1. STRATEGIC PRICING LUHAN LI, ANDREA DELLIT, JEAN VANNIER, CHRIS SPAUDE

2. WHAT IS MONEY? Money equals time? Money is not everything, but can get you anything (Julius Mgcini Cindi)

3. MONEY, MONEY, MONEY!!! (ABBA) a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively. “All that people have to do is to agree on what will be used as an intermediary means of exchange and that means of exchange becomes money.

4. MONEY EVOLVES, AND HAS DIFFERENT VALUES GOLD is the world’s currency. But Gold value augments throughout time (An ounce of gold 314-1170 in 12 years) Money is universal, but its intrinsic value can (and will) evolve.

5. WHAT IS A PRICE? PRICE IS NOT MONEY (DENNIS CLAYSON) PRICE IS A VALUE!

6. PRICE IS AFFECTED BY MANY FACTORS Monetary value Good/service sold in itself Supply of the good/service in itself Price

7. PRICE, AS A STRATEGY Price strategies will be more effective if based on value (aka the breakfast pill/saving life pill ) Price strategies CAN have an ethical component Marketing loves pricing strategies - flexible to work with - easy to benchmark - easy to foresee ( product maturity) - revenues equation are simple

8. THE X FACTOR(S) 1.Organizational objectives 2.Pricing objectives 3.Costs 4.Stage of life-cycle 5.Channel member expectations 6.Supporting other marketing mix objectives 7.Competition 8.Customer perception and response And, of course, the government (price fixing, discrimination, minimum prices, advertisement of prices

9. TO MAKE IT SHORT… Money is a medium for an exchange. A price is a value for an exchange. It can be translated with a monetary equivalency. “I promise you blood, sweat and tears. And a victory in the end” (Churchill. The price of war) IN MARKETING, WE LOVE PRICING STRATEGIES

10. STAGES OF MANAGING PRICING Development of pricing objectives Profit oriented Sales oriented Status quo oriented Assessment of target market evaluation of price Determination of demand Analysis of demand, cost, and profit relationships Evaluation of competitors’ prices Selection of a basis for pricing Selection of a pricing strategy Determination of a specific price

11. PRICING OBJECTIVES Profit Sales ( Revenue) Unit volume ( Product) Survival Social responsibility

12. PRICING STRATEGIES

13. Needs to be: Value Based Pro-active Profit Drive Flawed Strategies Cost-Plus Pricing Price product to cover fixed costs/add on profit Fixed costs change per volume Sales higher  more volume  lower fixed costs  reduce price??? Customer Driven Pricing What will the customer pay Customer honesty Customers don’t know value Share Driven Pricing Cutting prices is short term Maximize profits not market share

14. CUSTOMARY PRICING This is how we have always done it So this is how we will do it They can sell it for ____ We need to sell if for __ Fast Food restaurants 5 cents= 5 Pack

15. VARIABLE PRICING Fast changing markets Cannot set fixed prices, market changes to quick Advance s in technology

16. ONCE PRICE POLICY Prices are set No negotiations Everyone receives same price

17. FLEXIBLE PRICING Prices can be negotiated Within reason Internet has made more common More options

18. PSYCHOLOGICAL PRICING Odd pricing = $3.99 Represent bargains and savings Consumer ignore least significant digits Pricing bands  online searches Prestige Expensive=Good Discounting  lower sales

19. LOSS LEADER Selling for a loss in profits Attract new customers Offer other products Come for low price phone  buy expensive accessories

20. PRICE LINING/BUNDLING Pricing categories Associated with quality levels Two for one

21. PRICE ELASTICITY How does demand or supply change with price Inelastic vs. Elastic Slope of Line Necessity vs Want

22. ELASTICITY FACTORS (LINE SLOPE) Available substitutes Partially offset Brand loyalty Cost of switching Income Changes in the economy Changes in job market Time Cigarettes Initial inelastic Change to elastic (quit)

23. PRICE VS. VALUE & PRODUCT LIFE CYCLE *From from a blog from LiveseySolar Practice Builders Pricing professional services and product life cycles: why you probably should be increasing your price

24. CASE: LASER EYE SURGERY IN THE UK* *From from a blog from LiveseySolar Practice Builders Pricing professional services and product life cycles: why you probably should be increasing your price

25. CASE: UK LASER SURGERY 60% of population need corrective lenses 30% are nearsighted Claim glasses & contacts: Mature Laser Surgery 36 million eligible 100,000 choose each year Laser Surgery : Introductory *From from a blog from LiveseySolar Practice Builders Pricing professional services and product life cycles: why you probably should be increasing your price

26. CASE: INTRODUCTORY STAGE High costs Low volumes = slow sales Little or no competition Have to create demand *From from a blog from LiveseySolar Practice Builders Pricing professional services and product life cycles: why you probably should be increasing your price

27. CASE: ROGER’S ADOPTION CURVE “Laser eye surgery patients are all, by definition “innovators” and “early adopters”. (The 15% of patients that are first to try any newly introduced product).” *From from a blog from LiveseySolar Practice Builders Pricing professional services and product life cycles: why you probably should be increasing your price

28. CASE: INNOVATORS (FIRST 2.5%) According to LiveseySolar: “Adventuresome” Understand complex knowledge Cope with high levels of uncertainty Happy to pay more to be first Technology savvy Prefer “educated & engaged” Dislike mass marketing *From from a blog from LiveseySolar Practice Builders Pricing professional services and product life cycles: why you probably should be increasing your price

29. CASE: EARLY ADOPTERS (NEXT 13.5%) According to LiveseySolar: Ok with the early issues Will provide feedback Are listened to for advice More price sensitive group Pay for experiences, life change Technology savvy Prefer “educated & engaged” Dislike mass marketing *From from a blog from LiveseySolar Practice Builders Pricing professional services and product life cycles: why you probably should be increasing your price

30. VALUE MAXIMIZES PROFITS Recommendation: “There is still a significant percentage of market that will be happy to pay a higher price” Keep price as high as possible Price below the innovators This will maximize profits Price cutters will lose out in the current market Prices will decline as gain early majority *From from a blog from LiveseySolar Practice Builders Pricing professional services and product life cycles: why you probably should be increasing your price