also sho*s that arri(in at a successful pricin strate% is )ore

!icult *hen prices are elastic, +lthouh sales re(enues *ill increase *ith a

price cut an! !ecrease *ith a price increase" the chane in ross prot *ill

!epen! on the le(el of price elasticit%, houh a price )a% &e elastic" it )a%

not &e elastic enouh to pro!uce the (olu)e increase that is nee!e! to

)ore than o;set the )arin !ecrease create! &% a price cut,22

or e.a)ple" lets assu)e that the price elasticit% for the sa)e Tello* aes

a! is

–1,5, his is clearl% an elastic price" an! one that coul! lea! )an%

&usinesses to lo*er price to ro* sales an! (olu)e, o*e(er" as the

follo*in esti)ate sho*s" a strate% to lo*er price &% 10 percent *oul!lo*er the ross prot &% $4 )illion,

Lower/Price (trategy

rice per +! H $90 /aria&le -ost per +! H $50 +! /olu)e H 1,15 )illion a!sMarin per +! H $40

ales 'e(enue H $103,5 )illionGross rot H $46 )illion



+ strate% to raise prices &% 10 percent *hen the price elasticit% is –1,5

*oul! re!uce the a! (olu)e an! sales re(enue" &ut it *oul! pro!uce hiher

)arins an! a larer ross prot,

)aise/Price (trategy

rice per +! H $110 /aria&le -ost per +! H $50 +! /olu)e H 0,85

)illion a!s Marin per +! H $60

ales 'e(enue H $93,5 )illion otal -ontri&ution H $51 )illion

he &iest challene in usin price elasticities is not perfor)in the

calculationsJ it is esti)atin a (alue for price elasticit%, <(er% ti)e a

&usiness chanes its price" it has the opportunit% to co)pute the actual

price elasticit%, t )ust !o this co)putation" &ecause )aret con!itions

chane an! those chanes a;ect price elasticit%,

P)*$& A+ 0)&A/&2&+ A+ALB(*(

Brea#e(en anal%sis is enerall% (ie*e! as an accountin concept" &ut it is

e.tre)el% useful in e(aluatin the prot potential an! ris associate! *ithan% pricin strate% or )aretin strate%,23



Price and 0rea/&5en 2olume

or a i(en pricin strate% an! )aretin e;ort" it is useful to

!eter)ine the nu)&er of units that nee! to &e sol! in or!er to &rea

e(enOthat is" to pro!uce an operatin inco)e e@ual to Iero, Letsassu)e a &usiness has a )arin per unit of $2 an! total .e!

e.penses )aretin" sales" eneral" a!)inistrati(e" an! other pre#

ta. e.penses of $50 )illion, e see i))e!iatel% that the &usiness

nee!s to sell 25 )illion units in or!er to &rea e(enC + )arin of $2

per unit on 25 )illion units pro!uces $50 )illion" the a)ount nee!e!

to e@ual the .e! e.penses an! i(e the &usiness a Iero operatin

inco)e,

+n actual &usinesss .e! e.penses an! )arin per unit are not liel%

to &e roun! nu)&ers that *oul! )ae it eas% to co)pute the &rea#

e(en (olu)e in our hea!s" so lets e.trapolate a for)ula for

calculatin the &rea#e(en (olu)e fro) the for)ula that *e use! for

urin the operatin inco)e,

:peratin nco)e H /olu)e X Marin per =nit O i.e! <.penses

2olume H :peratin nco)e U i.e! <.penses

Marin per =nit

H $0 U$50 )illion

$2 per unit

H milllion units

o calculate the &rea#e(en (olu)e" *e *ant to set the operatininco)e e@ual to Iero in the e@uation, + Iero use! as an a!!en! a

nu)&er that is a!!e! to another nu)&er !oes not a;ect the

outco)e of the calculation" so *e can si)plif% the for)ula, he lo*er

the &rea#e(en (olu)e is relati(e to )anufacturin capacit% or

e.pecte! sales (olu)e" the reater the prot potential for a pro!uct

or &usiness,

Brea#<(en /olu)e H i.e! <.penses



Marin per =nit

Price and 0rea/&5en Maret (hare

Because &rea#e(en (olu)e is an unconstraine! nu)&er" *e )ust

consi!er *hether the &rea#e(en (olu)e is reasona&le, Maret share"

