The document presents an overview of value pricing by Global Partners Inc., emphasizing its importance for businesses to accurately price their products based on customer perceived value. It outlines various pricing approaches, their strengths and weaknesses, and provides a framework for optimizing pricing strategies through customer insights and segmentation. Additionally, the document highlights the need for companies to improve their pricing power and research to enhance profitability.

1. Value Pricing:
Getting the Price you Deserve
Presented by Global Partners Inc.
Cambridge MA USA
April 17th 2012

2. Welcome!
Global Partners Inc. is an international consulting, training and management
development firm.
We help Global 1000 companies to build their sales, marketing and customer
management capabilities in order to grow their businesses worldwide.
David Sanderson
Dave is a Principal at Global Partners, who focuses in areas at the intersection of
technology, consumer products, and healthcare. Dave has international
management experience with Global consumer product leaders, technology
leaders, and healthcare leaders.
Jay Gronlund
Jay is a Principal at Global Partners, who focuses on re-positioning
companies/brands, ideation sessions and business development in emerging
markets abroad. Jay has also been teaching a course on “Positioning and Brand
Development” at NYU since 1999.

3. Value Pricing Overview
What is it?
What
approaches are Value Why important?
there?
Pricing
How do you Why customer
optimize it? perceptions?

4. What approaches are there?
Cost-based pricing Competition-based pricing Customer value-based pricing
• Definition: Cost • Definition: Competition-
based-pricing based pricing approaches • Definition: Customer value-based
approaches use anticipated or pricing approaches use the value a
determine prices observed price levels of product or service delivers to a
primarily with data competitors as primary
predefined segment of customers as
from cost accounting source for setting prices
• Examples: Cost- • Examples: Parallel the main factor for setting prices
plus pricing, mark-up pricing, umbrella • Examples: Perceived value
pricing, target-return pricing, penetration/skim pricing, performance pricing
pricing pricing, pricing according
• Main strength: Does take customer
• Main strength: Data to average market prices
readily available • Main strength: Data perspective into account
• Main weaknesses: readily available • Main weaknesses:
• Does not take • Main Weakness: Does • Data are difficult to obtain and
competition not take customers (and
to interpret
into account customer willingness to
• Does not take pay) into account • Customer value-driven pricing
customers • Overall evaluation: Sub- approach may lead to relatively
(and optimal approach for high prices – need to take
customer setting prices;
long-term profitability into
willingness to appropriate for
pay) into commodities (if – and account
account only if – • Customer value is not a
• Overall evaluation: products/services in given, but needs to be
Overall weakest question cannot be
communicated
approach differentiated)
• Overall evaluation: Overall best
approach, direct link to customer
needs
PAGE 42 JOURNAL OF BUSINESS STRATEGY VOL. 29 NO. 4 2008

5. Determine your company's
optimal “Price Value”

6. Simon * Kucher Study
The better pricing know-how, thenot theya
46% of companies still think what able
65% of the only get half are higherin
Companies companies of they're the
pricing power,(theythey the profits
toprice warthey higher deserve
charge the didn't start)
expect when whattry to raise prices
Pricing power untapped
Inflation threat under-estimated
Four key measures
Price wars continue
Inflation
Pricing
Price wars threat Four key
power
continue under- measures
untapped
estimated
Source: 'Global Pricing Study 2011: "Weak pricing cuts profits by 25%"'. Simon – Kucher. August 2011.

7. Reputable Companies that Recognize
Importance of Value Pricing
Source: Team Top+ Customer Focus

8. Greatest Impact on the P&L and Profit
Improvement
1% Improvement of… Causes profits to increase by…
Price 10.4%
COGS 9.2%
Volume 1.7%
SG&A 0.3%
Baseline data (yearly basis): # of units sold / yr = 1k, unit price = 0’25, Variable cost / unit = 0’21, Fixed cost = 10’, SG&A = 6’
COGS = Cost of Goods sold
Source: SMC 2010

9. What is Value Pricing and Why
Important
Benefit
Value =
Price
Perceived Value Actual Value

10. Value Pricing
The true Test of Marketing…
The true test of a successful marketing strategy is its ability to create value profitably.
As one marketing expert aptly stated: For marketing strategists, pricing is the moment of
truth - all of marketing comes to focus in the pricing decision.
(acc. to Nagle/Hogan 2006)

11. Shaping Customer Value Perception
0,4 0,3 6,6
0,2 0,2
5,5 1,1
Competitors Higher quality ISO More flexible Less technical Own market
price raw materials certification financing support price
 Product quality  Financing options  Value of used material
 Product features  Service network  Customization options
 Duration of guarantee  Brand  Marketing support
 Certification  Packaging  …
Source: Arthur D. Little, Active Pricing

12. The Strategic Pyramid for Value Pricing
Optimal
Price
Level
Negotiating tactics for
multiple different price levels
layers
Value Communications – marketing
of & selling to maximize customer value
Pricing Strategy & Tactics – structured for key
pricing Pricing Strategy & Tactics – structured for key objectives,
objectives, customer
customer segments, benefit/solution, competitive
segments, benefit/solution, competitive
advantage, situation, product life
advantage, situation, product life
Value Assessment: Customer segmentation, needs, perceptions of
Value Assessment: Customer segmentation, needs, perceptions of benefit
/solution, insights, options
benefit/solution, insights, options

