The Strategy and Tactics of Pricing: A Guide to Growing More Profitably

Cover
Endorsement Page
Half Title
Title Page
Copyright Page
Table of Contents
Preface
Acknowledgments
List of In-Line Boxes
List of Exhibits
Chapter 1 Strategic Pricing
	Coordinating the Drivers of Profitability
	Leveraging Profit into Sustainable Growth
	Cost-Plus Pricing
	Customer-Driven Pricing
	Share-Driven Pricing
	The Role of “Optimizing” in Strategic Pricing
	What Is Strategic Pricing?
	Value Creation
	Value Communication
	Price Structure
	Pricing Policy
	Price Competition
	Price Setting
	Creating a Strategic Pricing Capability
	Summary
	Notes
Chapter 2 Economic Value
	The Guiding Force of Pricing Strategy
	The Role of Value in Pricing
	How to Estimate Economic Value
		Competitive Reference Prices
		Estimating Monetary Value
		Monetary Value Estimation: An Illustration
		Estimating Psychological Value
		Psychological Value Estimation: An Illustration
		The High Cost of Shortcuts
	Value-Based Market Segmentation
		Step 1: Determine Basic Segmentation Criteria
		Step 2: Identify Discriminating Value Drivers
		Step 3: Determine Your Operational Constraints and Advantages
		Step 4: Create Primary and Secondary Segments
		Step 5: Create Detailed Segment Descriptions
		Step 6: Develop Segment Metrics and Fences
	Summary
	Notes
Chapter 3 Price and Value Communication
	Strategies to Influence Willingness to Pay
	Value Communication
	Adapting the Message for Product Characteristics
		Low-Involvement Products with Psychological Benefits
		Low-Involvement Products with Economic Benefits
		High Involvement, Psychological Benefits
		High Involvement, Economic Benefits
	Strategies for Conveying Value
		Competitive Reference Effect
		Extremeness Aversion
		Switching Cost Effect
		Difficult Comparison Effect
		End-Benefit Effect
		Price-Quality Effect
		Expenditure Effect
		Shared Cost Effect
		Fairness Effect
	Multiple Participants in the Buying Process
		Transactional Value
	Summary
	Notes
Chapter 4 Price Structure
	Tactics for Pricing Differently across Customer Segments
	Challenges That Can Undermine Segmented Pricing
	Offer Configurations
		Optimizing the Structure of Offer Bundles
		Designing Segment-Specific Bundles
		Unbundling Strategically
	Price Metrics
		Creating Good Price Metrics
		Performance-Based Metrics
		Tie-Ins as Metrics
	Price Fences
		Buyer Identification Fences
		Purchase Location Fences
		Time of Purchase Fences
		Purchase Quantity Fences
	Dynamic Pricing and Yield Management
	Summary
	Notes
Chapter 5 Pricing Policy
	Influencing Customer Expectations and Purchase Behaviors
	Pricing Policies and Price Expectations
	The Emergence of Strategic Sourcing
	Policies for Price Negotiation
	Policies for Responding to Price Objections
		The Problem with Reactive, Ad Hoc Price Negotiation
		The Benefits of Proactive, Policy-based Price Negotiation
		Policies for Different Buyer Types
		Policies for Dealing with Power Buyers
	Policies for Successfully Managing Price Increases
		Policies for Leading an Industry-Wide Increase
		Policies for Transitioning from “Flexible” to “Policy-Based” Pricing
	Policies for Pricing in an Economic Downturn
	Policies for Promotional Pricing
	Summary
	Notes
Chapter 6 Price Competition
	Managing Conflict Thoughtfully
	Understanding the Pricing Game
	Competing To Grow Profitably
	Reacting To Competition: Think Before You Act
		Is There a Response That Would Cost Less Than the Preventable Sales Loss?
		If You Respond, Is Your Competitor Willing and Able to Cut Price Again to Reestablish the Price Difference?
		Will the Multiple Responses Required to Match a Competitor Cost Less Than the Avoidable Sales Loss?
		Is Your Position in Other (Geographic or Product) Markets at Risk If a Competitor Is Successful in Gaining Share?
		Does the Value of the Markets at Risk Justify the Cost of Response?
	Managing Competitive Information
	Collect and Evaluate Competitive Information
		Selectively Communicate Information
	When Should You Ever Compete On Price?
