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Online pricing optimisation in the travel & electronics industries
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Online pricing optimisation in the travel & electronics industries


Optimal pricing strategies balance supply and demand perfectly. However in the fast-moving online world it is difficult to sustain price competitiveness - especially in the hyper-competitive travel …

Optimal pricing strategies balance supply and demand perfectly. However in the fast-moving online world it is difficult to sustain price competitiveness - especially in the hyper-competitive travel and electronics industries. This presentation brings together pricing theory with established best practice to draw some conclusions. We also outline how software vendor Lixto tackles pricing optimisation on behalf of its clients in these industries.

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  • 1. Welcome to:‘Price Optimisation Technologies’ A webinar sponsored by …optimise your IT investments 1
  • 2. 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 …optimise your IT investments 2
  • 3. Agenda1. The new importance of optimised pricing2. Industry dynamics3. Pricing considerations4. Pricing optimisation …optimise your IT investments 3
  • 4. Pricing: now the most important marketing variable Falling: GNP Stock markets House prices Credit availability Currency exchange rates Employment= we all have less money to spend on luxuries like travel and electronics …optimise your IT investments 4
  • 5. Price discipline erosion by challengers and followers Pioneers Leaders Nichers Challengers Followers Customer Perceived ValueHigh LowPrice High Low Price Average Price …optimise your IT investments 5
  • 6. What to do? McKinsey on pricing in the downturn1. Watch for sudden shifts in price structure2. Monitor customer-level profitability3. Adjust to changing customer needs4. Update price sensitivity research5. Monitor your industry‟s microeconomics6. Study your suppliers …optimise your IT investments 6
  • 7. 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 …optimise your IT investments 7
  • 8. 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 …optimise your IT investments 8
  • 9. 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 …optimise your IT investments 9
  • 10. 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 …optimise your IT investments 10
  • 11. Consumer Online Behaviour VariesOnline Travel: Vs Online Electronics:• An intangible service • A physical product• An impulse purchase for • A researched capital a planned event investment• Needs source credibility • Needs physical evidence• Online search for best • Online comparison offers creates shortlist• Online booking • Check retail outlet availability …optimise your IT investments 11
  • 12. Pricing is key to success Online 2 (1 = Low; 5 = High) Barriers (Low) to entrySupplier Consumer 1 5 5bargaining bargaining (Low) (High) (High)power power Competitive Price Intensity = Competition Availability of 5 substitutes (High) …optimise your IT investments 12
  • 13. Economic pricing Price ($) SupplyPremium price Dependencies:Optimal price • Market maturity • CommoditisationEconomy price • Oligopolies / Brands • Elasticity / sensitivity Demand Volume (Units) …optimise your IT investments 13
  • 14. The internal circular argument Cost Volume “Yes, but . . . “ Price Demand …optimise your IT investments 14
  • 15. ‘Good’ pricing is not easy . . .• The maximum a customer is prepared to pay / perceived value / price points• Pricing for pioneers, leaders, challengers, nichers• Low cost operators, price makers and price takers• Pricing for segments / products / place / timing• Product line pricing, utilisation and yield• Penetration / loss leader pricing vs skimming• Competitive parity• Cost-plus (margin) or mark-up pricing …optimise your IT investments 15
  • 16. Customer Perceptions On Price / Quality Relative Quality Low High High Poor Value Premium SegmentRelativePrice ($) Economy Good Value Low Segment …optimise your IT investments 16
  • 17. 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 …optimise your IT investments 17
  • 18. How Lixto works …optimise your IT investments 18
  • 19. What do you get?1. Pricing dashboards and visualisations2. Tailored for your business rules and workflow3. Pre-built reporting, ad-hoc analysis and alerts …optimise your IT investments 19
  • 20. 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 …optimise your IT investments 20
  • 21. Thank you! Gerry BrownSenior Analyst, BI & CRM / Digital Marketing Bloor Research gerry.brown@bloorresearch.com …optimise your IT investments 21