pricing 101
DESCRIPTION
Pricing 101. Foundation for building a pricing strategy. Agenda for today. Pricing game. Your role: Use your pricing expertise to make as much money as possible in the marketplace. Pricing Game : Group 1. Look at items on the table - PowerPoint PPT PresentationTRANSCRIPT
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AGENDA FOR TODAY
Topics Time
Interactive pricing game Show us your pricing expertise
30- 45 minutes
How would you build a pricing strategy ? Case study and open discussion
15-30 minutes
Key Pricing takeaways Different approaches to pricingDiscuss Value based approachIntroduce segmentation
15-30 minutes
Page 2
Real Market Real Buyers & Sellers Real Transactions
PRICING GAME
Your role: Use your pricing expertise to make as much money as possible in the marketplace
Page 3
PRICING GAME : GROUP 1
• Look at items on the table• Document what you think each item
is worth in the form provided• Bring the form to us
• Congratulations you going to be the Buyers
Page 4
PRICING GAME : GROUP 2
• Congratulations you going to be the Sellers
• We are going to auction the items on the table and you can bid on every item. •Bids start at $1.00 and go up by $0.25 •Remember you need to turn around and sell these items so be careful on what you pay
• After you buy and item from the auction pick up a form from us
Page 5
PRICING GAME : BUYERS AND SELLERS
• Seller you can sell to any buyer and vice versa
• Everyone needs to do 1 transaction • Buyers be careful to not pay more
than what you valued an item• Sellers try to get the best price• Sellers after you sell your item fill
up your form and bring it to us
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PRICING GAME : WHAT DID YOU LEARN?
Page 7
Product Cost Customer ValuePrice
Sellers Profit= Price- Cost
Buyers Profit= Value-Price
• In every transaction both sides need to make a profit• Good Pricers try to understand
Value to set prices rather than focus on cost• Great Pricers try to maximize
value to get higher prices
Price
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PRICING IS CRITICAL
“The single most
important decision in
evaluating a business
is pricing power.”
Warren Buffett, 2011
Source: Warren Buffett in an interview with FCIC, May 2011
WHY IS PRICING CRITICAL?
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4%
7%
12%
3%
Impact to operating profit
Fixed Cost
Unit Volume
Variable Cost
Price
1% Improvement
DIFFERENT APPROACHES TO PRICING
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Cost Based
Value Based
Competitive Based
PRODUCT COST PRICE VALUE CUSTOMERS
The Cost-based Pricing Approach
The Value-based Pricing Approach
CUSTOMER VALUE PRICE COST PRODUCT
APPROACHES AND TOOLS TO MEASURE CUSTOMER VALUE
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VALUE MAP : PRICING BASED ON PERCEIVE VALUE
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VALUE WATERFALL: PRICING BASED ON ECONOMIC VALUE
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VALUE BASED SEGMENTATION CAN LEAD TO IMPROVED PRICING AND MARKET SHARE
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