1. Dell ’ s PC Pricing 1.Only PC company to report a profit 2.How?  Through Flexible Pricing 3.Traditional Pricing Method for PC industry Sales forecast  component bids  unit cost  list price based on bid cost, sales forecast, and desired markup. 4. Problems of the traditional pricing model - less flexible - less control 5. Flexible pricing: easy to gauge customer sensitivity  make them variable!

2. Dell ’ s Pricing 6. What does it take to do Flexible pricing? Suppliers: forecast changes  sharing cost information  schedule production Dell: cost information package; adjust prices based on quantity, profit target, proposed delivery dates  price transparency and flexibility Customers: advanced order or staggered delivered date

3. Sales Incentives (FT article) 1.Two different types of incentives 2.What is the problem with Chrysler’s incentive scheme? 3.Stretch Goals: Pros and Cons 4.Mike Jensen: Linear Compensation Scheme based on  Performance: past sales and profits  Current Market Conditions 5. Reeducate CFOs!

4. Trust in Markets Sherman Act (1890): To outlaw anticompetitive trusts and certain predatory tactics  political motives  Being “ big ” is bad If high market share  merger proposals were rejected By 1960 ’ s: “ The dangers of a vertical merger were grossly exaggerated ” (Robert Bork)

5. Trust in Markets Recent changes: –Government: Visible hand  Invisible hand –Focus: Political motives  Microeconomic outcomes (products and prices) – 30,000 Ft view  30 ft view –Enforcement: blocking merger  negotiation between parties

6. Making Fashion Faster (WSJ) 1.Value Propositions of High End Boutiques 2.New Value Proposition of Knockoffs 1.Affordable 2.Speed 3.New and Variety 3.What are High End Fashion Houses Doing To Fend Off Knockoffs? 1.Speedy production 2.Differentiation (quality & price) 3.Private fashion shows

7. Wine Distribution 1.Key Issue: Fostering Competition versus Regulating Alcohol Consumption 2. Source of the Problem: Misalignment between Federal Law (Interstate Commerce) and State Law (Alcohol Regulation) 3. Case for Transshipping: More Competition  More Choices and Lower Price  High Consumer Welfare (www.freethegrapes.org)www.freethegrapes.org

8. Small Wineries at the Bar (WSJ) 4. Case for Wholesalers: Ability to control alcohol consumption and underage drinking (www.pointclickdrink.com); collection of liquor taxes  Distributor Welfare & State Welfarewww.pointclickdrink.com 5. Which side do you support? 6. The Supreme Court Verdict 7. Response by big wineries

9. Selling Chocolate In India I.Challenges to sell chocolate I.Weather II.Distribution III.Consumer purchasing power II.Responses (by Nestle and Cadbury) I.Product: solid  liquid; change ingredients II.Price: Make it affordable! ( 1 rupee) III.Distribution: Cold chain network (piggyback) III.Cadbury: dual-distribution system

10. Developing Wal-Mart Account 1.Selling to Wal-Mart 1.Opportunity: 5300 stores and 138Million shoppers a week 2.Challenge: 2% acceptance rate 2.Birth of PenAgain 1.Problem (Need)  new product opportunity 2.Persistence: from high school on

11. Developing Wal-Mart Account 3. What Wal-Mart (Retailers) look for 1. Unique product, but with mass appeal 2. Sales history 4. How to lay the foundation? 1. Start from local stores 2. Go to trade shows 3. Who need this product?  why it deserves a place on Wal-Mart shelf

12. Developing Wal-Mart Account 5. Serving the Wal-Mart Account 1. High volume manufacturing capacity 2. Lower price 3. Broad product mix  Sell me a program! 6. Foot in the door (Trial period) 1. 500 store, 6-week trial  85% test

13. One Month to Make it & Pen Maker’s Trial 1.Mantra: 500 stores, 30 days, 85% sales 2.After you sold it, 1.Promotion: Push  Pull (core base) 2.Nontraditional promotion 3.Price: channel conflict 4.Inventory Tracking 5.Packaging & Shipping

14. One Month to Make it & Pen maker’s Trial 3. Passed the test  additional order for 150 stores 4. Key challenges as they grow 1. Survive weak times  Make it an everyday item 2. Shortage of workforce  merchandise service organization 3. Too many orders? (Office Depot) 4. Do not forget small accounts: product & relationship

15. You Got the Big Break: Now What? I.Their goal: Hit It Big II.After Wal-Mart I.Office Depot II.Walgreen’s 470,000 unit order III.CVS, Office Max, Staples, Bed Bath & Beyond III.Challenges of serving National Chains I.Financial gap II.Labor shortage III.Slotting fees IV.Packaging V.Product expansion VI.Adjust the priority of orders IV.Other challenges: Home