in contrast" is constraine! &et*een 0 an! 100 percent" an! so &rea#

e(en )aret share pro(i!es a &etter fra)e*or for Ku!in prot

potential an! ris, -o)putin the &rea#e(en )aret share re@uires

onl% that *e !i(i!e the &rea#e(en (olu)e &% the siIe of the taret

)aret,

Brea#<(en Maret hare H Brea#<(en /olu)e

Maret Ae)an!

f the &rea#e(en (olu)e is 25 )illion units an! the )aret !e)an!

for the pro!uct is 200 )illion units per %ear" then the &rea#e(en

)aret share *oul! &e 12,5 percent, he &usiness has a 24 percent

)aret share" *hich is 11,5 share points a&o(e the &rea#e(en



50 Maret Ae)an!

200 )illion

45

40

35

30

i.e! <.penses H $50

20

15

10

5

0 2 4 6 8 10 12 14 16 18 20

Brea#<

Maret

e; he raph assu)es a $2 )arin per unit that re)ains constant as (olu)e ro*s"ouh a sinicant rise in (olu)e nor)all% lea!s to a lo*er (aria&le cost per unit" *hich i)pro(es )arin, <(e

7*,U)& 8/8 0)&A/&2&+ 2.LUM& A+ 0)&A/&2&+ MA)&- (HA)

G r o s s P r o f i t ( m i l l i o n s )



point" as sho*n in iure 8#28, f the &usiness ha! onl% a 15 percent share of

taret )aret" the ris of a loss *oul! &e reater &ecause the &usinesss shar

*oul! &e closer to the &rea#e(en share,

P).U$- L*+& P)*$*+,

+s a &usiness a!!s )ore pro!ucts to its pro!uct line" it enhances sales ro*th

also increases the ris of canni&aliIin e.istin pro!uct sales, t is necessar%"

then" to no* &oth a pro!ucts price elasticit% an! the !eree to *hich it has

cross#price elasticit% *ith other pro!ucts, ro!ucts that ha(e a positi(e cross#

elasticit% are su&stitutesJ lo*erin the price of one pro!uct *ill !ecrease the!e)an! for the other pro!uct, ro!ucts that ha(e a neati(e cross#price elas

are co)ple)entar% pro!uctsJ lo*erin the price for one pro!uct *ill increase

!e)an! for &oth pro!ucts, Because the )arins )a% &e !i;erent for alternat

pro!ucts in a pro!uct line" a &usiness nee!s to i(e careful consi!eration to a

price chane to ensure that the total prots for the entire pro!uct line *ill

increase,



7*,U)& 8/ P)*$& &LA(-*$*-*&( A+ $).((/P)*$& &LA(-*$*-*&( .7

$.MP&-*+, &-&),&+-(

0ra (hare = -i ( & ( $ 0 A 7

P

P

urf 19,5 0, 0, P 0, 0, 0, 0, 0, 0,

P

P

P

P

P

a& 3,6 0, 0, 0, 0, 0, 0, 0, 0, P<lasticitiesC + 1 price chane in the &ran! colu)n creates the percent

chane in )aret share for each ro* of &ran!s,

Pricing (ustitute Products

hen it e.ten!s its pro!uct line" a &usiness )ust reconiIe that so)e

canni&aliIation *ill occur if custo)ers can easil% su&stitute one pro!uct in

the line for another, iure 8#29 sho*s the price elasticities an! )aret

shares for nine laun!r% !eterents" alon *ith their cross#price

elasticities,24 he results of this e)pirical stu!% illustrate the price elas#

ticit% of each &ran! of !eterent" as *ell as the cross#price elasticit% ofsu&stitutes, +s sho*n" the cross#price elasticities are )uch hiher for the

hiher#share &ran!s,

■ -ide Price *ncrease; + 10 percent increase in i!es price *oul!

