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


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



The moment of truth


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


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


price at the moment of truthCopyright Margin2 2011

Strategic Price Position

CustomerValue

Competitive Anchors

IdentifyMinimum

Price

Sales Channel

Strategic Price Positioning

Source: Hinterhuber 2010


Equation for Customer Value


PriceValue

Benefit

Risk

Effort

=

-

-


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

+

+


‘They saved me £10,000 in tax’

‘They processed my accounts in

2 days’

‘My friend referred them

to me’


Activity Value Mapping


Value

Differentiation

High

Low

Common Unique

Cost Benefit Break Even Point

Value Destroyers

Integral Features

Market Benefits

Margin Drivers



How much would you pay for this car?


Ford Focus 1.6 Zetec 2007 45,000 miles


This Ford Focus 1.6 Zetec 2001

with 139,000 miles is advertised for £695


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?


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


£1.78 £1.25 £1.50


Understand your customers customer through sales chains

Farmer Manufacturer Retailer ConsumerShopper

e.g. Food & Drink Sales Channel

Farmers Markets

Research, Marketing and Advertising



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



Thank you


Documents

The Price is Right Event 1st November 2011