Raising Prices Matthew Noack and Stephanie Ferris By PresenterMedia.com PresenterMedia.com

Increasing prices will increase profit margin Increase price without alienating existing customers Consumer Price Index increase 3% in 2011 Raising Prices and Profit Margin

“Going with your gut” Priced too low Cost-based pricing Leaves room for more profit margin Competitor-based pricing Not bad if identical, but can cause price war Salespeople-based pricing Incentive for too low of price Video How Not to Set Prices

Eliminate discounts or change terms and conditions Raising Prices Cost increases = price increases Test price increase Charge for add-on services Redesign or re-launch “Premium” version

Customer behavior Cash? Pay back early? Don’t let one time deals turn into company policy Discounts

“Price buyers” Only do business when profitable Excess inventory Lower price, take away value They rarely change and are not loyal customers Example: AT&T sells iPhone 3gs for $49 Avoiding Price Wars

In 2011 increased prices from $1 to $1.20 Right as Netflix increased prices and lost customer Do you still use RedBox even after price increase? If yes, would you pay $1.50/night? If no, what would you be willing to pay per night? Redbox

Increased prices by splitting up services Didn’t add value Drastically raised prices from reference price (Huge % increase) Perceived value was reference price Netflix

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt price-to-increase_n_ html price-to-increase_n_ html References

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