lo*er i!e (olu)e &% 13,9 percent an! increase the (olu)e of

urf &% 3,7 percent,



■ (urf Price ecrease; + 10 percent !ecrease in urfs price

*oul! increase urf (ol# u)e &% 19,1 percent an! lo*er i!e

(olu)e &% 4,6 percent,

o full% un!erstan! the e;ects of pro!uct line su&stitutes" lets e.a)ine t*ot%pes of co;ee sol! in the sa)e co;ee shopC the shops reular co;ee"

price! at $1,50 a cup" an! a specialt% co;ee" price! at $2,50 a cup, he

reular co;ee is price elastic elasticit% e@ual to –2" *hereas the specialt%

co;ee is inelastic –0,8, 'eular co;ee !riners en# erall% *oul! &e

incline! to s*itch to the specialt% co;ee if the specialt% co;ee price *ere

lo*ere!" as the cross#price elasticit% is 0,4, o*e(er" specialt% co;ee

!riners enerall% *oul! not &e incline! to s*itch to reular co;ee if the

price for the specialt% co;ee *ere raise!" as the cross#price elasticit% is 0,2,

+lthouh )an% pricin strateies coul! &e teste!" a 10 percent increase inthe price of the specialt% co;ee shoul! increase the co;ee shops )onthl%

ross prot,

Pricing $omplementary Products

:f course" pro!ucts that co)ple)ent a certain pro!uct *ill also &e a;ecte!

*hene(er that pro!ucts price chanes, oft*are" printers" an! scanners are

pro!ucts that co)ple)ent



3" Part ,,, Maretin$ Mi.

personal co)puters" an! so the !e)an! for these pro!ucts (aries *ith the

price of per# sonal co)puters, f the cross#price elasticit% &et*een -s an!

sprea!sheet soft*are *ere 0,6" then for each 1 percent chane in the price

of -s" there *oul! &e a 0,6 percent chane in the !e)an! for sprea!sheet

soft*are, f co)puter in!ustr% prices !ecrease &% 10 percent" the !e)an!for sprea!sheet soft*are shoul! o up &% 6 percent, -on(ersel%" if the price

of personal co)puters *ere to increase &% 10 percent" the !e)an! for

sprea!# sheet soft*are *oul! o !o*n &% 6 percent,

-usto)er (alue an! &usiness prota&ilit% !epen! on e;ecti(e pricin

strateies, ih prices !o *on!ers for )arins &ut often result in lo*

custo)er (alue" especiall% *hen a pro!ucts percei(e! &enets are less than

its percei(e! price, n co)petiti(e )arets *here pro!uct !i;erentiation is

hih" (alue#&ase! pricin presents a pricin loic that is !esine! to !eli(er

superior (alue for custo)ers an! hih prota&ilit% for &usinesses,

Maret#&ase! pricin starts *ith custo)er nee!s" co)petitors positions"

an! the &usinesss pro!uct positionin an! then *ors &ac*ar! to )arin,

n contrast" cost# &ase! pricin starts *ith the cost of the pro!uct an! a

!esire! )arin an! then *ors for*ar! to a )aret price, -ost#&ase! pricin

often lea!s to un!er# an! o(erpricin in )arets *here sinicant pro!uct

!i;erentiation is possi&le, But in )arets *here !i;erentiation is )ini)al

an! custo)ers are price sensiti(e" cost#&ase! pricin can &e a (ia&le

approach to pricin, n this chapter *e presente! (e (alue#&ase! pricin

)etho!oloiesC

1, 2alue/in/Use Pricing9rice is set to pro(i!e custo)ers *ith an

attracti(e sa(ins after consi!erin the o*nership costs of

ac@uirin" o*nin" usin" )aintainin" an! !isposin of a pro!uct,

2, Life/$ycle 2alue Pricing9rice is set *ith respect to the total

cost of o*nership o(er the life c%cle of a pro!uct on the &asis of

the net present (alue of the !i;erence &et*een the co)pan%s

an! a co)petitors total costs of o*nership,



3" Part ,,, Maretin$ Mi.

