what is a pricing strategy and why do you need one?

What Is A Pricing Strategy and Why Do You

Need One?

Date:17th June 2010

Facilitator: Sammy Rose MBA, MCIMChartered Marketer

Mentor: Richard Mooney DipM, Chartered Marketer, FCIM

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ROUND UP:-

•Product Proposition – What About This Makes Us Different?

•Target Audience – Know Who This Is And Address Them Instead Of Everyone In General

•Competitors – How They Affect Our Product Proposition And Sales & Marketing Approaches

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FACTORS AFFECTING PRICE?

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FACTORS AFFECTING PRICE

Legal

ConstraintsCosts Objectives

Consumer

Attitudes

Company’s

Market Profile

DifferentialsPotential

CompetitorsCompetitors

PRICE

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Quick Break Even Chart

£Sales

Break evenProfit

Costs

Loss

VOLUME

SA

LE

S/C

OS

TS

Quick Break Even Calculation: Fixed Costs

G.P%

Where G.P% = Gross Profit

Sales

RELATIONSHIP BETWEEN PRICE DISCOUNTING & SALES INCREASING

Existing % Gross Margin% Price

Reduction 5 10 15 20 25 30 35 40 50

% Volume increase required for same gross margin

2.0 67 25 15 11 9 7 6 5 4

3.0 150 43 25 18 14 11 9 8 6

4.0 400 67 36 25 19 15 13 11 9

5.0 100 50 33 25 20 17 14 11

7.5 300 100 60 43 33 27 23 18

10.0 200 100 67 50 40 33 25

15.0 300 150 100 75 60 43

Copyright Durham University Business School

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RELATIONSHIP BETWEEN PRICE INCREASES & SALES DECREASES

Existing % Gross Margin% Price

Increase 5 10 15 20 25 30 35 40 50

% Volume decrease to generate same gross margin

2.0 29 17 12 9 7 6 5 5 4

3.0 37 23 17 13 11 9 8 7 6

4.0 44 29 21 17 14 12 10 9 7

5.0 50 33 25 20 17 14 12 11 9

7.5 60 43 33 27 23 20 18 16 13

10.0 67 50 40 33 29 25 22 20 17

15.0 75 60 50 43 37 33 30 27 23

Copyright Durham University Business School

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ARE WE MAKING A PROFIT?

BRAND MAPPING

High Price

Low Price

Low

Quality

High

Quality

Rip off & false economy strategy High Value Strategy

Premium Strategy

Average Strategy

Economy Strategy

Superb Value Strategy

Good Value Strategy

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Relationship Between Market Position, Price & Sales

Economy Average Premium

Sales

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Routes To Market

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BRAND MAPPING

High Price

Low Price

Low

Quality

High

Quality

Rip off & false economy strategy High Value Strategy

Premium Strategy

Average Strategy

Economy StrategySuperb Value Strategy

Good Value Strategy

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Pricing For Volume

PRICING

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VOLUME

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ROUND UP:-

•Price For Profit

•Bundle Instead Of Discount

•Play on Customer's Vanity

•Remember Your Branding Proposition

•Consider Your Stance on Margin v Volume

•Keeping Playing Chess

•Consider Your Distribution Channels

•Use Incremental Prices To Help Negotiate Best Deals