Effective Pricing

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Effective price management for profit.

Effective price management for profit.

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