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2010 EMM Group

Strategic and Tactical PricingStrategic and Tactical Pricing

Strategic and Tactical PricingStrategic and Tactical PricingTrainingTraining Sample MaterialSample Material

TrainingTraining Sample MaterialSample Material

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2

Price is a Part of the Value PropositionPrice is a Part of the Value Proposition

Pricing identifies the part of the value generated for thecustomer that we can capture, given competitive considerations

Support

Promise Differentiation

Effort Risk

Price

Value Proposition can be Adjusted with

Benefits and/or Price

2010 EMM Group

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3

Three-way Perspective to PricingThree-way Perspective to Pricing

How do weprovide goodvalue to customerat an attractive

price.

CustomerCustomer

that is better thanthe competition.

CompetitionCompetition

and meets ourprofitability goals

CompanyCompany

How do we usepricing to establishand keepcustomerrelationships.

anticipatingcompetitiveresponses.

while building oneof the mostvaluable assets forour business

What aspect ofprice is mycustomerparticularlysensitive to .

knowledge ofwhich gives acompetitive edge

enabling us toleverage that toour advantage

2010 EMM Group

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4

Why is Pricing Important?Why is Pricing Important?

The biggest driver of profitability

Central to competitiveness

Key to penetrating markets and segments

Directly linked to brand equity

Pricing is Critical for Growth

2010 EMM Group

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5

Fundamental to SuccessFundamental to Success

Pricing is

The biggest driver of profitability

Central to competitiveness

Key to penetrating markets and segments

Directly linked to brand equity

0 4 8 12

Fixed cost

Volume

Variable cost

Price

2.7

3.7

7.3

11.0

Pricing is the #1 Lever to Drive Margins

Improve 1% Profit improvement (%)

-10%

0%

10%

20%

Price decrease Break-evenvolume increase

-5.0%

17.5%

2010 EMM Group

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6

Fundamental to Success (contd)Fundamental to Success (contd)

Pricing is

The biggest driver of profitability

Central to competitiveness

Key to penetrating markets and segments

Directly linked to brand equity

Leveraging price psychology to beat larger

and experienced competitors

15 minutes could save you 15% or

more on your car insurance.

ost

reliable

brand

(1 years)

4th largest

global

luxury

brand

Top-seller

in US

ahead

of

2010 E Group

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7

Fundamental to Success (contd)Fundamental to Success (contd)

Pricing is

The biggest driver of profitability

Central to competitiveness

Key to penetrating markets and segments

Directly linked to brand equity

Value pricing to successfully penetrate luxury car market

Most

reliable

brand

(12 years)

4th largest

global

luxury

brand

op-seller

in

ahead

of

2010 EMM Group

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8

Fundamental to Success (contd)Fundamental to Success (contd)

Pricing is

The biggest driver of profitability

Central to competitiveness

Key to penetrating markets and segments

Directly linked to brand equity

Hurt brand equity through ill-conceived promotion strategy

Europe1992

Tanked sales

Customer perception suffered

Took 5 years to recuperate

=

Retailers insist on matching

Buy 1, Get 1 Free promotion

Free

2010 EMM Group

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9

Common Issues With PricingCommon Issues With Pricing

Usi r ls f t ,ssumpti s lf-trut s

Diff r t i t r l perspecti es

MistakeMistake LessonLesson

Response by established brokeragehouses to discount brokerage

Hurt entire business in knee-jerk

response to day-trader segment

Dont use as first responseor lever to competitiveactions

2010 EMM Group

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10

Common Issues With PricingCommon Issues With Pricing

Cost-plusprici

ricechangeuncorrelated

ithcustomerehavior

MistakeMistake LessonLesson

Dont use as first response orlever to competitive actions

Pricing should includeexternal view (not justinternal)

2010 EMM Group

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11

Common Issues With PricingCommon Issues With Pricing

Pricechange ithout

consideringcustomerperceptions

Overuseofpricepromotions

Dont useas first responseor lever tocompetitiveactions

Pricingshould includeexternal view (not justinternal)

MistakeMistake LessonLesson

Not relating price to brandequity

successfullyprotected blue-chipimage in face of stillprice competition

failed attempt atintroducingpremium apparelline

2010 EMM Group

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12

Common Issues With PricingCommon Issues With Pricing

Focusonchannel orproduct,not customer

Noconsideration forelasticit

orcost toserve

Dont useas first responseor lever tocompetitiveactions

Pricing should includeexternal view (not justinternal)

Not relating price to brandequit

MistakeMistake LessonLesson

Consider customer

segmentation & elasticity

Through the & much of

9 s the creditcard industry

offered one flatprice to allcustomer

80s

2010 EMM Group