The art of pricing by Rafi MohammedPresentation Transcript
Written By Rafi Mohammed.
It teaches us how to find hidden profits to grow your
It lays emphasis on following the approach of multi
About the author
A graduate of Boston university, the London school of
Economics and Cornell University.
Director of Simon-Kucher & Partner.
Also authored books like 1% windfall and Online
Three Keys to better Pricing
Profitability Empower your
make you more
when to cut
Make it possible
for your best
provide you with
• Quicker responsiveness perhaps or services customized
just the way you want them rather than being limited to
generic service bundles.
• It can be done by providing insurance, an extended
warranty or a technician who can come to your office and
fix any problem which arise.
• Which makes it easier to buy by providing an extended
period to pay.
For every product in the world, customers will have
different valuations. If you set just one offer, you are
failing to take advantage of this fact.
Ford Motor Company’s Case
Lloyd Hansen analyzed Ford’s pricing practices and
found if he could generate an additional 1% of net
profit margin, this would have the effect of boosting
net income by 33%
its cash flow by incredible 45%
Its market valuation by 45%
Strategies adopted by Lloyed
• By sharing with them information about which models were
most profitable and providing incentives on sale of those
• By providing discounts on high margin models.
• By linking special promotions to customers who would finance their
vehicle purchases through Ford credit.
• So more sales were made to higher margin commercial and Government
fleets while corresponding lower sales were made to the low-margin daily
rental car companies.
Decoding the true value of your
product or service
Factors determining value a product in customer’s
Substitutes Competitors Income Demand Environment
Use customer characteristics.
Use delivery time differences.
Offer Quality discounts.
Charge differently based on where customers are
Use mixed building.
It means having a line of products offered at different
prices to different customers.
Versioning works well because:
1) It allows you to capitalize on different valuations your
2) Adding attributes to your basic product can attract
entirely new customers and open up new market.
3) Versioning is cost effective.
The final step in pricing is to make your pricing practices
sparkle by tapping into the ways people think.
Use the nine and zero effect
Use a payment plan to enhance satisfaction
Set your prices high for prestigious products
Anchor your products appropriately
Prices to suggest a good quantity to purchase
Pose your pricing offer as a series of small investments
rather than one sizable transaction