Winner Pricing Thesis Award 2009-2010 !

December 2010- The European Pricing Platform announces with great pleasure the new winner of the Best European Pricing Master Thesis Award 2009-2010.
With his thesis “Barriers to Value Based Pricing Strategies within Irish Small to Medium Sized Enterprises: A Quantitative Survey Analysis”, Eoin Healy – Dublin City University Business School – convinced our jury that he had the most complete pricing thesis of the other 6 theses that were selected. Eoin won a € 500,00- cash reward, a bundle of books worth € 75,00- a free ePP training of his choice valued at € 1.500,00- and free ePP participation for 12 months worth € 395,00- .

The jury motivated their choice as following: “Very professional thesis with clear steps in study design that is straight in our core business. The methods and objectives are well formulated and the thesis has a really scientific methodology. In general the thesis gives a valuable empirical contribution to the value of pricing research.”

The motivation of Eoin to dedicate his thesis to pricing topic came from the lack of time contributed to pricing during his masters in Marketing, as opposed to branding, distribution strategies or buyer behaviour. Eoin says: “ I found this odd as I had read about the power of pricing in terms of the profitability of a firm. So I begun researching the topic of pricing within academic databases and of course on the web. This is how I came to find the ePP and its pricing thesis award.” By knowing that there was a competition to enter Eoin made his definite choice to devote his thesis to pricing.

The reason why Eoin choose to provide a piece of literature for Small and Medium Sized business within Ireland, was because they make up the majority of business types within the Irish market. His study highlighted both the importance of value based pricing to them while at the same time pointed to reasons, or barriers, why they might not yet be using value based pricing strategies. Therefore Eoin says: “I felt it would be most appropriate to analyse them in the interest of the larger Irish economic context. Through research, value based pricing was picked as my strategy of choice due to the fact that it is said to result in greater profitability to the firm and it can ultimately result in a sustainable competitive advantage!”

At the finish of his thesis Eoin concluded that there is still so much to learn on pricing in the whole marketing community, but particularly also amongst the academics. They should revisit how important pricing actually is as an element of the marketing mix and spend much more time on sharing information and knowledge about it.

Eoin finishes with an important conclusion: “Pricing I believe is one of the most frightful and misunderstood elements in most marketers toolbox and it is only through learning more about pricing that we will over come that fear. This I feel, is where organisations such as the EPP can help.”


Need a Pricing Strategy ? Fire a customer

If you haven't walked away from a piece of business in the past six months, then it is very likely that your company doesn't have a pricing strategy.

In other words, you are trying to be all things to all people, and that is not a strategy. In fact, it could have a detrimental impact on your business because it means that highly price-sensitive customers will infiltrate your company and obtain pricing that is well below what your loyal customers who value your offering pay.

I've learned that it's not the best customers who get the best price; it's the best negotiators. We call them "system beaters." They know where the holes are in your pricing — how to get premium products at discount prices, or secure special discounts by making your salespeople feel guilty or afraid of losing their business. They might also negotiate free delivery, demand an unusually high level of technical support, pay bills late — the list goes on.

So how do you deal with customers who have champagne tastes but want to pay beer prices? If you want to ensure that your company's pricing integrity is not compromised, you must walk away from them. By doing so, it energizes your company to focus on the opportunities that will grow your business — and, most importantly, increase your profits.

Before you fire an account, it's a good idea to do a customer-profitability analysis. That will enable you to identify which accounts are unprofitable, so you can reprice or fire them.

Recently, I was talking to the president of a successful company that had lost an account that represented 25% of its sales volume. Sounds like a disaster, right? Wrong! Even though sales went down, profits went up! This is not an unusual story. Most companies have many customers that are unprofitable, and the best gift you could give the business is to fire these accounts. Some of them may be willing to pay the higher price, but don't fret over those that won't; let them take their unprofitable business to your competitors. Be prepared, however, for resistance from the sales force, particularly if they are paid commission on volume. (We'll talk about that topic in our next column.)

We recently had a client who was selling a seasonal product to a large chain retailer, while the volume was outstanding, the profits were unsustainable. They had a negative margin on the product, meaning that the more they sold, the more money they lost. The retailer had convinced them that no other suppliers had taken a price increase.

Looking at the data, we found that the rest of the category had been increasing prices while our client had been offering more and more, effectively decreasing their prices. We put together a sound business case to support a double-digit price increase and worked to bring the account team on-side. The manufacturer felt they deserved the increase and their conviction to the business case resulted in a successful presentation to the retailer.

