BayerChairProfessorWillemBurgers英.pptx

1、PricingBayer Chair ProfessorWillem Burgers1Course OutlineFoundations Case:Atlantic ComputerThinking Strategically Case:McCawEmbedded Pricing Case:SignodeTools,Tactics,and Tricks:Metrics,Fences,FramingCase:Blockbuster VideoChannels and PricingCase:Shanghai HonggongMathematics,Case:Jahwah Price Resear

2、chPrice War Case:Kodak Funtime2Importance of PricingMarketing and PricingWhere does pricing reside in an organization?“Pricing gets caught between the cracks.Everybody wants to be a part of it.Yet,nobody really owns it.Pricing is ad hoc.”G.Smith,Pricing Strategy and Practice3Price Level Price settin

3、gPricing PolicyNegotiation Tactics and Pricing Setting ProceduresPrice&Value CommunicationCommunication,Value Selling ToolsPrice StructureMetrics,Fences,TimingValue CreationEconomic Value,Offering Design,SegmentationThe Strategic Pricing Pyramid4What is the Right Price?1.Value to Customer2.Competiti

4、on3.Our Cost4.Strategic Objectives$51.Customer Value/Willingness to PaySubstitutes/Uniqueness?Switching costs?Easy to compare price?Easy to compare quality?Price/Quality relationship?Significant expenditure?Important end-benefit?Ingredient?Does the buyer pay?Fairness?Inventory?6Value?One Barrel of C

5、oca ColaMilkEvian WaterOrange JuiceLemon OilScope MouthwashJack DanielVisine Eye Drops$78.83$126.00$189.90$251.16$390.88$826.65$4,133.26$32,202.2472.Competition How many sellers?Monopoly OligopolyHow many buyers?Monopsony-OligopsonyHow differentiated is the product?Monopolistic competition83.Escape

6、the Cost Plus DelusionCost Based Pricingproduct cost price value customers?Value Based Pricingcustomers value price cost product?The role of cost in pricingrelevant costs,incremental costs,avoidable costs,opportunity costs:Our goal is to maximize gross profit94.Strategic ObjectivesGrowth?Profit?Surv

7、ival?StabilityCost?10Pricing Strategy AlternativesCompetition-based Cost-plusValue-in-use Custom basedAuction/Liquidation Strategic Objectives/Constraints11Business as a GameBut there are many gamesRule based games(e.g.,employment contract)follow the principle that for every action there is a reacti

8、on and to play well you must look ahead and reason backwardFreewheeling games(e.g.,contract negotiation)follow the principle that you can not take away more from the game than you bring to it and to play well you must maximize this value12 The Players in the Game CustomersCompetitors CompanyCompleme

9、ntors SuppliersParts of the Game1.Players Who is playing?Can you add players?Do you have to play?2.Added ValuesWhat amount of value disappears when you leave the game?How can you increase valueParts of the Game3.RulesCan we change the rules of the game?4.TacticsCan we change perceptions of the game,

10、using threats or promises?5.ScopeCan we go play the game somewhere else?Changing the Pricing Game Conventional PricingStruggle among competing functions:marketing,sales,finance.Reactive to market conditions and customer pressure Subsequent to product-market decisionsStrategic Pricing Changes incenti

11、ves to create support across functions Pro-active,policy driven Early in the product development process 16Tactical Questions Commonly AskedStrategic Questions That Should be AskedWhat price do we need to cover our cost and profit objectives?What sales changes would be necessary or tolerable for us

12、to profit from a price changes?Can we deploy a marketing strategy that will keep those sales changes within acceptable ranges?What costs can we afford to incur,given the prices we can achieve in the marketplace,and still earn a profit?What price is the customer willing to pay?Is our price justifiabl

13、e given the objective value of our product or service to the customer?How can we better communicate that value,thus justifying the price?What is the right price structure for the customer/for different customers?What prices do we need to meet our sales and market share objectives?What level of sales

14、 or market share can we most profitably achieve?What marketing tools should we use to win market share most cost-effectively?Asking the Right Questions:17An unprofitable price?-Pricing error-Value communication defect-Market share delusions-Market segment error-Product/service overbuilt-Customer pow

15、er-Commoditization18Market Change Dynamics Leading to CommoditizationEntry of new competitors in market or segmentImitation among competitorsBuyers develop capacity and confidence to measure functions and quality of products,services,and vendorsExperience and competition among suppliers reduces buye

16、rs sense of risk19The Specialty-Commodity ContinuumPriceHighLowLowHighService AdditionsSpecialtyCommoditytimeNicheExperience curveValue added strategyPrice compression/innovationBreaking the Commodity CycleFour possible strategies,Value added strategy:Moving along the diagonal to increase price and