3, Percei5ed/2alue Pricing9rice is set on the &asis of the (alue

that custo)ers realiIe *hen the% co)pare the price an! &enets

of the co)pan%s pro!uct *ith those of a e% co)petitors

pro!uct,

4, Performance/0ased Pricing9rice is set on the &asis of

custo)er preferences for !if# ferent le(els of price an!perfor)ance an! tain into consi!eration ho* the co)pan% an!

co)petitors are positione! *ith respect to !eli(erin &oth price

an! perfor)ance,

5, $ustomeriation 2alue Pricing9rice is set &% un&un!lin a

pro!ucts features or perfor)ance le(els" placin a price on each"

an! then allo*in custo)ers to select the ones the% *ant, he

price of the top#perfor)in pro!uct ser(es as the reference price,

-usto)ers *ho &u% the pro!uct *ith onl% the features the% !esireha(e an inferre! sa(ins relati(e to the reference price,

Ai;erent (alue#&ase! an! cost#&ase! pricin strateies are especiall%

suita&le for particular phases of the pro!uct life c%cle, Aurin the earl%

staes of the life c%cle" si) pricin" sinle#se)ent pricin" an!

penetration pricin are usuall% the appropriate strat# eies, +s )arets enter

their ro*th phase" )an% co)panies focus on )ulti#se)ent (alue#a!!e!

pricin" *hereas lo*#cost lea!ers create (alue *ith a lo* price, +s its

pro!uct



)o(es into the )ature phase of the life c%cle an! &eco)es )ore

co))o!itiIe!" a &usiness )a% use a plus#one strate% to !i;erentiate the

pro!uct on the &asis of a &enet that is )eaninful to custo)ers, :ther

&usinesses )a% pursue a re!uce#focus pricin strate% in an e;ort to she!

price#sensiti(e custo)ers to the point *here a price#(olu)e co)&ination

%iel!s lo*er sales &ut hiher prots, n the !ecline stae of the pro!uct life

c%cle" a &usiness )a% nee! to pursue a har(est#pricin strate%" raisin

prices s%ste)ati# call% an! re!ucin its )aretin e;ort in anticipation of

e.itin the )aret, But after i)ple)entin a har(est#pricin strate%" so)e

&usinesses !isco(er a prota&le niche )aret that pro)pts a return to

pre)iu) pricin,

-hanes in price a;ect &oth (olu)e an! )arin, + price !ecrease that

ro*s (olu)e an! sales &ut results in a !ecrease in total contri&utiona!(ersel% a;ects a &usinesss prof# its, he oal of an% pricin strate%

shoul! &e to ro* or at least )aintain prots, + &usi# ness al*a%s nee!s to

!eter)ine &eforehan! ho* a price chane *ill a;ect ross prot,

Because price a;ects )arin" an! &ecause a certain le(el of .e! e.penses

is nee!e! to achie(e a certain le(el of )aret penetration" a &usiness nee!s

to assess the prot potential an! ris of an% pricin strate% it consi!ers, +

&rea#e(en (olu)e anal%sis is helpful in assessin prot potential an! ris"

&ut not as helpful as a &rea#e(en )aret share anal%sis, Because a&usinesss )aret share is al*a%s constraine! &et*een 0 an! 100 percent"

*hereas (olu)es are unconstraine!" the &rea#e(en )aret share is a

&etter relati(e in!e. &% *hich prot potential an! ris can &e Ku!e!, Brea#

e(en )aret share ena&les a &usiness to aue the prot potential an! ris

of a pricin strate% &% consi!er# in the taret share in liht of the

!i;erence &et*een the &usinesss current share an! its &rea#e(en )aret

share, or &usinesses that are operatin &elo* the &rea#e(en point" a

)aret share &rea#e(en anal%sis *ill also sho* the feasi&ilit% of achie(in a

&rea#e(en (olu)e *ithin a )aret conte.t,

rice#(olu)e relationships are )a!e )ore co)ple. &% (ar%in !erees of

price elas# ticit%, rice elasticit% is a )easure of price sensiti(it% a)on

&u%ers, hen prices are inelastic" price increases re!uce (olu)e &ut

increase sales re(enue an! prots, rice !ecreases in this situation increase

(olu)e &ut re!uce sales re(enue an! lo*er prots, hen prices are elastic"

a price !ecrease *ill increase (olu)e an! sales re(enue" &ut prots )a% o

!o*n if )arins are lo*,

ro!uct line pricin !ecisions nee! to consi!er cross#price elasticit%, heprice elas# ticit% for a pro!uct )a% sinal a particular pricin strate%" &ut