If you are not prepared to fire customers, an alternative is to offer versions of your product or service offering. Take, for example, a company that specialized in storage. It had premium clients in the pharmaceutical industry that used its storage facilities because of the high level of security, temperature control and 24/7 access it provided. However, it also had low-priced accounts that appreciated the superior offering, but were not willing to pay for it. Consequently, the pharmaceutical customers asked for the same prices as the lower-priced accounts. A potential disaster!

In order to do business with both types of customers, the company built a separate storage facility for low-value products. By doing so, it reduced its cost to serve and was able to offer lower prices profitably. The pharmaceutical companies were not interested in this option because they valued the superior security and other benefits, and so the problem was resolved.

Whether you choose to walk away from your unprofitable customers, or provide versions of your offering, don't let them sip on champagne when they paid for beer.

Source: Paul Hunt (Pricing Solutions) for Financial Post


OFT urges brands to review "misleading" Price Ads

Retail and brand marketers are being urged to review their pricing strategies by the Office of Fair Trading (OFT) or face tough “enforcement action” following its report into misleading price advertising.

The OFT says it recognises that advertising price is a “key part of active price competition which benefits both consumers and the economy” but warns that some pricing practices can mislead consumers and break the law. The watchdog says it will “actively monitor” price promotions and “take targeted national enforcement action against firms using practices that constitute serious breaches of the law”.

The OFT supports the Advertising Standards Authority (ASA) which regulates the content of ads and sales promotions in the UK. The report identified seven potentially misleading pricing practices as part of a new framework to regulate price advertising.

Drip pricing, where additional costs are added during the buying process, time limited offers and baiting sales, where only a small proportion of stock is available at the advertised price, were identified as the most harmful to consumers.

Despite recent criticism, buy one get one free (BOGOF) deals were seen as one of the least harmful practices.

Under the new framework, companies such as RyanAir which use drip pricing throughout the booking process and retailers such as Marks & Spencer which has been accused of bait selling with its recent £10 champagne offer, could face court action and fines.

The British Retail Consortium slammed the report saying that consumers benefit from the competition and are good judges of the best deals. Tom Ironside, BRC director of business and regulation, says: “Customers aren’t stupid. They make sophisticated judgements about prices and value within stores, between stores and over time and have all the information they need to do that.”

The OFT seeks to reassure “fair dealing businesses” that they should not be concerned that they risk enforcement action on trivial matters. John Fingleton, OFT chief executive, says: “Misleading pricing is not only bad for the consumer, it is also bad for competition, and creates an uneven playing field between fair dealing businesses that stick to the spirit of the law, and those that push the boundaries too far. “We urge all firms to review their pricing practices and to get their houses in order where necessary.”

The Institute of Promotional Marketing welcomed the OFT’s report and says: “Price promotions that are deliberately designed to confuse and mislead consumers are simply not acceptable.” The IPM says it will look to incorporate the findings into its best practice guidance.

The seven pricing practices investigated are:
  • Drip pricing - where optional price increments such as taxes, card charges and delivery charges are added during the buying process
  • Time-limited offers - for example “offer must end today”
  • Bait pricing - when consumers are drawn in with offers of discounts although few items are available at the discount price
  • Complex pricing - for example offers where the price depends on numerous elements which may be conditional on each other
  • Reference pricing - such as “was £100, now £60”
  • Multiple unit price promotions - such as “three for two”
  • ’Free’ products offered as part of a package - such as “first two months free
Source: Rosie Baker, Marketing Week


Top 5 Pricing Trends for the Holiday Season

With the holiday season upon us, many retailers are wondering what pricing strategies they should implement to price for profit and growth.

This year, more than ever, the U.S. is a “have” and “have not” economy. On the negative side, consumer sentiment remains low and the unemployment rate continues to sit at 9.6%. However, there is positive news: Personal expenditures were up by 2.6% in the third quarter, the Dow Jones Index is over 11000, corporate profits are on the upswing and unemployment has stabilized (albeit at an unacceptably high level).

Bottom Line: A new opportunity exists this holiday season to serve cautiously confident consumers who, due to pent up demand and an interest in treating themselves, are willing to open their wallets.

