Pricing Products Partly Based on Ebert

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Pricing ProductsPartly Based on Ebert Griffin
Chapter 11

• For My Friends in BSAD 101
• By Thomas Hilton

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Key Topics

• Pricing objectives
• Price-setting tools
• Pricing strategies and tactics
• Cost-Justifying Information Systems

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Pricing to Meet Business Objectives

• Profit maximizing objectives
• Market share objectives

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Price Setting Tools

• Cost Oriented Pricing

Breakeven Analysis
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Breakeven Analysis
Figure 111
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Pricing Strategies

• Pricing existing products
• Pricing new products
• Price skimming
• Penetration pricing
• Pricing e-commerce products
• Dynamic vs. fixed

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Pricing Tactics

• Price lining
• Psychological pricing
• Odd-even pricing
• Discounts

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Justifying I.S. Projects

• Why Develop Information Systems
• Cost-Justification
• Non-cost Justification

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Why Develop Information Systems?

• Information is the intended output
• Data is the main input
• Is there a difference?
• There had better be!

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Data Objective Measures of Traits of Real-World
Objects

• Objective
• Not subjective
• Replicable
• Measures
• Values
• Quantitative
• Qualitative

• Traits
• Characteristics
• Attributes
• Real-World Objects
• Entities or Classes
• Tangible
• Intangible

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Information Data Aggregated and Placed in a
Useful Context

• Data
• see prior
• Aggregation
• Groups
• Calculations
• Manipulations

• Context
• Titles
• Labels
• Rows
• Columns
• Usefulness
• Decision-Making
• Judged by User

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Information Quality

• Six Traits
• Accuracy
• Timeliness
• Relevance
• Verifiability
• Accessibility
• Security

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Cost-Justification

• Is the system worth its cost?
• Compare worth with cost
• Various Methods
• ROI
• Present Value
• Cost-Benefit Analysis

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Cost-Benefit Analysis

• Conceptually Simple
• Quantify all Costs
• Quantify all Benefits
• Divide Costs by Benefits
• If C/B Ratio lt 1, then Proceed

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Cost-Benefit Analysis

• Complex in Practice
• System Lifespan
• Tangibles vs. Intangibles
• Future Orientation

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Costs

• People
• Facilities
• Supplies
• Data
• Hardware

Software Training Procedures Opportunities Confusi
on
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Benefits

• Cost Elimination
• Worker
• Process
• Carrying Cost
• Cost Reduction
• Efficiency
• Productivity
• Maintenance

• Cost Shifting
• Inventory
• Labor
• Debt
• Profit Generation
• Product
• Service

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Cost-Benefit Analysis Table
Costs Costs Costs Costs Benefits Benefits Benefits Benefits
Tangible Tangible Intangible Intangible Tangible Tangible Intangible Intangible
Name Quantity Name Quantity Name Quantity Name Quantity
Tangible Cost Subtotal Intangible Cost Subtotal Tangible Benefit Subtotal Intangible Benefit Subtotal
Cost Subtotal Cost Subtotal Cost Subtotal Benefit Subtotal Benefit Subtotal Benefit Subtotal
Cost-Benefit Ratio Cost-Benefit Ratio Cost-Benefit Ratio Cost-Benefit Ratio Cost-Benefit Ratio Cost-Benefit Ratio Cost-Benefit Ratio Cost-Benefit Ratio
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An Example

• Network Design Proposal

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Non-Cost Justifications

• Cost-benefit analysis is not iron-clad
• Often, detractors can discredit it
• Therefore, it must be accompanied by non-cost
  justifications
• Organizational culture
• Strategic direction
• Potential competitive advantage
• Environmental Imperatives
• Top Management Support

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Review

• Putting a Price on Information involves
• Objectives Profit? Market share?
• Strategies Existing? New? E-Commerce?
• Tactics Price-lining? Psychological? Discounts?

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Now You Do It!

• Cost-justify an information system of your choice
  using the CBA table in this presentation
• Email it to me within 10 days