*hen there is cross#price elasticit% &et*een pro!ucts in the sa)e line" a

&usiness nee!s to carefull% anal%Ie the prot i)pact of a price chane, he

!e)an! for pro!ucts that are su&stitutes *ill chane in the !irection of the

price chane of the su&stitute, he !e)an! for co)ple)entar% pro!ucts *ill

chane in(ersel% to a price chane in the pro!uct the% co)ple)ent,

1 o* coul! cost#&ase! pricin lea! to a price that is lo*er than

the one custo)ers *oul! ha(e pai!E o* !oes this a;ect theprot of a &usinessE

o* coul! cost#&ase! pricin lea! to a price hiher than taret

custo)ers are *ill# in to pa%E o* !oes this a;ect the prot of

a &usinessE

3 o* !oes (alue#&ase! pricin !i;er fro) cost#&ase! pricinE

hat shoul! a &usiness !o if the (alue#&ase! price is not hih

enouh to !eli(er !esire! le(els of prota&ilit%E




4 o* *oul! an earth#)o(in e@uip)ent )anufacturer use (alue#

in#use pricin to !eter)ine the custo)er (alue of its pro!uctE

o* *oul! the earth#)o(in e@uip)ent )anufacturer use the

net present (alue of a custo)ers total cost of o*nership to seta (alue priceE

# o* *oul! o%ota use percei(e!#(alue pricin to set a price for

the riusE o* *oul! o%ota select a specic price that

!eli(ere! a )eaninful custo)er (alueE

! +t *hat price *oul! the rius not ha(e an% percei(e! custo)er

(alueE

8 o* coul! o%ota use perfor)ance#&ase! pricin to !eter)ine a

price that *oul! create a oo! (alue for custo)ers an! a oo!

price for o%otaE

o* coul! u&aru use custo)eriIation pricin for the u&aru

:ut&ac an! &enet fro) a top#!o*n price presentation of

price#perfor)ance optionsE

1" h% *oul! +pple use a si)#pricin strate% for a ne* +pple

pro!uctE

11 hat in! of pricin strate% is sinle#se)ent pricinE h% is

sinle#se)ent pricin use! earl% in the ro*th stae of the

pro!uct life c%cleE

1 h% *oul! a &usiness use a penetration#pricin strate%

instea! of a sinle#se)ent strate%E o* !oes the

penetration#pricin strate% create custo)er (alueE

13 o* !oes a lo*#cost#lea!er#pricin strate% !i;er fro) a

penetration#pricin strate%E14 h% *oul! a &usiness use )ulti#se)ent pricin earl% in the

late#ro*th stae of the pro!uct life c%cleE

1 hat is plus#one pricin an! *h% is a &usiness )ore liel% to

use it in the )ature stae of the pro!uct life c%cleE

1# hat is re!uce#focus pricinE o* can a &usiness possi&l% &e

)ore prota&le *ith fe*er custo)ers an! lo*er (olu)esE

1! h% *oul! a &usiness use har(est pricinE h% !o )an%&usinesses usin har(est pricin ne(er e.it the )aretE



he four interacti(e )aretin perfor)ance&ase! pricin" pricin strateies"