Trend 1: Tailor your pricing strategy to your customer:

•In economically-depressed areas, continue the status quo pricing strategy of recent holiday seasons: focus on staple products, offer financing and layaway plans.
•In cautiously-confident markets, there is an opportunity to sell higher margin luxury products and services.

Trend 2: Show customers why they should purchase your product:

•In previous holiday seasons, price was the key driver of sales. This holiday season, cautiously-confident customers are willing to pay a premium for unique features (for instance, ads for Apple’s MacBook Air highlight its thinness).

Trend 3: Feature upscale “reach” products to cautiously-confident consumers:

•While the basic version of an upscale product may be discounted to attract consumers, reap higher profits by offering upgrades as well as complementary products.

Trend 4: Welcome cautiously-confident consumers back with new pricing plans:

•Offer generous financing and layaway plans.
•Minimize risk with “satisfaction guaranteed” pledges.
•Offer lower cost options such as “basic” versions, rentals, and leases.

Trend 5: Offer experiences to cautiously-confident consumers

•After years of pinching pennies, consumers are willing to splurge on fun experiences.

Source: Rafi Mohammed, FOXBusiness


European Pricing Platform partners with Vistaar

The European Pricing Platform - the first not-for-profit knowledge sharing platform for pricing decision makers in Europe - announces partnership with Vistaar Technologies - an innovator of B2B price and revenue management solutions - as a Pricing Technology Expert. Vistaar will sponsor and co-host upcoming ePP events with the purpose of helping participants achieve corporate profit objectives by sharing best pricing practices ranging from strategy and planning to sales execution and performance management.

“The uneven nature of economic recovery across the world and especially in Europe has further highlighted the need for organizations to have flexible, market-specific pricing strategies in order to maintain strong competitive advantage in the marketplace,” said Venky Subramanian, Regional Director, EMEA, Vistaar. “We are excited about the partnership with ePP, as it will provide the opportunity for us to work collaboratively with key pricing professionals across Europe and share best practice techniques and technologies to address complex pricing issues that straddle multiple pricing structures, regulatory frameworks, countries, languages, and currencies.”

Vistaar’s solutions enable some of the world’s largest companies to develop, implement and manage sophisticated pricing strategies in simple fashion, resulting in significant margin benefits. For these companies, Vistaar’s easily configurable pricing software and Excel user-interface options facilitate collaboration across a large cross-functional set of stakeholders involved in pricing by providing science based analytics, market intelligence, and scenario planning to help them make informed and intelligent decisions. Vistaar’s customers such as AMD, Beam Global, Cisco, Ford, and GE Aviation are operating in unique business environments, have complex product portfolios, and are implementing comprehensive pricing strategies to maintain or gain market leadership in various market segments around the globe.

“Vistaar has been selected to join our group of pricing technology experts worldwide because of their proven track record, deep expertise, customer experience, and pricing science methodologies,” said Pol Vanaerde, ePP president. “We are pleased to have Vistaar included on our expert list, and look forward to working closely with them to better serve our participants.”

About European Pricing Platform

The ePP offers your company to have the right pricing tactics in place to guarantee customer loyalty and deliver sustained margin growth to your business. Enhance your pricing know-how and be successful in it by joining this dynamic and yet resourceful pricing platform.

About Vistaar Technologies, Inc.

Vistaar is an innovator of price and revenue management solutions. Vistaar’s pricing software enables companies to achieve pricing best practices through price analytics, price optimization, price list management, and deal management. Vistaar is working with companies such as AMD, Beam Global, Cisco, Ford and GE to transform pricing operations into a strategic advantage. For these companies, Vistaar pricing software drives measurable price and margin improvements that deliver profitable growth and maximum shareholder value. Vistaar’s operations include six offices across North America, Europe and South Asia.

The Price is Complicated

Pricing is not about one number. By determining your worth and building value perception around that, your pricing strategy can strengthen brand perception and differentiation.

Setting the right price points is no easy task. In today’s post-recessionary economy, product pricing is particularly tricky because consumers’ perception of value is confounding and seems to shift constantly. People will camp out overnight for the chance to buy a $499 iPad, but you can’t seem to spark any interest in a $4.99 burger combo.

You may not be able to predict how consumers will behave, but you can use pricing to your advantage. The solution lies in taking a strategic approach to pricing decisions. But even before we get into strategy, I need to challenge some conventional wisdom about setting prices.

