BayerChairProfessorWillemBurgers英.pptx

BayerChairProfessorWillemBurgers英.pptx

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PricingBayerChairProfessorWillemBurgers1CourseOutlineFoundationsCase:

AtlanticComputerThinkingStrategicallyCase:

McCawEmbeddedPricingCase:

SignodeTools,Tactics,andTricks:

Metrics,Fences,FramingCase:

BlockbusterVideoChannelsandPricingCase:

ShanghaiHonggongMathematics,Case:

JahwahPriceResearchPriceWarCase:

KodakFuntime2ImportanceofPricingMarketingandPricingWheredoespricingresideinanorganization?

“Pricinggetscaughtbetweenthecracks.Everybodywantstobeapartofit.Yet,nobodyreallyownsit.Pricingisadhoc.”G.Smith,PricingStrategyandPractice3PriceLevelPricesettingPricingPolicyNegotiationTacticsandPricingSettingProceduresPrice&ValueCommunicationCommunication,ValueSellingToolsPriceStructureMetrics,Fences,TimingValueCreationEconomicValue,OfferingDesign,SegmentationTheStrategicPricingPyramid4WhatistheRightPrice?

1.ValuetoCustomer2.Competition3.OurCost4.StrategicObjectives$51.CustomerValue/WillingnesstoPaySubstitutes/Uniqueness?

Switchingcosts?

Easytocompareprice?

Easytocomparequality?

Price/Qualityrelationship?

Significantexpenditure?

Importantend-benefit?

Ingredient?

Doesthebuyerpay?

Fairness?

Inventory?

6Value?

OneBarrelofCocaColaMilkEvianWaterOrangeJuiceLemonOilScopeMouthwashJackDanielVisineEyeDrops$78.83$126.00$189.90$251.16$390.88$826.65$4,133.26$32,202.2472.CompetitionHowmanysellers?

MonopolyOligopolyHowmanybuyers?

Monopsony-OligopsonyHowdifferentiatedistheproduct?

Monopolisticcompetition83.EscapetheCostPlusDelusionCostBasedPricingproductcostpricevaluecustomers?

ValueBasedPricingcustomersvaluepricecostproduct?

Theroleofcostinpricingrelevantcosts,incrementalcosts,avoidablecosts,opportunitycosts:

Ourgoalistomaximizegrossprofit94.StrategicObjectivesGrowth?

Profit?

Survival?

StabilityCost?

10PricingStrategyAlternativesCompetition-basedCost-plusValue-in-useCustombasedAuction/LiquidationStrategicObjectives/Constraints11BusinessasaGameButtherearemanygamesRulebasedgames（e.g.,employmentcontract）followtheprinciplethatforeveryactionthereisareactionandtoplaywellyoumustlookaheadandreasonbackwardFreewheelinggames（e.g.,contractnegotiation）followtheprinciplethatyoucannottakeawaymorefromthegamethanyoubringtoitandtoplaywellyoumustmaximizethisvalue12ThePlayersintheGameCustomersCompetitorsCompanyComplementorsSuppliersPartsoftheGame1.PlayersWhoisplaying?

Canyouaddplayers?

Doyouhavetoplay?

2.AddedValuesWhatamountofvaluedisappearswhenyouleavethegame?

HowcanyouincreasevaluePartsoftheGame3.RulesCanwechangetherulesofthegame?

4.TacticsCanwechangeperceptionsofthegame,usingthreatsorpromises?

5.ScopeCanwegoplaythegamesomewhereelse?

ChangingthePricingGameConventionalPricingStruggleamongcompetingfunctions:

marketing,sales,finance.ReactivetomarketconditionsandcustomerpressureSubsequenttoproduct-marketdecisionsStrategicPricingChangesincentivestocreatesupportacrossfunctionsPro-active,policydrivenEarlyintheproductdevelopmentprocess16TacticalQuestionsCommonlyAskedStrategicQuestionsThatShouldbeAskedWhatpricedoweneedtocoverourcostandprofitobjectives?

Whatsaleschangeswouldbenecessaryortolerableforustoprofitfromapricechanges?

Canwedeployamarketingstrategythatwillkeepthosesaleschangeswithinacceptableranges?

Whatcostscanweaffordtoincur,giventhepriceswecanachieveinthemarketplace,andstillearnaprofit?

Whatpriceisthecustomerwillingtopay?

Isourpricejustifiablegiventheobjectivevalueofourproductorservicetothecustomer?

Howcanwebettercommunicatethatvalue,thusjustifyingtheprice?

Whatistherightpricestructureforthecustomer/fordifferentcustomers?

Whatpricesdoweneedtomeetoursalesandmarketshareobjectives?

Whatlevelofsalesormarketsharecanwemostprofitablyachieve?

Whatmarketingtoolsshouldweusetowinmarketsharemostcost-effectively?

AskingtheRightQuestions:

17Anunprofitableprice?

-Pricingerror-Valuecommunicationdefect-Marketsharedelusions-Marketsegmenterror-Product/serviceoverbuilt-Customerpower-Commoditization18MarketChangeDynamicsLeadingtoCommoditizationEntryofnewcompetitorsinmarketorsegmentImitationamongcompetitorsBuyersdevelopcapacityandconfidencetomeasurefunctionsandqualityofproducts,services,andvendorsExperienceandcompetitionamongsuppliersreducesbuyerssenseofrisk19TheSpecialty-CommodityContinuumPriceHighLowLowHighServiceAdditionsSpecialtyCommoditytimeNicheExperiencecurveValueaddedstrategyPricecompression/innovationBreakingtheCommodityCycleFourpossiblestrategies,Valueaddedstrategy:

MovingalongthediagonaltoincreasepriceandservicePricecompression/innovation:

MovingalongthediagonalreducingpricesandservicesMarketfocus:

StayingupalongthearcfocusingontheclientsonlywhowouldpayanadditionalpriceExperiencecurve:

Movingdownalongthearcaheadofanyoneelse21EmbeddingtheStrategy-Distributors/Salespeopleincentivesandexpectations,skills,knowledge,tools.-Customerincentivesandexpectations22Signode1.WhatpricestrategiescanyourecommendtoSignode?

