Effective Pricing

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Effective price management for profit.

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Effective Pricing

  1. 1. Pricing For Profit<br />Rags Srinivasan<br />Iterative Path<br />
  2. 2. Three Components Of Effective Price Management<br />2. Incremental Analysis<br />1. Value-add to Segments<br />Profit<br />3. Customer Margin<br />Effective price management is about pricing for profit not market share<br />Rags Srinivasan © 2009<br />
  3. 3. Value-add To Segment means avoiding cost-based pricing<br />Value-add to Segments<br /><ul><li>Value-based pricing – Understand your costs are irrelevant to your customers, customers pay for value
  4. 4. Segmentation and Versioning – Value to different customers is different
  5. 5. Reference Price – Price customers are willing to pay is influenced by their reference price
  6. 6. Price Realization – Reduce price leakages and increase pocket price</li></ul>Profit<br />Rags Srinivasan © 2009<br />
  7. 7. Decisions are made at the margin<br />Incremental Analysis<br /><ul><li>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?
  8. 8. Relevant Costs –Before you make a new investment understand the incremental profit just from that – not the aggregate. </li></ul>Profit<br />Rags Srinivasan © 2009<br />
  9. 9. Focus on the total profit from the Customer<br />Customer Margin<br /><ul><li>Cost to serve customers –is there alignment between cost to serve and revenue from a customer? Does each customer add to your profit?
  10. 10. Maximize total Profit per customer – Can you include complements that help maximize total profit per customer?</li></ul>Profit<br />Rags Srinivasan © 2009<br />

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