TRANSACTION PRICING December 11, 2002 Transaction Pricing Developing unit prices for individual products or services.

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Presentation transcript:

TRANSACTION PRICING December 11, 2002

Transaction Pricing Developing unit prices for individual products or services

Pricing Considerations Define unit of service or product Understand the market Customers Competitors Product/Service Life Cycle Volume Potential Barriers to Entry

Pricing Considerations

Pricing Considerations - Cost Base Fixed versus variable costs How quickly fixed costs can be avoided Individual product/service variable costs (if producing or rendering more than one) Marginal and incremental costs Target volumes and break-even points Sensitivity analysis on volume levels (market share) Capital investment Working Capital requirements

Pricing Considerations

Investment Risk Achieving target volumes Competitor reactions Risk mitigation strategies –Cost variability –Sharing risk and rewards with suppliers/partners

Go Forward Strategy Plan strategy before entry Position product/service as evironment changes Quickly adjust as competitiors’ react and customer values change

Key Decision Drivers Customers Competition Market Price Volume Costs Investment Strategy Willingness to Pay Our Advantage Winning price Break-even, Profit Fixed,Variable Return on Investment Drive market share

eds.com Mary Bundy