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Welcome to:

‘Price Optimisation Technologies’

A webinar sponsored by

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About Bloor Research• Established 1989, is the leading independent European IT

analyst company and serves Europe and North America• Specialist IT product / market research reports• White papers, product reviews, customer case studies• Strategic Advisory Services for vendors and end users• Free IT articles @ www.IT-analysis.com /

www.IT-director.com

www.bloorresearch.com

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Agenda

1. The new importance of optimised pricing

2. Industry dynamics

3. Pricing considerations

4. Pricing optimisation

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Pricing: now the most important marketing variable

= we all have less money to spend on luxuries like travel and electronics

Falling: GNP

Stock marketsHouse prices

Credit availabilityCurrency exchange rates

Employment

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Price discipline erosion by challengers and followers

Customer Perceived Value

HighPrice

LowPrice

Pioneers Leaders Challengers Followers

High Low

Nichers

Average Price

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What to do? McKinsey on pricing in the downturn

1. Watch for sudden shifts in price structure

2. Monitor customer-level profitability

3. Adjust to changing customer needs

4. Update price sensitivity research

5. Monitor your industry’s microeconomics

6. Study your suppliers

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Many businesses are ill-equipped in pricing automation

• Manual environmental monitoring and ad hoc spot-checking

• Analysis in spreadsheets• Paper-based static reporting• Lack of drill-down to detail• Pricing actions based on experience and

best estimates• Slow to respond to competitive threats

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Attributes of the Travel & Electronics Industries

• Driven by GNP and consumer ‘feelgood’ factor• Global price transparency and intense competition• Commoditisation and disintermediation• Seasonality and demand uncertainty• Supply chain / logistics oriented• Infinite number of product / service price offers that

change daily or weekly• Different offers and prices for different geographic

markets

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Online Travel

• European market is valued at 50Bn+ EURO

• In the UK, of those planning holidays, 76%

researched destinations and 66% booked flights

and accommodation online

• Online holidays bookings are easier and quicker;

better priced; and offer 24/7 availability - only 22%

trust advice from travel agents or holiday firms

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Online Consumer Electronics

• European market is valued at 50Bn+ EURO

• 77% of electronics purchases are researched

online; customers test and buy at retail stores

• 50%+ of electronics consumers use web

comparisons - comparing prices online is easier,

and there is a wider range of products

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Consumer Online Behaviour Varies

Online Travel:• An intangible service• An impulse purchase for a planned event• Needs source credibility• Online search for best offers• Online booking

Online Electronics:• A physical product• A researched capital

investment• Needs physical evidence• Online comparison

creates shortlist• Check retail outlet

availability

Vs

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Pricing is key to success Online

(1 = Low; 5 = High)

Consumerbargaining power

Supplierbargainingpower

1(Low)

5(High)

2(Low)

5(High)

5(High)

Barriersto entry

Availability of substitutes

Competitive Intensity

PriceCompetition=

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Economic pricing

Price ($)

Volume (Units)

Supply

Demand

Optimal price

Dependencies:• Market maturity• Commoditisation • Oligopolies /

Brands• Elasticity /

sensitivity

Economy price

Premium price

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The internal circular argument

Volume

Cost

Demand

Price“Yes, but . . . “

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‘Good’ pricing is not easy . . .

• The maximum a customer is prepared to pay / perceived value / price points

• Pricing for pioneers, leaders, challengers, nichers• Low cost operators, price makers and price takers• Pricing for segments / products / place / timing• Product line pricing, utilisation and yield• Penetration / loss leader pricing vs skimming• Competitive parity• Cost-plus (margin) or mark-up pricing

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Customer Perceptions On Price / Quality

RelativePrice ($)

Relative QualityLow

Low

High

High

PremiumSegment

EconomySegment

Poor Value

Good Value

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How pricing automation helps

• Define automation around your market “space”• Regular reporting of competitor online prices• Visibility of ‘whole product’ components• Alerts of market events such as stock-outs and

over-supply• Workflow to turn insight into pricing actions

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How Lixto works

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What do you get?

1. Pricing dashboards and visualisations

2. Tailored for your business rules and workflow

3. Pre-built reporting, ad-hoc analysis and alerts

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Summary and Conclusions

Pricing is moving from an internal to an external environment management focus

Optimised pricing is key to online revenue and profits in a downturn economy

Automated pricing solutions that reduce complexity and improve real-time price responsiveness should be considered

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Thank you!

Gerry Brown

Senior Analyst, BI & CRM / Digital Marketing Bloor Research

gerry.brown@bloorresearch.com