	Summary
	Notes
Chapter 7 Price Level
	Setting the Prices That Capture a Share of the Value Created
	The Price-Setting Process
		Step 1: Define the Viable Price Range
		Step 2: Make Strategic Choices
	Option 1: Skim the Market
	Option 2: Penetrate the Market
	Option 3: Neutral Market Pricing
		Step 3: Assess Break-Even Sales Changes
	Break-even Sales Change Calculation
		Step 4: Gauge Price Elasticity
		Step 5: Account for Psychological Factors
	Communicating New Prices to the Market
	Summary
	Notes
Chapter 8 Measurement of Price Sensitivity
	Research Techniques to Supplement Judgment
	Types of Measurement Procedures
		Uncontrolled Studies of Actual Purchases
		Historical Sales Data
		Panel Data
		Store-Level Transaction Data
		Analyzing Historical Data
	Experimentally Controlled Studies of Actual Purchases
		In-Store Purchase Experiments
		Laboratory Purchase Experiments
	Uncontrolled Studies of Preferences and Intentions
		Direct Questioning
		Buy-Response Surveys
		Attribute Rating
		In-Depth Interviews
	Experimentally Controlled Studies of Preferences and Intentions
		Simulated Purchase Experiments
		Trade-off (Conjoint) Analysis
	Using Measurement Techniques Appropriately
		Using Judgment for Better Measurement
		Using Online and Mobile Techniques
		Outside Sources of Data
		Selecting the Appropriate Measurement Technique
	Summary
	Notes
Chapter 9 Financial Analysis
	Analyzing Costs and Profits for Pricing
	Evaluating the Financial Implications of Price Alternatives
	Why Incremental Costs?
	Why Focus on Avoidable Costs?
	Understanding the Financial Implications of Alternative Price Levels
		Evaluating the Potential Profitability of a Price Change
	Break-Even Sales Incorporating a Change in Variable Costs
	Break-Even Sales Analysis for Reactive Pricing
	Mapping a Range of Potential Financial Outcomes
	Break-Even Sales Curves
	Watching Your Baseline
	Covering Non-Incremental Fixed and Sunk Costs
	Summary
	Notes
	Appendix 9A
	Case Study
	Appendix 9B
	Derivation of the Break-Even Formula
Chapter 10 Specialized Strategies
	Adapting Pricing to Accommodate Common Challenges
	Adapting Pricing Strategy Over the Category Life Cycle
		Pricing an Innovation
		Price Reductions in Growth
		Pricing the Established Product in Maturity
	Managing Export Prices in Foreign Currencies
		Foreign Market Sales Strategy
		Competitive Impact of Exchange Rate Shifts
		Four Generic Strategies for Managing Exchange Rate Price Adjustments
	Navigating Grey Markets and Parallel Imports
	Managing Pricing Under Duress—Inflation, Pandemics, Recessions
	Creating Economically Efficient Transfer Prices
	Summary
	Notes
Chapter 11 Creating a Strategic Pricing Capability
	Assembling Talent, Processes, and Data to Build Competitive Advantage
	Essential Elements of the Pricing Organization
		Creating Alignment on Pricing Objectives
		Matching the Extent of Pricing Centralization with Organizational Needs
		Decision Rights Specify Pricing Roles and Responsibilities
		Pricing Processes to Ensure Strategy Implementation
		Performance Measures and Incentives: Aligning Sales Incentives with Strategy
	Systems to Support the Pricing Function
		Data Needed to Inform the Pricing Function
		Common Protocols for Creating Relevant Insights
		Customer Analytics to Guide Management Choices
		Analysis of Win–Loss Data
		Customer Profitability and Cost-to-Serve
		Process Management Analytics
		Price Bands
		Price Waterfalls
		Pricing Systems
	Managing the Organizational Change Process
		Senior Management Leadership
		Demonstration Projects
	Summary
	Notes
Chapter 12 Ethics and the Law
	Understanding the Constraints on Pricing
	The Legal Framework for Pricing
	Price Fixing or Price Encouragement
		Horizontal Price Fixing
	Resale Price Fixing or Encouragement
		Vertical Price Fixing
		Direct Dealing Programs
		Resale Price Encouragement
	Price and Promotional Discrimination
		Price Discrimination
		Defenses to Price Discrimination
		Promotional Discrimination
		Competitive Injury, Defenses, and Indirect Purchasers
	Using Nonprice Variables to Support Pricing Goals
		Vertical Nonprice Restrictions
		Nonprice Incentives
	Other Pricing Issues
		Predatory Pricing
		Price Signaling
		Most-Favored-Nation Clauses
	Summary
	Notes
Index