Communicating Value and Price

Adapted from Nagle, Hogan, and Zale’s The Strategy and Tactics of Pricing, 5th Ed., Chapter 4

Value-based pricing strategies fail unless potential customers recognize and understand the value of your products and services and how they differ from those of your competitors. Clear value and price communication can protect your value proposition from competitive encroachment, improve willingness-to-pay, and increase the likelihood of purchase. Effective messages cater to both different types of products and different stages of the buying process.

What is Strategic Pricing?

Adapted from Nagle, Hogan, and Zale’s The Strategy and Tactics of Pricing, 5th Ed., Chapter 1

Introduction

Many factors determine profitability:

• technology
• regulation
• market information
• consumer preferences
• relative costs

Pricing strategy must take these factors into account to match products with prices that will deliver value to customers and profits to suppliers.

Profit and Loss Cases

Adapted from Marc Cosentino’s Case In Point, 8^th edition (p. 37-40):

The Profit and Loss case has several variations, but all of them deal with the central framework:

E (P = R – C) M

where E represents the economic situation and M describes the market and/or industry. Within the parentheses, we have Profit = Revenues – Costs.

How to Raise Prices the Right Way

Speaking of raising prices, here’s a summary of strategies on how companies can cover rising costs by raising prices without losing customers. The full article from professors Kusum L. Ailawadi and Paul W. Farris can be found here.

Good Luck Leaving Your Wireless Phone Plan

T-Mobile’s latest push to brand itself as the anti-contract wireless provider is a welcome move in a market where confusing and complex two-year contracts are standard practice. However, concerns such as network coverage and speed, data allowance plans, and phone offerings often prevent customers from switching providers. The Wall Street Journal provided the latest update on the state of the industry in its article Good Luck Leaving Your Wireless Phone Plan.

Cracking the Mysteries of the Male Shopper

Read the article from The Wall Street Journal in its entirety here: Cracking the Mysteries of the Male Shopper. My summary and thoughts are below:

In my four semesters of college co-ed life, I have never seen a single one of my male friends go shopping. I’ve often wondered how they manage: fabrics wear thin, styles shift, seasons change. They remain clothed, so I suppose they must do their shopping on the sly–or online.

Ways to Cut Costs

From Case in Point 7, p. 55-56, p. 59 of the 8th edition:

LABOR
•   Cross-train workers [may increase costs in the short run]
•   Reduce and prevent overtime (pay-and-a-half rates)
•   Reduce employer 401(k) or 403(b) match
•   Raise employee contribution to health-care premium
•   Institute four 10-hour days instead of five eight-hour days [this is an interesting idea]
•   Convert workers into owners
•   Contemplate layoffs
•   Institute across-the-board pay cuts

The First Four Steps

The basics of approaching any case, summary from Marc Cosentino’s Case in Point, p. 32-33:

1. Summarize the Question

• confirms that you listened and understood the question correctly
• allows you to hear the information again