Many chains use a cost-plus approach. That is, prices are based on food costs plus a labor charge and an overhead factor. The problem with cost-plus pricing is that it is a short-term, inside-out approach. Not only does it leave you vulnerable to variability in commodities pricing, but it also doesn’t reflect the full margin potential of your offerings. Customers may be willing to pay more for some items, but cost-plus pricing essentially treats all products the same. Pricing should be decided from the outside in.

Given Subway’s success with its $5 Footlong promotion, you may think you need to match or beat it, or find your own magic price point. But trying to find that magic number is like searching for the Holy Grail—it’s likely a fruitless and frustrating endeavor, because pricing isn’t about one number. Instead of trying to figure out the threshold that customers won’t give you permission to exceed, determine what your offering is worth and use your pricing strategy to set customers’ value perceptions accordingly.

There is no single price or pricing strategy that works for every chain. Audits and analyses of competitor’s pricing are crucial inputs to your price setting, but the point is not to simply copy other’s approaches. You should approach pricing as thoughtfully and strategically as your menu. ”I say we give up those antiquated approaches and adopt some new ways of thinking about pricing. Price should be considered a touch point through which you express your brand and customers experience it. Pricing strategy should be aligned with your brand strategy. That is, you should use your brand image and positioning to drive price decisions—and in turn, use pricing to strengthen your competitive advantage and brand differentiation. Here are some ways to set your pricing strategy.

Reinforce your brand identity. Use price to communicate what your brand stands for. For example, if your brand is about 1950s-style fast food, then price your offerings with that style. You probably can’t charge ’50s prices, but you can price your offering for an even dollar amount instead of using today’s 99-cent convention—and offer classic combos for classic prices. If your brand is about offering healthy alternatives, ensure your healthier offerings are priced lower than the more mainstream ones—and definitely don’t charge more for substituting a healthy ingredient like soy milk or fat-free cheese.

Be clear about your competitive positioning. Don’t be afraid to charge more if you’re competing on quality, exclusivity, or a superior experience. Starbucks’ recent 9 percent same-store sales increase results prove that customers are willing to pay a price premium even in this economy. On the other hand, if you’re a low-price player, keep your prices low across the board—even one or two higher-priced products can detract from your position. Consider making a claim like “everything under $1.99 every day” and don’t offer combos that add higher price points to your menuboard.

Vary price to emphasize brand differentiation and value. Variable pricing draws attention to the value you offer or to the one dimension that most meaningfully differentiates you from competitors. If your burgers are your best product, pricing them higher than other menu items communicates their uniqueness. If special fries are your most popular menu item, sell all of your products with a side of fries and set your prices accordingly.

Vary price to target customer segments. You can also use variable pricing to appeal to certain customer segments. If you want to attract families, price your offerings to favor quantities and selections appropriate for family purchases. If dine-in customers are more desirable than take-out, consider a separate menu with special prices (and perhaps special products) for them. If you want to grow your breakfast daypart, accept a lower margin for those items.

Anchor your pricing. Price anchoring uses cues to set the customer’s expectations. Those TV infomercials that claim their new gizmo is “a $50 value that’s available today for only $19.99” use price anchoring to increase the perceived value of their offering. Wegman’s grocery stores show competitors’ prices on their shelves to prove their items are competitively priced. And car dealerships don’t display that $50,000 fully loaded model only to encourage customers to add on expensive options—they also use it to make customers feel like they’re getting a deal if they walk away with a $35,000 version. You can use similar approaches to communicate the perceived value of your menu items.

Pricing is too important to be made as an arbitrary decision. And just because consumers have cut back on spending doesn’t mean pricing is simply a game of “how low can you go.” With a strategic approach, you can use price as a helpful tool in your brand-building toolbox.

Source: QSRmagazine.com - Denise Lee Yohn


Firms sue Air France-KLM for price fixing

Hundreds of European companies, led by Ericsson and Philips, are to sue Air France-KLM and Martinair for more than €500m for fixing freight prices, their lawyer said today.

'Today for the first time, cartel victims across Europe are standing up together and demanding refunds from cartelists,' said Peter Koutsoukis, the managing director of litigation company Claims Funding International.

Koutsoukis said over 300 companies from 11 EU member states were claimants in the case which he described as the 'largest cartel damages claim ever in continental Europe'.

'We are suing three cartel airlines liable for the damage caused by all of the cartel,' which he said involved 22 airlines that have pleaded guilty or have been convicted of price fixing by regulatory authorities.

