This is a copy of a presentation I gave to the Maroondah Business Association on Wednesday 4th September 2013

1. the shocking truth about
pricing

2. Today’s Webinar…
Todays Talk:
► Why pricing is getting
really scary?
► Why is pricing so
important?
► Ten Ways to Better Frame
Your Pricing

3. Number 10
Power to the Customer
The Marketer The Customer
Customers know more about marketers,
than marketers know about customers

4. Number 9
Comparisons are easy

5. Number 8
Scan & Scram

6. Number 7
Everyone’s going to know about this

7. Number 7
Premium Pricing…

8. Number 7
…or Commodity Pricing?

9. Number 6
Automatic Refunds

10. Number 5
Err at your peril

11. Number 4
Outsourced Pricing

12. Number 3
I’m not buying your time

13. Number 2
Just give me your quote!

14. Number 1
Beaten to a Pulp

15. pricing
why is it important?

16. You have a product with a 30% margin, and you are planning on reducing
prices by 5%. What sort of volume uplift is required to maintain existing
revenue?
You have a product with a 20% margin, and you are planning on increasing
prices by 8%. What sort of volume are you putting at risk?
 20% Volume Uplift 10% Volume Uplift 5% Volume Uplift
 8.2% of volumes  28.6% of volumes  38.7% of volumes
Quiz Time
Decreasing & Increasing Prices

17. Why is Pricing so Important?
Impact on Operating Profit of a 1% improvement in…
2.3%
3.3%
7.8%
11.1%
Fixed Costs Volume Variable
Costs
Price
2.6%
3.6%
8.7%
12.3%
Fixed Costs Volume Variable
Costs
Price

18. …Regardless of the Industry
Impact on Operating Profit of a 1% improvement in Price
22.0%
13.5%
12.7%
12.3%
11.4%
11.1%
10.4%
10.1%
9.8%
9.3%
8.6%
6.8%
6.1%
3.0%
1.8%
Automotive
Transportation
Metals & Mining
Chemicals
High Tech &
Electronics
Aurospace & Defense
Paper
Insurance
Healthcare
Oil & Gas
Communications
Consumer Products
Pharmaceuticals
Banking
Investment
Impact of a 1% Price Improvement on Operating Profit
For The Kroger Retail Food
Chain…
► If prices were increased 1%...?
For Coca Cola…
► If prices were reduced 1%...?
For Continental Airlines
► 44mill passengers x Average fare
of $193 = Loss
Slide 18

19. Slide 19
50.0%
40.0%
32.0%
28.0%
26.0%
18.0%
8.0%
2.0%
Packard Other Compaq HP IBM Gateway Dell Apple
Source: Docters, R et al (2004) Winning the Profit Game: Smarter Branding, Smarter Pricing, McGraw-Hill, p40
The Importance of Price
As the Primary Selection Criteria, by brand – PC Industry
How Important is Price?
In the Personal Computer Industry

20. The Wheel of Fortune
A Catalogue of Pricing Models, Strategies & Tactics
Misc Pricing
Models II
Misc Pricing
Models I
Digital
Pricing
Models
Digital
Advertising
Models
Legal &
Professional
Service
Software
Pricing
Models
Time-based
Pricing
Value-based
Models
Traditional
Pricing
Models
Pricing
Models,
Strategies &
Tactics
 User-based
 Usage-based
 Time-based
 Location-based
 Input -related
 Hybrids (Input / Output –related)
 Output -related
 1G: Sponsorship
 2G: Cost-per-Thousand
 3G; Cost-per-Click
 4G: Cost-per-Action
 Freemium
 Pay-What-You-Want
 Direct Cross Subsidy
 Indirect Cross Subsidy
 Paired Products
 Second-hand Products
 Unbundling
 Pay-As-You-Go
 Gimmicks
 Choices
 Price Experiments
 Buy Now / Upsell Later
 Buy Now / Compliment Now
 A Product is for Life…
 Free Today, not Tomorrow
 Start the Clock
 Cost-Plus Pricing
 Market / Competition Pricing
 Non-Linear / Two-Part Pricing
 Dynamic Pricing / Revenue or Yield Management
 Customer Value Analysis
 Economic Value Analysis
Auctions
 English
 Dutch
 Yankee
 Vickery
 Reverse

21. Words of Pricing Wisdom
“…if you have to have a
prayer session before
raising…prices…then
you’ve got a terrible
business”
“Price is what you
pay…value is what you get”
“The single most important
decision in evaluating a
business is pricing power”

22. But What is “Pricing Power”?
“The ability of
you to get the
price you
deserve for
the value you
provide”

23. 10 ways to better frame your
pricing

24. Number 10
Don’t over-complicate your Pricing

25. Slide 25
Number 9
Don’t Talk About Costs…

26. Slide 26
Number 8
…talk About Value Instead!
The Hallmarks of a good Value Proposition:
► What value does your product or service provide to
customers
► Quantify the Magnitude of the Value provided
► Illustrate that value is superior to the competition

27. Number 7
Know Your Competition & Customer
0
2
4
6
8
10
Adhesion
Appearance
Strength
Rheology
Durability
Resistance
Environmentally
Friendly
Low Odour
Us The Competition
 Understand the
Customer
 How important are
these value attributes
to them?
 Understand the
Competition
 Points of parity, points
of difference, points of
contention

28. Number 6
Link Prices to a Customer Value Metric

29. Number 5
Do you really want half price?

30. Number 4
What happened to Boxing Day?

31. Number 3
Sell Goods As Services

32. Number 2
Understand Behavioural Economics

33. Number 1
If You’re Negotiating with a Pitbull…

34. Any
Questions?

35. Jon Manning
Founder & Director, Sans-Prix.com
Founder & Managing Director, PricingProphets.com
PO Box 533, Ascot Vale, Vic 3032 Australia
foursquare.com/sansprix
youtube.com/user/PricingProphets
linkedin.com/company/Pricing-Prophets
jon@sans-prix.com
+61 (0) 405 629-141
@SansPrix | @PricingProphets facebook.com/PricingProphets
http://www.SansPrix.BlogSpot.com
SlideShare.net/SansPrix
Slide 35
Contact Information