PRICING PLANS

1
Peter F. Drucker
Consumers do not see it as their job to ensure
manufacturers a PROFITThe only sound way to
price is to start outwith what the market is
willing to pay
2
The Price of
501

• Levis

3
PRICING OBJECTIVE

• PENETRATION
• SKIMMIMG
• ROI
• STABILITY

4
Psychological

• perceived value
• indication of quality
• association

5
INFLUENCES ON PRICING DECISIONS

• PSYCHOLOGICAL
• INDUSTRY CONDITIONS
• DECISION MAKER
• STAGE OF PRODUCT LIFE CYCLE

6
. . . Pricing history

• Started at 50
• Competition drove to 10 in decline
• Enter new market up to 75

7
PRICING PLANS
8
Developing a Pricing Strategy (1)
ASSESS PRICE COMPETITIVENESS

• Identify Quality Dimensions
• Weight Quality Dimensions
• Measure Competitors
• Discover price/quality preferences
• (Value Mapping)

9
Developing a Pricing Strategy (2)
VALUE MAPPING
RELATIVE PRICE
RELATIVE QUALITY
10
Developing a Pricing Strategy (3)
SET PRICING OBJECTIVES

• GROWTH
• MAINTAIN
• QUALITY
• HARVEST

DRIVEN BY MARKETING FINANCE
11
Developing a Pricing Strategy (4)
STRATEGIC PRICE FOCUS

• Stage of Evolution of the Market
• Consumer Price Sensitivity

12
Developing a Pricing Strategy (5)
TARGET MARKET SEGMENT

• Driven by price spread and profitability

13
Developing a Pricing Strategy (6)
EVALUATE COMPETITVE STRATEGIES

• Assess likely reaction of competition

14
Developing a Pricing Strategy (7)
MEASURE VALUE TO CONSUMER

• Trade off values - cosmetics
• Increase in productivity, lowering costs,
  increasing revenues (EVC)

15
Developing a Pricing Strategy (8)
PRODUCT LINE PRICING

• The Product Range
• The HP inkjet cartridge
• Competitive Block
• Options, exclusive models

16
Developing a Pricing Strategy (9)
SET PRICE

• Communicating to the Market
• The Sales Force
• Channel Control

17
..pricing policy killer
18
PRICING COMPARISONS
5,32
CANNON III 70 X 140 Classic
3,57
CANNON III 70 X 140 Comm.
IKEA 70 X 140
TESCO 70 X 140
KOTVA 70 X 140
0,00
2,00
4,00
6,00
8,00
10,00
12,00
14,00
16,00
18,00
EXCHANGE 30 K 1USD
CZECH
STORE PRICING
KOTVA 70 X 140
16,50
TESCO 70 X 140
10,30
IKEA 70 X 140
14,16
CANNON III 70 X 140 Comm.
3,57
CANNON III 70 X 140 Classic
5,32
Includes 22 Vat/30Margin/12 Duty
19
HOW THEY DO IT

• MAKRO
• PRICING FOR COMPETITION

20
Foreign Market Pricing (1)

• Assume Local Market Pricing
• In-market Freight
• Distribution Centre
• Warehousing
• In-Bound Costs

21
Foreign Market Pricing (2)

• Customs, Duty, Tax, Withholding
• Port to Port Freight, Insurance, Demurrage
• Ex-Factory to Port
• Net, Loaded at Factory Door
• Special Shipping Packaging

22
Foreign Market Pricing (3)

• Established Market Pricing
• New Packaging
• Foreign Standards
• FX Cover

23
Foreign Market Pricing (1)

• Paternalistic Finance
• lower cost funds for pipeline
• fixtures, equipment
• currency shortages
• Politics

24
..an example

• New flat screen and design for computer. . . .

25
SharpVue Corp

• Sells 100 screens per week at 1000
• Profit of 20,000
• Marketing wants to drop price 10 to stimulate
  sales
• How many units must be sold to hit breakeven?

26
Discount Trap

• Gross Profit Is
• Price 5 10 20
• Dsct Sales Increase Needed
• 1 25 11.1 5.3
• 5 inf 100 33.3
• 10 inf inf 100