Although pricing decisions can have a direct bearing on an enterprise’s bottom line, many companies fail to address market uncertainties with the aid of a carefully crafted pricing strategy. Most pricing decisions are based on questionable assumptions and crude heuristics that will put financial and brand health in jeopardy. What does an efficient revenue strategy refer to? How will companies ward off the price war, become a price leader, and carry out a pricing strategy to generate value added？
An appropriate pricing strategy must take social, economic and psychological factors into consideration. We will draw lessons from economics, psychology and sociology to examine the role of pricing decision in an overall marketing strategy and assess whether it can help a company attain broad management objectives. This course is intended to help participants design and implement a well-crafted pricing strategy to gain more value from customers.
This course will equip middle-to-top-level managers with critical concepts and management tools so that they can implement a sensible pricing strategy to reap profits.
By the end of the course, participants will have learnt how to:
- Recognize and exploit the different roles that prices play in a competitive marketplace;
- Address the restraints that shape a comprehensive pricing strategy;
- Track customer value efficiently and design a revenue model that helps an organization attain broader strategic objectives;
- Determine the role of costs, competitors, customers and company goals in setting a “proper” price;
- Understand the impact of customer sentiment and social factors on demand;
- Estimate and act on willingness-to-pay information;
- Respond intelligently to price competition and the broader forces of commoditization;
- Identify and grasp the opportunities for price customization that are palatable to customers;
- Skillfully design a sales promotion campaign that can not only boost sales, but also enhance brand equity.
Missions of “Pricing”
- Every business has to price what it sells. It is inescapable and indispensable, yet also deeply misunderstood. Pricing is by no means an exercise in running the numbers. In fact, prices educate and stimulate consumers as much as they mark value. And pricing questions are as much about dollars and cents as about strategy (how should we earn a profit from the value that we provide? What arguments convince customers and keep competitors at bay? Can we tailor prices without eroding goodwill?) This opening session will talk about the “missions” of pricing and the steps organizations must take to improve this basic business skill. Putting prices right will unlock unexpected opportunities to capture and even grow value.
Rethinking the revenue model
- Given the current social and economic landscape, customers ultimately pay only for satisfaction of their needs and wants, not some proxy (an object or a period of services). Perhaps, the most strategic aspect of pricing is the revenue model adopted by managers—their company’s policy on how it makes money. Specifically, managers need to figure out what features (or entire products) they put a price on and what are free; which customers are asked to pay and which are not; when and how income is collected. This session will help remove the complexity inherent to designing a proper customer-centric revenue model by breaking down this tricky issue into a small set of levers (what decisions do I face) and principles (how should I decide). This course will further probe into the guiding principles and present the cases of companies that have re-energized or disrupted their market by proactively drawing up a revenue model.
- How can a businessman assess whether the price of a particular commodity is “proper”? Any sensible pricing decision is, in many ways, a balancing act combining internal (looking inward) and external (looking outward) sources of information. The financial benefit of choosing a proper price dwarfs any other driver of performance. With the aid of a simple framework, this session will present four factors that can make a difference to company’s effective decision (company, cost, competitor and customer). This move is aimed at helping participants understand the types of costs that matter in pricing and their proper contribution to decision-making. Selling Value to Stubborn Buyers
At the heart of every proper pricing strategy lies the set of actions businesses must take to demonstrate and communicate value to their customers. When the value of an offering is clearly understood by both firm and customer, price is seldom a problem. A company needs to better understand what “value” means to customers and honor its promises so that its business can give a sense of calibration and confidence that helps fight off the pressure imposed by clients and competitors. Besides, a more efficient process will enable more rapid sales, enhancing the company’s business performance. This session will discuss the complications that often arise when an organization tries to sell value in a market plagued by cynical, stubborn buyers. This move is aimed at making clear what tasks executives need to complete so as to bring the company’s competitive advantages into full play. It takes five steps to fulfill this objective.
Three Drivers of Price Competition
- No pricing course is complete without a discussion on competition. How can we stop a costly price war or better still, avoid it in the first place? What does it take for a company to become a price leader? Can executives take action without breaking the laws to pressure competitors into complying with business rules? The proper answers to these questions rest on the realization that the “price war” unfolds on three fronts: the seemingly irrational actions of rivals, and bias of customers and executives. This session will probe into the price war from these three perspectives by presenting cases and proposing solutions. One Customer, One Price
Not all customers are created equal. Certain groups invariably find more value in a good than others do. A smart executive spots this and realizes that pushing the same price across the whole market is inefficient. In some cases, it leaves a good chunk of money in the pockets of customers rather than the coffers of companies; in other cases, it prevents sales that still make economic sense at some lower price. This session is based on the counterintuitive idea that proper price discrimination requires some input from customers. The traditional “take-it-or-leave-it” does not suffice. Tailoring prices to variations in customer valuations will not only bring more revenues to a company with competitive advantage, but also benefit the company in some unexpected ways as it demonstrates the company’s open attitude towards customer engagement and customer empowerment and its confidence in product quality. This session will introduce a simple framework and examples of (some highly creative) pricing models.
- Price promotion is often compared to a shot in the arm. In response to peer pressure, many companies have resorted to it. Sales go up when discounts are offered and take a nosedive when they are retracted. As time goes by, merchants have to step up discounts, more frequently, to attract customers who are increasingly accustomed to (and fed up with) price promotions. These behaviors on the supply and demand sides will undoubtedly result in a raft of issues. As the downward spiral is predictable, are executives discounting sensibly? Is there a healthier way to entice customers, one that can motivate the purchase without undermining the brand? This session aims to provide answers to these frequent practical questions and a useful checklist that is used to measure a company’s performance in designing sales promotion campaigns.
- What are the issues that businesspeople should consider when contemplating significant changes in the company’s monetization practice? First, there is the question of structure. The management team needs to decide how far down the company to push responsibility (the depth dimension), and how many different job profiles to involve in the process (the breadth dimension). The second question is one of incentives. What is the best way to compensate those who are ultimately responsible for the “health” of a price? The third question concerns pricing decisions, which exist at three different levels of abstraction. At the highest level, that of the industry, the goal is to gauge the tone of a particular market: significant fluctuations in demand or supply, new regulations, changes in customer sentiment or economic wellbeing, changes in the competitive landscape and so on. At the product level, monetization is focused on the goal of capturing value from customers, keeping in mind that differences in valuation are expected and should be exploited. Finally, at the lowest level, that of the transaction, the management team needs to ensure that the pricing protocol does not feature unnecessary, costly leaks: there needs to be a logical argument for each and every concession offered to a potential or existing customer. In this session, participants will get to know more about the power of pricing and learn how to build a strategic pricing organization.
Who should attend
The programme is aimed at mid- to senior-level professionals across areas of companies in business and consumer markets who approve, design, or implement pricing decisions. It should also appeal to directors of smaller companies and entrepreneurs who are introducing new products and services or believe their current offerings fail to capture a fair share of the value they create in the marketplace.