tools an! the application e.ercises outline!it%" an! &rea#e(en anal%sis, o


18 o* *oul! a &usiness esti)ate the price elasticit% nee!e! for a

price !ecrease that *oul! )aintain the current le(el of protsE

1 h% shoul! a &usiness al*a%s raise price *hen it is inelasticE

" hen price elasticit% is –1,5 to –2" *h% *oul! a price re!uction

result in larer (ol# u)es" hiher )aret share" an! reatersales &ut lo*er protsE

1 h% is &rea#e(en )aret share )ore useful than the &rea#

e(en (olu)eE

hat happens to a su&stitute pro!uct *hen the price of another

pro!uct in a &usi# nesss pro!uct line is increase! &% 10 percent

*hen the cross#price elasticit% is 0,4E h% *oul! a &usiness

intentionall% shift sales (olu)e fro) one pro!uct to another in

its pro!uct lineE

3 hat happens to a co)ple)entar% pro!uct *hen the price of

the pro!uct that it co)# ple)ents is !ecrease! &% 10 percent

an! the cross#price elasticit% is 0,4E



%ou can enter the !ata presente! to

o&tain the ans*ers, Tou )a% also

enter other !ata to see the results"

an! %ou can sa(e %our *or, he

ure nu)&ers in parentheses are

relate! e.a)ples in -hapter 8" &ut

the lettere! instruc# tions pertain to

the online e.ercises,

8@1 2alue/in/Use Pricing iure

8#6

+, he o*nership costs for a

&usinesss pro!ucts thate.ten! the life of )achine

Sui!s appear in the rst

e.a)ple, +ssess the

econo)ic (alue for se(eral

price points an! select a

price that cre# ates a

)eaninful (alue for

custo)ers,

B, n this e.a)ple" lets assu)ethat the usae cost for the

&usinesss pro!uct is further

re!uce! to $2,50 per poun!,

o* *oul! this a;ect

custo)er (alue an! the

perception of the (alue price

of $2,45E

8@ Percei5ed/2alue Pricingiures 8#8 an! 8#9

+,+ssu)e the &usiness can

i)pro(e its ease of use fro)

a 5,6 ratin to a 7,5 ratin,

o* *oul! this chane the

o(erall &enets an!

custo)er (alue at the

current price of $6"250E

B,ith this hiher ease#of#use

ratin" ho* *oul! the custo)er

(alue in!e. chane if the

&usiness raise! its price to

$6"500 an! the &usinesss

ratin on price of e@uip)ent

increase! fro) 7,5



to 8,0E oul! %ou reco))en! this

price increaseE

8@3 Performance/0ased 2alue

Pricing

iures 8#11 an! 8#12

+,'eplace the e.istin !ata

*ith t*o car perfor)ance

factors each *ith three

le(els of perfor)ance e,,

Z20 MG" 25 MG" an! [30

MG an! a price factor *ith

three price le(els e,,

$20"000" $25"000 an! $30"000, hen

ran the nine alternati(es fro) 1

)ost preferre! to 9 least

preferre! an! interpret the

perfor)ance an! price cur(es,

B, nput the pro!uct positionin

position on each perfor)ance

factor an! price for %our

co)pan% auto an! co)petin

auto, nterpret the (alue in!e.

for each auto)o&ile an! ho*each )iht inSu# ence )aret

share,

8@4 Price/2olume Pricing iures 8#

23 to 8#25

+, he price elasticit% for personal

co)# puters is esti)ate! to &e –

2, or the - )anufacturer

sho*n" e(aluate the sales an!prot i)pact of a 10 percent

price increase an! a 10 percent

price !ecrease,

B,or each pricin strate%"

!eter)ine the &rea#e(en

)aret share an! !is# cuss the

prot ris associate! *ith it,

+otes

1, Nuotation fro) the /alue

ricin an! rota&le Gro*th

orshops le! &% ', Best"

1995–2005,

2, Dtep +si!e +pple ans" +pple>ee!s to ell a&lets to the -

-ro*!"F Retrevo Blog e&ruar%

23" 2009C

httpC***,retre(o,co)content

&loapple#ta&lets# pc#users,

retrie(e! Aece)&er 2010,

http://www.retrevo.com/content/blog/apple-tabletspc-users








3, , >o&le an! , Gruca"

Dn!ustrial ricinC heor% an!

Manaerial ractice"F

Marketing Science" 18" 3

1999C 435–54,

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on n!ustrial ricinC heor%

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Marketing Science" 18" 3

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https://www.mes.executiveboard.com/Public/Default.aspx








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