The art of pricing by Rafi Mohammed


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The art of pricing by Rafi Mohammed

  1. 1. Submitted by: Ankush Goyal Anshu Goyal
  2. 2. Introduction Written By Rafi Mohammed. It teaches us how to find hidden profits to grow your business. It lays emphasis on following the approach of multi pricing.
  3. 3. 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 Marketing.
  4. 4. Three Keys to better Pricing Profitability Value’s role Different Perspectives
  5. 5. Profitability Empower your employees to make you more money. Provide consistent guidelines on when to cut prices. Create confidence in your product. Make it possible for your best customers to provide you with additional profits.
  6. 6. Value’s Role Offer enhanced Service • Quicker responsiveness perhaps or services customized just the way you want them rather than being limited to generic service bundles. Provide peace of mind • 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. Arrange Financing • Which makes it easier to buy by providing an extended period to pay.
  7. 7. Different Perspectives 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.
  8. 8. 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 ford’s net income by 33% its cash flow by incredible 45% Its market valuation by 45%
  9. 9. Strategies adopted by Lloyed Hasen Empower the sales force. • By sharing with them information about which models were most profitable and providing incentives on sale of those models. Use promotional discounts. • By providing discounts on high margin models. Cross-sell financing • By linking special promotions to customers who would finance their vehicle purchases through Ford credit. Restructure fleet sales mixes • 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.
  10. 10. Decoding the true value of your product or service Factors determining value a product in customer’s mind: Substitutes Competitors Income Demand Environment
  11. 11. Pricing Strategies Differential Pricing Versioning Segment- based Market Conditions
  12. 12. Differential Pricing Use customer characteristics. Use delivery time differences. Offer Quality discounts. Charge differently based on where customers are making purchase. Use mixed building. Negotiation.
  13. 13. Versioning 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 customers have. 2) Adding attributes to your basic product can attract entirely new customers and open up new market. 3) Versioning is cost effective.
  14. 14. Segment-based Interval ownership Bundling Leasing Prepaid Rental
  15. 15. Continued… Two-part pricing Hurdles Payment plans Customizing pricing All-you-can-eat pricing
  16. 16. Psychological Strategy 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