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What is a pricing strategy and why do you need one?
- 1. What Is A Pricing Strategy and Why Do You Need One? Date:17th June 2010 Facilitator: Sammy Rose MBA, MCIM Chartered Marketer Mentor: Richard Mooney DipM, Chartered Marketer, FCIM 1
- 2. ROUND UP:- •Product Proposition – What About This Makes Us Different? •Target Audience – Know Who This Is And Address Them Instead Of Everyone In General •Competitors – How They Affect Our Product Proposition And Sales & Marketing Approaches 2
- 3. FACTORS AFFECTING PRICE? 3
- 4. FACTORS AFFECTING PRICE Legal Costs Objectives Constraints Consumer PRICE Company’s Attitudes Market Profile ? Potential Differentials Competitors Competitors 4
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- 8. Quick Break Even Chart Sales £ Profit Break even Costs SALES/COSTS Loss VOLUME Quick Break Even Calculation: Fixed Costs G.P% Where G.P% = Gross Profit Sales 8
- 9. RELATIONSHIP BETWEEN PRICE DISCOUNTING & SALES INCREASING Existing % Gross Margin % Price Reduction 5 10 15 20 25 30 35 40 50 % Volume increase required for same gross margin 2.0 67 25 15 11 9 7 6 5 4 3.0 150 43 25 18 14 11 9 8 6 4.0 400 67 36 25 19 15 13 11 9 5.0 100 50 33 25 20 17 14 11 7.5 300 100 60 43 33 27 23 18 10.0 200 100 67 50 40 33 25 15.0 300 150 100 75 60 43 Copyright Durham University Business School 9
- 10. RELATIONSHIP BETWEEN PRICE INCREASES & SALES DECREASES Existing % Gross Margin % Price Increase 5 10 15 20 25 30 35 40 50 % Volume decrease to generate same gross margin 2.0 29 17 12 9 7 6 5 5 4 3.0 37 23 17 13 11 9 8 7 6 4.0 44 29 21 17 14 12 10 9 7 5.0 50 33 25 20 17 14 12 11 9 7.5 60 43 33 27 23 20 18 16 13 10.0 67 50 40 33 29 25 22 20 17 15.0 75 60 50 43 37 33 30 27 23 Copyright Durham University Business School 10
- 11. ARE WE MAKING A PROFIT? 11
- 12. BRAND MAPPING High Price Premium Strategy Rip off & false economy strategy High Value Strategy Average Strategy Low High Quality Quality Good Value Strategy Superb Value Strategy Economy Strategy Low Price 12
- 13. V 13
- 14. Relationship Between Market Position, Price & Sales Sales Economy Average Premium 14
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- 16. Routes To Market 16
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- 19. BRAND MAPPING High Price Premium Strategy Rip off & false economy strategy High Value Strategy Average Strategy Low High Quality Quality Good Value Strategy Economy Strategy Superb Value Strategy Low Price 12
- 20. Pricing For Volume PRICING VOLUME 20
- 21. ROUND UP:- •Price For Profit •Bundle Instead Of Discount •Play on Customer's Vanity •Remember Your Branding Proposition •Consider Your Stance on Margin v Volume •Keeping Playing Chess •Consider Your Distribution Channels •Use Incremental Prices To Help Negotiate Best Deals 21