The companies claim that they were overcharged about 10% on international air freight between 2000 and 2007 because of an illegal price-fixing agreement between airlines.

Koutsoukis said court papers would be signed on Air France-KLM and KLM's daughter company Martinair, all registered in the Netherlands, tomorrow.

Source: RTE Business


No complaint against KPN and Vodafone for 'Smart Pricing'

SRM decided not to fail a complaint against KPN and Vodafone. This is wat Adformatie tells. The education institution was of  the opinion that the providers neglected to inform their customers about charging their phone calls by the minute instead of per second. Within 24 hours that KPN and Vodafone heared about the threatening complaint, they adjusted their communication towards their customers.

SRM heeft besloten geen klacht in te dienen bij de Reclame Code Commissie tegen KPN en Vodafone. Dat meldt de Adformatie. Het opleidingsinstituut wilde klachten indienen, omdat de providers verhulden en zelfs verzuimden te melden telefoongesprekken per minuut af te rekenen. KPN en Vodafone hebben na aanleiding van de dreigende klacht binnen 24 uur begeleidende teksten aangepast naar: 'Gesprekken worden op de hele minuut naar boven afgerond.' SRM heeft daarop besloten verder geen klachten door te zetten.

Source: © 2000 - 2010 Telecompaper


Smart Pricing: lawsuit against KPN and Vodafone

The trademark company SRM gets into combat with telecom operators KPN and Vodafone. Both companies would mislead their customers about calling credits they apply. Last Thursday, the company challenged KPN to court and  filed complaints with the Advertising Code Committee. The core of the complaint is that the providers don't let their cusomters pay per second anymore, but by the minute. This implicates that phone bills get at least 40% more expensive. 

Het Merkenbureau SRM bindt de strijd aan met telecomaanbieders KPN en Vodafone. Beide bedrijven zouden hun klanten misleiden over beltarieven. Het bureau daagde KPN donderdag voor de rechter en diende klachten in bij de Reclame Code Commissie.

Steen des aanstoots is dat de aanbieders hun klanten niet meer per seconde laten betalen, maar per minuut. Daardoor valt de telefoonrekening ten minste 40 procent duurder uit dan mag worden verwacht op basis van het aantal gebelde seconden. De onthulling was voor de VVD aanleiding een meldpunt te openen tegen mogelijke misleiding door telecombedrijven. Over deze dagvaarding en het zogenaamde ‘smart pricing’ initiatiefnemer en marketingdeskundige Max Kohnstamm.

Source: Radio1 on Wordpress.com


Hotel prices still low but on the rise: study

Global hotel prices stabilised in the first half of 2010, but after seven consecutive quarters of price falls, were still at levels seen six years ago, according to the latest Hotel Price Index.

According to Hotels.com, the average price of a hotel room rose two percent in the second quarter of 2010, the first rise since the end of 2007.While prices in all regions were either flat or down year-on-year in the first three months of 2010, by Q2 prices had risen one percent in Europe and the Caribbean, three percent in the Americas and had stabilised in Asia.

"There is considerable worry about the fragility of the economic recovery and the possibility of a double-dip recession. Hotel pricing trends, up to the end of Q2 of 2010, confirm that a stabilisation has indeed been under way in the hotel industry, and that there are hints of a recovery. Hotel prices appear to have hit the bottom in the first half of 2010, and have lately trended up 2% against the prior year, the first time prices have risen since 2007,” said David Roche, global president of Hotels.com.

“If indeed we're seeing the beginning of a true recovery, it is an uneven recovery, and one starting from a low base. Prices remain at levels not seen since 2003 or 2004 in much of the developed world – the Asian-Pacific region is the only one to show any significant growth. Business capitals of the world such as New York, London and Singapore are seeing significant price rises again – but this is not mirrored in other capitals (Dublin hotel prices fell 6% and Moscow fell 8%).”

In 2010, the key factors acting to stabilise and even improve hotel pricing are the return of corporate travel (more pronounced in North America than in Europe), the general improvement in macroeconomic conditions and the slowing down of additional new room capacity.

Positive trend

“We’re seeing travel bookings pick up around the world,” said Victor Owens, vice president of marketing, North America for Hotels.com. Owens added, “It’s stimulating to see not only the breadth of travel both domestic and international, but also the steady rise in hotel prices which is helping reinvigorate the industry. There are, of course, still deals to be had, especially in international destinations like Abu Dhabi, Dubai and Reykjavik which each saw a major drop in hotel prices during the first half of 2010.”

