Pricing For ProfitRags SrinivasanIterative Path

Three Components Of Effective Price Management2. Incremental Analysis1. Value-add to SegmentsProfit3. Customer MarginEffective price management is about pricing for profit not market shareRags Srinivasan © 2009

Value-add To Segment means avoiding cost-based pricingValue-add to SegmentsValue-based pricing – Understand your costs are irrelevant to your customers, customers pay for valueSegmentation and Versioning – Value to different customers is differentReference Price – Price customers are willing to pay is influenced by their reference pricePrice Realization – Reduce price leakages and increase pocket priceProfitRags Srinivasan © 2009

Value-based pricing – Understand your costs are irrelevant to your customers, customers pay for value

Segmentation and Versioning – Value to different customers is different

Reference Price – Price customers are willing to pay is influenced by their reference price

Price Realization – Reduce price leakages and increase pocket price

Decisions are made at the marginIncremental AnalysisPrice Elasticity –Understand how your volume will change with price. Do you know by how much the sales will increase with a 10% price cut?Relevant Costs –Before you make a new investment understand the incremental profit just from that – not the aggregate. ProfitRags Srinivasan © 2009

Price Elasticity –Understand how your volume will change with price. Do you know by how much the sales will increase with a 10% price cut?

Relevant Costs –Before you make a new investment understand the incremental profit just from that – not the aggregate.

Focus on the total profit from the CustomerCustomer MarginCost to serve customers –is there alignment between cost to serve and revenue from a customer? Does each customer add to your profit?Maximize total Profit per customer – Can you include complements that help maximize total profit per customer?ProfitRags Srinivasan © 2009

Cost to serve customers –is there alignment between cost to serve and revenue from a customer? Does each customer add to your profit?

Maximize total Profit per customer – Can you include complements that help maximize total profit per customer?