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Managing Price: one of the most attractive – and overlooked-opportunities to boost profits.

For a company with average economics, improving unit volume by 1% yields a 3.3% increase in operating profit, assuming no decrease in price.

But, as Exhibit 1 shows, a 1% improvement in price, assuming no loss of volume, increases operating profit by 11.1 %.

* Based on overage economics of 2,463 companies In Compustat aggregate

There are two fools in any market. One does not charge enough. The other charges too much.

--- Russian Proverb

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Ignores the voice of the customer, Can lead to overpricing in weak markets and under-pricing in

strong markets

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Penetration Pricing Strategies (Price Sensitive) 1) Low-price leader The market has reached maturity. 2) Experience-curve pricing The low price is intended to ramp volume quickly and to keep out competition. 3) Bundling (discussion) Increase overall demand.

Skim-Pricing Strategies 1. This strategy is often used for segment differential pricing of new products where time is a primary factor in the decision process. 2. Image/Brand This product line strategy targets customers with high search costs who are attracted to brands that have achieved a reputation for high quality and exclusivity

Hybrid Pricing Strategies 1) Cost-plus pricing 2) Complementary pricing. (SVN) 3) Premium pricing (student plan) 4) Random discounting

The initial strategy focuses on skimming the inelastic demand of the innovator then reducing prices on a predictable basis as the market matures in order to attract more price sensitive customer groups

5) Second-market discounting

LeadTools Atalasoft Vintasoft GdPicture Discussion

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