Tel Net Pricing 03 27 2010 Fawzi Behmann

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Fawzi Behmann, President, TelNet Management Fawzi.behmann@telnetmanagement.com 03-27-2010

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Pricing What should I consider in establishing pricing for my business?

The presentation provides an overview on pricing. What factors drive pricing, pricing structure, overview of pricing strategy, how to go about establishing competitive pricing for products and/or services for my business. The presentation will include walkthrough examples and conclude with some thoughts on pricing model.

Fawzi Behmann has over 20 years experience in product line management for multiple product lines at different companies both for equipment and semiconductor fields. Also, he was exposed to pricing for applications and services. Fawzi Behmann holds BSC, Master in Computer Science and MBA.

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Price is a key factor in buying decision products

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Factors Drive & Influence Price

» Market Segmentation

» What price would the market bear?

» Importance of features/benefits

» Competitive offering as a substitute

»  Intensity of competition

»  Others: e.g. product, services, support

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Product family XYZ – Unit Price/Cost/Margin

Basic $100 $ 75 33% Enhanced $145 $100 45%

Ultra $170 $105 62%

Model Price

Typical Strategy to drive price: •  Cost + markup •  Value based

Unit Margin

Price

Cost

Cost Margin

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Pricing Strategy: Product family XYZ – Unit Price & Price Breakdown

Basic $100

Enhanced $145 F1 F3

F4

$40 $35 $30 $20 $10 $5

Ultra $170 F4 F5 F2 F3 F6 F7

$35 $30 $25 $20 $10 $10

F1

F3 F1

F6 F2 F4 F7

F5

$40 $30 $15 $10 $5

$40

F5

F2

$5

Functional Building Blocks and $ value Model Price

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Example – Product Family XYZ Models and volume based pricing (Price Matrix)

Ultra Ultra 1

Enhanced Enhanced 1

Basic Basic 1 Basic 2

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Product family XYZ – Financials (Part of business case)

Assumption: Price erosion by 10% annually

Pricing Trend

Volume Forecast

Revenue Forecast

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Product family XYZ – Market Share (part of business case)

Product Volume Forecast

Product XYZ Market Share

Market Size (SAM)

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Product family XYZ – Competitive Differentiation

Feature & Price Competitive Analysis

SWOT Analysis •  Strength •  Weakness •  Opportunity •  Threat

Margin Analysis

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Summary

•  It is important to clearly position your product into the right market segment. •  Have a clear understanding of market size, players, competitive offerings, pricing and value proposition •  Define your product price, cost, and margin •  Establish price matrix (discount by volume) and and use to target the right customers to maximize design win •  Conduct SWOT analysis regarding your product and understand competitive threats, opportunities, strengths and weaknesses •  Watch competitive pressure selling at lowest price can easily tempt you in lowering your price to win and your profit •  Develop clear value and differentiated proposition •  Develop Brand equity

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Look At The Total Picture

Return on Investment

Net Income

Assets Managed

Unit Margin

Unit Volume

Price

Cost

Market Share

Market Size

Minus

Times

Times

Divided By

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