the pricing puzzle
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January 2011 | The Pricing Puzzle
What’s your strategy?
January 2012
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Speaker Notes
January 2011 | The Pricing Puzzle
1% reduction in fixed costs improves
profitability by 2.3%BUT
1% increase in pricing can boost profitability 11%
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Did you know…
Source: McKinsey & Company Impact study of 2,400 companies
January 2011 | The Pricing Puzzle
Puzzled?How do you put the pieces together?
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January 2011 | The Pricing Puzzle 4
The six strategies for pricing
Puzzle Pieces
• Competition Based
• Loss Leader
• Penetration Strategy
• Premium/High End
• Cost-plus
• Predatory
January 2011 | The Pricing Puzzle 5
Striving to meet and or beat the prices your competitor is charging.
Competition Based
A competition based pricing strategy focuses solely on what the
competition is charging. It is:
•challenging for a small business to maintain
•provides very narrow profit margins.
Think of this strategy as rock-bottom pricing.
January 2011 | The Pricing Puzzle 6
Give it away to get more in the future
Loss Leader
Historically, printers have done “pro-bono work” to win
customers. Make sure you look at the entire picture,
before aligning yourself with a freebie client. Remember
all of your competition has been asked to do the work for
free also.
January 2011 | The Pricing Puzzle 7
Increasing the value to your customers, build loyalty and enter the market.
Penetration Strategy
Unless you are “blood brothers” with your customers,
loyalty in the our business is a very difficult thing capture.
Offering value-added services can help secure the
relationship and build your brand loyalty – storefronts,
fulfillment, promotional premiums or database
management.
January 2011 | The Pricing Puzzle 8
Premium – High End
Exceptional reputation, quality, and
distinction. In order for you to
implement this type of pricing
strategy, you must have built your
brand recognition to a high end,
premium level.
Image courtesy of Rosebrook Meyer
January 2011 | The Pricing Puzzle
Two types of “cost plus” pricing:
Full cost pricing includes both
variable and fixed costs and adds a %
markup.
Direct cost pricing uses the variable
costs plus a % markup. Usually only
used when competition is high as it
usually leads to a loss over time.
“Cost plus” strategy: Full cost and Direct cost
Fixed costs
• Equipment Leases
• Your building
Variable
• Paper
• Toner/ElectroInk
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January 2011 | The Pricing Puzzle 10
Predatory
A carnivorous cousin, Deinonychus,
about the size of a man, leaped on its
prey, wrapped its long arms and
three-fingered hands around it, and
kicked it to the death with sickle-
shaped toenails.
January 2011 | The Pricing Puzzle 11
January 2011 | The Pricing Puzzle 12
What is the important piece?
A puzzle is not complete without all the parts. Be systematic and strategic in your decisions.
Do not set the pricing and then just forget it. All pricing strategies can make sense one time or another (except predatory!), but none alone are always sufficient.
Your goal must be to stay one step ahead of your competition.
January 2011 | The Pricing Puzzle 13
Market Strategy:No, not this type!
January 2011 | The Pricing Puzzle
Mohawk MakeReady provides practical tools
and actionable information for digital
printers like you.
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We can help…
Visit: www.MohawkMakeReady.com to browse content, request a meeting, or join the community.
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