2.Whatsuggestionsdoyouhaveforcompensationforthesalesforce?

3.Thesalesforceofferstoincreasesalesby5-10%ifweallowadditionalpriceflexibility.Assumethepriceflexibilitywillreducepricesby4%onaverage,shouldyouaccepttheoffer?

Showwithcalculationwhyyoushouldaccepttheofferornot.4.DoyouseeanyerrorinSignodespresentallocationofitsmarketingresourcestodifferentsegments?

Whaterrordoyousee?

Whatmightbetheexplanation?

5.AnybrandstrategysuggestionsforSignode?

23MetricsWhatisametric?

Whatisabadmetric?

Whatisthecostofusingthewrongmetric?

Goodmetrics24GoodMetrics1.Aresomeofyourcustomerssubstantiallymoreexpensivetoserve?

2.Canyouattractadditionalcustomersatalowerprice?

3.Canyoulinkyourpricetocosttoservetodriveexpensivecustomerstoyourcompetitorswhileattractingnon-costlycustomerstoyou?

4.Canyouenforceyourmetric?

5.Doesyourmetricfitchannelsellinghabits,customerbuyinghabits,andsenseoffairness?

25QuantityDiscountsTypology:

NodiscountsAllunitsdiscountsfixedplusvariablevariable1plusvariable2fixed1plusvariable1andfixed2plusvariable226WhyQuantityDiscounts?

1.keepbigcustomers2.matchcompetition3.savecosts4.enablepricediscriminationLargerbuyersaremorepriceelastic/pricesensitiveLargerbuyersmayhavemoreoptionsAsecondorthirddress/cupofcoffee/haslessvalue5.blocknewcompetitiveentry27ProductLinePricingAlineofsubstitutes（forexamplecarmodels）ImagebuildingMarketexpansionSegmentationPricedefenseEntrypoint/modelAlineofcomplements（forexamplerestaurant+theater）Bundling/MergingdemandcurvesTie-ins28PriceDiscriminationCapturingthecustomersurplus:

Chargecustomersaccordingtohowmuchtheyvaluetheproduct.NeedtoknowthepriceacustomerisactuallywillingtopayNeedtoseparatecustomersaccordingtotheirwillingnesstopaymore/lessNeedtokeepyourhigh-payingcustomerscustomershappy29FencesBuyeridentificationPurchaselocationPurchasetimingPurchasequantityProductbundleTie-insProductdesign30PriceCommunication1.Percentagesornumbers?

2.Donttalkprice,talkvalue3.Pricecues4.Priceendings5.Saleanyone?

31PriceFramingThepowerofthreeStartfromthetopReferencepricesProspectTheory32BodyofKnowledgeFocusingonlosingfewercustomersisthequickestroadtogreaterprofitsThelessyoutalkprice,thehigherthepriceyouwillgetFinanceiswrongwhentheytelluspeopledonotlikeriskMoreinformationsellsmoreproductThecenterisbetter33BodyofKnowledgeIfyouwanttotemptcustomers,distractthemfirstIfyoucannotdistractthem,makethemsadSendmentowomenandsendwomentomenBeautifulwomenreducemensabilityto（dis）countGettinglittlefavorsgetsyoutogettingbigfavors34BlockbusterVideo1.AsMiketriestosurvive,competingwithBlockbuster,whatistherightpricingstrategyforMike?

2.WhatisthepriceMikeshouldaskMr.Atkinsforhisstore?

Identifyandcalculatedifferentpossibleprices35ChannelPricingandSub-OptimizationSub-optimization:

Asystemconsistofsub-systems.Whensub-systemsoptimizeperformance,systemperformanceisnotoptimized.Sub-optimizationisthecoreissueofchannelperformanceandchannelmanagement36Sub-OptimalPricing37CrocodileT-ShirtsManufacturingCost40RMBGrossProfit360RMBManufacturersSellingPrice400RMBDistributorsDirectCost10RMBDistributorsGrossProfit100RMBDistributorsSellingPrice510RMBRetailersDirectCost10RMBRetailersGrossProfit80RMBRetailersSellingPrice600RMBQuestionDemandforCrocodileshirtsisverypriceelastic.Priorexperienceshowsthata20%offsalecanincreasesalesby50%;a30%offsalecanincreasesalesby100%.Shouldthedistributoroffera100RMBpricediscounttoretailersinexchangefor50%moreshirtsordered?

SupposeCrocodileproducedtoomanyshirtsforwinter,andnowsummeriscoming.Crocodilelowersitspricetothedistributorsby200RMB.Whatwillthedistributorsdowiththepricetheychargetheretailers?

SupposeCrocodilelowersthepricetoretailersdirectlyby200RMBinordertogetridofitsinventory.Shouldtheretailerlowerthepriceby200RMBifdoingsowilldoublethesalesoftheshirt?

38WhatisyouradviceforBlockbuster?

“ThewholebusinesswasoperatingwrongTherewerentenoughtapesinthestoresYearafteryearthestudioskeptraisingthepriceoftapestocompanieslikeBlockbuster.Whenthepriceoftapesgotuptoabout$65each,werealizedwecouldntaffordtobuyenoughtapestosufficientlystocktheshelves.”SumnerRedstone,ChairmanofBlockbuster39PricingPolicies“Pricingpoliciesspecifythecircumstancesunderwhich,andtheamountsby