17、servicePrice compression/innovation:Moving along the diagonal reducing prices and services Market focus:Staying up along the arc focusing on the clients only who would pay an additional priceExperience curve:Moving down along the arc ahead of anyone else21Embedding the Strategy-Distributors/Salespeo

18、ple incentives and expectations,skills,knowledge,tools.-Customer incentives and expectations22Signode1.What price strategies can you recommend to Signode?2.What suggestions do you have for compensation for the sales force?3.The sales force offers to increase sales by 5-10%if we allow additional pric

19、e flexibility.Assume the price flexibility will reduce prices by 4%on average,should you accept the offer?Show with calculation why you should accept the offer or not.4.Do you see any error in Signodes present allocation of its marketing resources to different segments?What error do you see?What mig

20、ht be the explanation?5.Any brand strategy suggestions for Signode?23MetricsWhat is a metric?What is a bad metric?What is the cost of using the wrong metric?Good metrics24Good Metrics1.Are some of your customers substantially more expensive to serve?2.Can you attract additional customers at a lower

21、price?3.Can you link your price to cost to serve to drive expensive customers to your competitors while attracting non-costly customers to you?4.Can you enforce your metric?5.Does your metric fit channel selling habits,customer buying habits,and sense of fairness?25Quantity DiscountsTypology:No disc

22、ountsAll units discountsfixed plus variablevariable 1 plus variable 2fixed 1 plus variable 1 and fixed 2 plus variable 226Why Quantity Discounts?1.keep big customers 2.match competition3.save costs 4.enable price discriminationLarger buyers are more price elastic/price sensitiveLarger buyers may hav

23、e more optionsA second or third dress/cup of coffee/has less value5.block new competitive entry 27Product Line Pricing A line of substitutes(for example car models)Image building Market expansion SegmentationPrice defenseEntry point/modelA line of complements(for example restaurant+theater)Bundling/

24、Merging demand curves Tie-ins28Price DiscriminationCapturing the customer surplus:Charge customers according to how much they value the product.Need to know the price a customer is actually willing to pay Need to separate customers according to their willingness to pay more/lessNeed to keep your hig

25、h-paying customers customers happy29FencesBuyer identification Purchase locationPurchase timing Purchase quantityProduct bundle Tie-insProduct design30Price Communication1.Percentages or numbers?2.Dont talk price,talk value3.Price cues 4.Price endings5.Sale anyone?31Price FramingThe power of three S

26、tart from the topReference prices Prospect Theory32Body of KnowledgeFocusing on losing fewer customers is the quickest road to greater profitsThe less you talk price,the higher the price you will getFinance is wrong when they tell us people do not like riskMore information sells more productThe cent

27、er is better33Body of KnowledgeIf you want to tempt customers,distract them firstIf you can not distract them,make them sadSend men to women and send women to menBeautiful women reduce mens ability to(dis)countGetting little favors gets you to getting big favors34Blockbuster Video 1.As Mike tries to

28、 survive,competing with Blockbuster,what is the right pricing strategy for Mike?2.What is the price Mike should ask Mr.Atkins for his store?Identify and calculate different possible prices35Channel Pricing and Sub-OptimizationSub-optimization:A system consist of sub-systems.When sub-systems optimize

29、 performance,system performance is not optimized.Sub-optimization is the core issue of channel performance and channel management 36Sub-Optimal Pricing37 Crocodile T-Shirts Manufacturing Cost 40 RMB Gross Profit 360 RMB Manufacturers Selling Price 400 RMB Distributors Direct Cost 10 RMB Distributors

30、 Gross Profit 100 RMB Distributors Selling Price 510 RMB Retailers Direct Cost 10 RMB Retailers Gross Profit 80 RMB Retailers Selling Price 600 RMB QuestionDemand for Crocodile shirts is very price elastic.Prior experience shows that a 20%off sale can increase sales by 50%;a 30%off sale can increase

31、 sales by 100%.Should the distributor offer a 100 RMB price discount to retailers in exchange for 50%more shirts ordered?Suppose Crocodile produced too many shirts for winter,and now summer is coming.Crocodile lowers its price to the distributors by 200 RMB.What will the distributors do with the pri

32、ce they charge the retailers?Suppose Crocodile lowers the price to retailers directly by 200 RMB in order to get rid of its inventory.Should the retailer lower the price by 200 RMB if doing so will double the sales of the shirt?38What is your advice for Blockbuster?“The whole business was operating

33、wrong There werent enough tapes in the storesYear after year the studios kept raising the price of tapes to companies like Blockbuster.When the price of tapes got up to about$65 each,we realized we couldnt afford to buy enough tapes to sufficiently stock the shelves.”Sumner Redstone,Chairman of Blockbuster 39Pricing Policies“Pricing policies specify the circumstances under which,and the amounts by