The Price is Right Event 1st November 2011
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Transcript of The Price is Right Event 1st November 2011
price at the moment of truth
How to Identify your Optimum Price
An Introduction to Value Based Pricing
Copyright Margin2 2011
price at the moment of truth
Why is Pricing so important?
Those companies that ‘achieved true excellence in their price execution capabilities . . . earned operating profits 24% higher than their industry peers’
Hogan 2011
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price at the moment of truth
The moment of truth
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PriceValue
The price you offer is therefore
fundamental to your customers
value calculation, it’s a moment of
truth where theory becomes practice
Every purchase is therefore a balance between the price offered and the value
delivered, there is the constant risk of losing the sale or missing out on vital profit.
In every sale, the buyer makes a
mental or physical calculation of the
value they will gain from making a
purchase
price at the moment of truth
So, if its about ‘Value’, what does that mean?
• Its judged in unquantifiable terms
• It is judged from a range of perspectives
• It is always placed in the context of today’s sale
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price at the moment of truthCopyright Margin2 2011
Strategic Price Position
CustomerValue
Competitive Anchors
IdentifyMinimum
Price
Sales Channel
Strategic Price Positioning
Source: Hinterhuber 2010
price at the moment of truth
Equation for Customer Value
Copyright Margin2 2011
PriceValue
Benefit
Risk
Effort
=
-
-
price at the moment of truth
Types of Customer Benefit
Price Sensitivity
Service Level
Functional Uniqueness &ability to meet
consumer needs
Economic Commodities
with pricebased appeal
Intangible Image, brand,
unique experience
+
+
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‘They saved me £10,000 in tax’
‘They processed my accounts in
2 days’
‘My friend referred them
to me’
price at the moment of truth
Activity Value Mapping
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Value
Differentiation
High
Low
Common Unique
Cost Benefit Break Even Point
Value Destroyers
Integral Features
Market Benefits
Margin Drivers
price at the moment of truth
price at the moment of truth
How much would you pay for this car?
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Ford Focus 1.6 Zetec 2007 45,000 miles
price at the moment of truth
This Ford Focus 1.6 Zetec 2001
with 139,000 miles is advertised for £695
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How much would you pay for this Ford Focus 1.6 Zetec 2007 with 45,000 miles on the clock?
This Ford Focus 1.6 Zetec 2011
with 22 miles is advertised for £12,000
How much would you pay for this Ford Focus 1.6 Zetec 2007 with 45,000 miles on the clock?
price at the moment of truth
How Coca Cola exploits different sales channels
2 Litre in Tesco 500ml in Coop 250ml in a Pub0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.09
0.25
0.6
Price per 100ml
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£1.78 £1.25 £1.50
price at the moment of truth
Understand your customers customer through sales chains
Farmer Manufacturer Retailer ConsumerShopper
e.g. Food & Drink Sales Channel
Farmers Markets
Research, Marketing and Advertising
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price at the moment of truth
3 Points to Remember about Pricing
• Getting it right has a huge impact
• Its about understanding what your Customers are willing to pay
• To exploit the opportunity you need to understand your customers, competitors and channels
Copyright Margin2 2011
price at the moment of truth
Thank you
Copyright Margin2 2011