Pricing Ken Homa.

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Presentation transcript:

Pricing Ken Homa

Supply Chain : Value Added Profit Value Added Profit Value Added P R I C E Profit Value Added PROFIT R.O.S. R.O.I Parts & Matl SUPPLIER MANUFACTURER DISTRIBUTOR RETAILER

Gross to Net Pricing LIST PRICE (GROSS PRICE) FUNC’L DISC. PROMO ALLOW. INVOICE PRICE (WHOLESALE PRICE) CASH DISC MKTG. PROG. Volume Rebate Coop Advertising NET PRICE

MARKSTRAT Retail price (MSRP) Avg. retail price Avg. selling price channel mix Avg. retail price channel margins Avg. selling price

MARKSTRAT Retail price (MSRP) Avg. retail price Avg. selling price channel mix Avg. retail price channel margins Avg. selling price Base cost learning curve Current transfer cost inventory / new production Avg. transfer cost

“Right” Price ?

Pricing Analyses Share gains & losses

If and only if: all else constant

Pricing Analyses Share gains & losses Share loss => price ??? All else constant ‘Unusual’ margins

Pricing Analyses Share gains & losses Share loss => price ??? All else constant ‘Unusual’ margins Higher price points, higher margins (generally) Favorable costs or unsustainable prices ? Value mapping

Value Map P R I C E BENEFITS Many Few High Low VALUE FUNCTION VALUE SHORTFALL VALUE SURPLUS

Actual Price = Predicted Price

Value Shortfall Value Surplus Actual Price = Predicted Price

Pricing Analyses Share gains & losses Share loss => price ??? All else constant ‘Unusual’ margins Higher price points, higher margins (generally) Favorable costs or unsustainable prices ? Value mapping The critical strategic tool When refined, useful tactically Sensitivity analysis

What if ?

Pricing Analyses Share gains & losses Share loss => price ??? All else constant ‘Unusual’ margins Higher price points, higher margins (generally) Favorable costs or unsustainable prices ? Value mapping The critical strategic tool When refined, useful tactically Sensitivity analysis Worst case, breakeven, most likely

Real Life Pricing Product proliferation “Managed” allocations Derivative models “Managed” allocations “Meet competition” quotes Price leaders / followers

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