Smart
Pricing
Farmer’s Harvest

Till

Plant

Weed

Harvest
Harvest Time!
Farmer’s Harvest
Till

Plant

Weed

Harvest

Business Cycle
Develop

Create

Market

Sell
The 4 Levers- 1% better
The 4 Levers- 1% better

2.45%
Increased Profits
The 4 Levers- 1% better

3.28%
Increased Profits
The 4 Levers- 1% better

6.52%
Increased Profits
The 4 Levers- 1% better

10.29%
Increased Profits
A 1% difference..
increased profit
12
10

8
6
4
2
0
Fixed Cost

Sales Quantity

Variable Costs

Price
The 3 Simple Pricing
Models

• Cost Plus
• Competition Based or
“Strategic” Pricing
• Consumer based pricing
Cost Plus
My Costs + 25%
‘Strategic’ Pricing
What is my competition
charging for a similar
item?
Consumer Pricing
“What can I gouge this sucker
Customer for?”
Which Model
are you
using?
Why the
traditional models
fail
Cost Plus
• No incentive for Efficiency gains
• Price Floor
• Leaving money on the table
Strategic
• Who’s saying that the competition is
pricing right?

• Moves your product to commodity
• Southwest vs Delta.
Consumer Based
• Negotiation skills reign
• Bad Blood

• Biased based
Pay as you wish
4 Price Points for “Fries with that?”
Razors & Video Games
Price Wars
What Did Walmart do to win
the retail game?
Think Small
98% of their skus sell
less than 20 copies per year
Think Small
1 Billion downloads
@ $0.33 each
= $330,000,000
Think Small
1 Billion downloads
@ $0.33 each
= $330,000,000
Subscription Model

Fresh Videos, on demand
Subscription Model

Fresh Fruits, every month
Snob Premium
Which sold (nearly 4x) better:
A Chinese silk scarf for $200-300
or
A French silk scarf for $2000-3000

Same ...
Snob Premium

WHY?!?
Pay if it works
Pay only if it works
model.
No results, no pay.
So what’s the right
way to price?
Smartpricing 121026085016-phpapp02
Smartpricing 121026085016-phpapp02
Smartpricing 121026085016-phpapp02
Smartpricing 121026085016-phpapp02
Smartpricing 121026085016-phpapp02
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Smartpricing 121026085016-phpapp02

  1. 1. Smart Pricing
  2. 2. Farmer’s Harvest Till Plant Weed Harvest
  3. 3. Harvest Time!
  4. 4. Farmer’s Harvest Till Plant Weed Harvest Business Cycle Develop Create Market Sell
  5. 5. The 4 Levers- 1% better
  6. 6. The 4 Levers- 1% better 2.45% Increased Profits
  7. 7. The 4 Levers- 1% better 3.28% Increased Profits
  8. 8. The 4 Levers- 1% better 6.52% Increased Profits
  9. 9. The 4 Levers- 1% better 10.29% Increased Profits
  10. 10. A 1% difference.. increased profit 12 10 8 6 4 2 0 Fixed Cost Sales Quantity Variable Costs Price
  11. 11. The 3 Simple Pricing Models • Cost Plus • Competition Based or “Strategic” Pricing • Consumer based pricing
  12. 12. Cost Plus My Costs + 25%
  13. 13. ‘Strategic’ Pricing What is my competition charging for a similar item?
  14. 14. Consumer Pricing “What can I gouge this sucker Customer for?”
  15. 15. Which Model are you using?
  16. 16. Why the traditional models fail
  17. 17. Cost Plus • No incentive for Efficiency gains • Price Floor • Leaving money on the table
  18. 18. Strategic • Who’s saying that the competition is pricing right? • Moves your product to commodity • Southwest vs Delta.
  19. 19. Consumer Based • Negotiation skills reign • Bad Blood • Biased based
  20. 20. Pay as you wish
  21. 21. 4 Price Points for “Fries with that?”
  22. 22. Razors & Video Games
  23. 23. Price Wars
  24. 24. What Did Walmart do to win the retail game?
  25. 25. Think Small 98% of their skus sell less than 20 copies per year
  26. 26. Think Small 1 Billion downloads @ $0.33 each = $330,000,000
  27. 27. Think Small 1 Billion downloads @ $0.33 each = $330,000,000
  28. 28. Subscription Model Fresh Videos, on demand
  29. 29. Subscription Model Fresh Fruits, every month
  30. 30. Snob Premium Which sold (nearly 4x) better: A Chinese silk scarf for $200-300 or A French silk scarf for $2000-3000 Same silk, similar designs, same manufacturer
  31. 31. Snob Premium WHY?!?
  32. 32. Pay if it works Pay only if it works model. No results, no pay.
  33. 33. So what’s the right way to price?
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