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Andreas Hinterhuber and Stephan Liozu write that pricing scholars lean toward recommending customer value-based pricing. They provide a mini case study of how to use this method to make sure that you don’t leave money on the table.
Companies differ in their approaches to price setting, but most fall into one of three buckets: cost-based, competition-based or customer value-based. Customer value-based pricing uses data on the perceived customer value of the product as the main factor to determine prices.
However, implementing customer value-based pricing is not easy. Developing a customer value-based pricing program is a multiyear project demanding executive attention and requiring substantial changes in corporate processes.
How will you make a profit when customers know everything about your costs? The answer could be about putting a dollar value to access and charging admission to your store.
Should you price a consumer product at a price that ends in 99 cents — or price it at a round dollar amount?
When should a company “nickel-and-dime” customers by charging separately for various extras, and when is it better to combine all of the charges into one total price? It depends on a variety of factors, such as whether customers comparison shop, whether they are more sensitive to the prices of some components (delivery) than to others, whether the price of one component is small or large relative to the others, and whether the company controls the costs and quality of a particular component.
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There are several questions an organization should ask to improve its pricing strategy, including: What is the marketing strategy in this segment? What is the differential value that is transparent to target customers? What is the price of the next best alternative offering? What is the customer’s expectation of a “fair” price?
By asking these questions and others, an organization can choose a price point that provides the largest long-term value to the supplier.
Recent research suggests that consumers’ state of mind affects their openness to new products affiliated with existing brands.
Marketers cannot avoid discounted sales, and consumers have come to expect them. The average shopping mall, grocery store or online shop is littered with discounted products: Tide detergent is 10% off; books are sold with free shipping; Nike sneakers are buy-one, get-one-free.
More and more companies are now able to change their prices in real time to capture the full possible value of goods and services. Here’s how to do dynamic pricing right.
Do big discount strategies really prompt new customers to buy more items, more often? Or does promotional pricing actually undermine attempts to increase future spending among existing customers? A recent large-scale study of a U.S. catalog retailer investigated how discount promotion strategies ultimately affect the bottom-line business.
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The past decade has seen a virtual explosion of information about customers and their preferences. Many companies have the ability to gauge customers’ willingness to pay for their products and can determine with some accuracy the effect of price changes on sales volumes.
Companies should spend less time trying to fool customers with hidden charges and devote more effort to competing on differences that really matter, say the authors. Imaginative managers may want to consider how a move toward honest pricing in their industry — such as unit pricing at supermarkets and the U.S. government”s Energy Star program — could help sell more and better products to a loyal customer base.
Evidence suggests that innovative products boost a company’s long-term financial performance and stock-market value, whereas promotions may negate gains.
Everyday low prices vie with aggressive promotional pricing in an increasingly competitive retail environment.
Dramatic sales growth is spurred, not by drops in price, but by the collective effects of increased competition.
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The ability to set the right price at the right time, any time — the very definition of a pricing capability — is becoming increasingly important. Based on their work with dozens of companies, the authors explain how investments in human capital, systems capital and social capital come together to form a pricing capability that competitors will have a hard time imitating.
The authors examine the theoretical and practical problems associated with trade promotions, and they explain how the right kind of deal can be created — a transparent system that generates mutual trust and provides benefits to both manufacturers and retailers. The key is proper implementation of what is thus far a little understood tool: the pay-for-performance trade promotion, in which retailers get rewarded according to how much they sell, not how much they buy.
A new twist on a decades-old analytic technique promises to give marketers a better tool for measuring their customers' willingness to pay (WTP), outperforming common survey-based methods.
The pricing of services in the United States is a mess. Consider these examples:In 1992, Congress enacted the Cable Act to rein in prices in the cable television industry.
Gray market goods — brand name products sold through unauthorized channels — are an increasing threat to multinational companies. The authors present a framework to help select the right approach to coordinating price-setting decisions on the basis of a subsidiary’s local resources and the complexity of a product’s market. Examples of price coordination methods are provided.
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