13. Steps for a value-based Approach to
Value Pricing
Define and study the key customer segments + needs/perceptions and new
Step 1 insights for each
Isolate and assess the most significant drivers of value for customers’ business
Step 2 and purchase decisions
Quantify the impact of your product/service solution for each value driver in
customers’ business
Step 3
Estimate the value and incremental benefit/impact created by your
product/service, particularly for those features that are different from
Step 4 competitors’ offerings
Develop new benefit/offer and value pricing strategy
Step 5
Source: Hutt/Speh - Business Marketing Management

14. 1. Value Assessment: Key Factors that
Determine the “optimal” Price
NEW FOCUS: Customer User Segments –
Ascertaining competitive value what they need, value, etc. – what
Customer User Segments
Cost calculation
Cost calculation perceptions & prices
Ascertaining competitive value they need, value, etc.
perceptions & prices
Determination of perceived Identification of the buyers‘the buyers‘
Determination of perceived Identification of attitudes,
Determination ofmark-up benefit/value, price surcharges
benefit/value, price surcharges usage, decision drivers, insights on values
Determination of a a mark-up and discounts based on
and discounts based on
attitudes, usage, decision drivers,
competitive advantages
competitive advantages insights on values
Competition-oriented
Cost-oriented price suggestion
Competition-oriented
price suggestion Distinct Value Value Offer
Distinct Offer
Cost-oriented price suggestion price suggestion price suggestion
price suggestion
Greater Customer Focus – Key for The “optimal price”

15. Creating Satisfied Customers
The purpose of a business is not to make money;
it is to create a customer and satisfy that customer.
- Peter Drucker

16. Identifying and assessing customer
needs and value drivers
Conjoint analysis KANO analysis
Delight
Delighters
Customer Satisfaction
More Is Better
Neutral
Must Be there
A “basic” need
Dissatisfaction
Expert Interviews
Absent Fulfilled
Presence of the Characteristic

17. Quantifying Impact – B2B Example

18. Value Pricing Objectives - Examples
• Maximize Current Revenue
• Maximize Current Profit
• Build Market Share
• Combined – Revenue + Market Share
• Strengthen Customer Relationships
• Maximize Initial Trial (e.g. new
product/service)
• Defend against New Competition

19. Factors to Consider for Value Pricing
Strategy
• Product Quality – Perceived and Real
• Market/Customer Characteristics and Key Value
Drivers
• Competition
• Demand Elasticity in Target Categories
• Product Life Cycle
• Cost – Manufacturing and Marketing/Selling
• Positioning – To Be More Distinct and Relevant

20. Example: Opportunity to Position
Product/Service with a Premium Price
Advantage Premium
High strategy strategy
Quality
Me Too!
Medium strategy
Low-price Economy
Low leader strategy
Low Medium High
Price

21. Pricing Strategies in the Product Life
Cycle
Source: Deloitte Consulting

22. Pricing Strategies in the Product Life Cycle
Example: GPS Pricing
Source: Market Reporter, www.pricegrabber.com

23. Apple vs. Dell
Value Pricing at Premium Levels

24. GPI Recommended Approaches
To Improve Your Value Pricing*
• Advanced, Deeper Customer Research – to identify new insights, beyond
traditional methods (e.g. using new digital applications)
• New creative, innovative ideas – use ideation to develop better, more
distinct benefits/solutions that will enhance perceived value
• Strengthen Customer Relationships – improve brand image of company
and product/service, plus new customized services to leverage insights
• Credibility , Prove Your Value with Metrics – Marketing to quantify
positive impact (ROI) of solution and added value for customers
* Approaches consistent with “most important areas for improvement” from
recent IBM survey among CMOs , highlighted in new e-book from GPI

25. Are You Ready to Explore New Value
Pricing Opportunities?
Summary Webinar
>Majority of companies do not charge the prices they deserve
>Value pricing Analysis effective way to improve profitability of products
> Value Assessment is key to determine customer segments and needs
> Establish Objectives and Strategies for defined markets
> Communicate values to sales team and customer to achieve optimal price
Start by Asking:
• Do we understand the Benefit/Value offered to our customers?
• Do our customers recognize and understand this value? Different by
segment? In priority?
• Are we really getting the true value we deserve?

26. Thanks for attending
Global Partners Inc. is an international consulting, training and management
development firm.
We help Global 1000 companies to build their sales, marketing and customer
management capabilities in order to grow their businesses worldwide.
Our highly customized programs in Value Selling, Global Account
Management, Customer Focus and Strategic Marketing are designed to achieve
maximum impact on clients’ revenue and market share growth and to create lasting
change and tangible benefits.
One Broadway - Cambridge, MA 02142
Office: 1 (781) 352 2460
Fax: 1 (617) 401 3604
info@globalpartnersinc.com
www.globalpartnersinc.com