North American prices show modest signs of recovery

•Prices paid by travelers for hotel rooms in North America (the U.S. and Canada) rose 3 percent between Q2 2009 and Q2 2010. The North America HPI stood at 101 in Q2 2010.

•This was the first quarter in which prices rose (year-on-year) since the end of 2007. Stronger demand, both from domestic and business travelers, has given hoteliers the confidence to hold their prices and maybe start raising rates.

•Prices for hotels in the Caribbean rose by 1 percent year-on-year in Q2 2010 – again the first signs of rates increasing since the end of 2007. This meant that the Caribbean HPI stood at 100 – a recovery back to the average rate of 2004 and a sign of just how far prices had dropped during the global downturn.

•Prices across Latin America also rose by 3 percent in Q2 2010 when looked at on a year-on-year basis.
European prices start to recover in 2010
•Prices paid by travelers for hotel rooms in Europe rose 1 percent between Q2 2009 and Q2 2010 (they were flat between Q1 09 and Q1 10).

•Prices had fallen for seven consecutive quarters, from Q2 2008 to Q4 2009, so this indication of rates improving will be encouraging for hoteliers.

•The Hotel Price Index for Europe stood at 101 in Q2 2010 as a result of the modest price gains. That means that hotel rooms are now 1 percent more expensive across Europe than they were in 2004, when the Hotel Price Index was started and 16 points lower than their peak in Q2 2007.

Asia – back to Q2 2009 levels, but with a varying picture across the region

•Prices paid by travelers for hotel rooms in Asia remained stable in Q2 2010 averaging 117 points, the same level as in Q2 2009.

•Overall, Asia's Index in Q2 2010 stands at 117 points, markedly higher than when the Hotel Price Index was first started in Q1 2004. This is in contrast to every other region of the world where the Index has remained very close to the 2004 level of 100. This reconfirms the general growth in the Asian region and the increased demand for hotels in the region.

•The prices paid in Asia, and their pace of recovery, show clear variations across the region. Large business and convention hubs, like Singapore and Hong Kong, have seen rates go up on the back of returning corporate travel demand.
Source: m-travel.com

Inflation stays high as clothes, food and travel rise !

• Air transport saw the biggest August increase on record

• City expected inflation to fall back towards 2% target

• Bank of England dilemma over interest rates intensifies

Dearer air fares, rising food bills and price mark-ups on clothes after the summer sales kept Britain's inflation rate stubbornly high at 3.1% last month.

The figures, released today by the Office for National Statistics, confounded City expectations that the cost of living, as measured by the consumer prices index, would fall back towards the government's 2% target.

Air fares rose 16% in August, the sharpest rise for the month on record, while clothing and footwear prices notched up their biggest August rise since 2001 as retailers stocked up with new autumn lines. The ONS said the global jump in commodity prices was having an impact on the cost of food.
Falling fuel prices helped offset some of the increases in air travel, clothes and food but were not enough to bring the annual rate down to the 2.9% level predicted by the City.
The persistently high level of inflation will add to the policy dilemma faced by the Bank of England. It has kept the bank rate at the emergency level of 0.5% for more than 18 months in an attempt to hasten the UK's recovery from recession but also has a legal duty to hit the 2% inflation target.

Jeremy Cook, analyst at currency broker World First, said: "This figure will exacerbate divisions in the [Bank of England's rate-setting] monetary policy committee with Andrew Sentance likely to only increase the volume of his calls for interest rate rises as soon as possible. Unfortunately the recovery is still too weak and I forecast February of next year as when rates should rise first."

Alternative measures of inflation were also higher than expected in August. The Retail Prices Index – which includes more housing costs – fell from 4.8% to 4.7%. The City had pencilled in a drop to 4.6%.

James Knightley, UK economist at ING, said: "Looking to the inflation outlook, there are some concerns about food price inflation and the hike in the VAT rate at the beginning of next year, but the strengthening seen in sterling should at least help to dampen import price inflation in coming months. Meanwhile, a weak economic recovery and the headwinds of major fiscal austerity measures should dampen corporate pricing power and limit the likelihood of second-round price effects in the medium to longer term."
Source: Larry Elliott, guardian.co.uk


New article about ePP and PFD in largest Dutch marketing magazine 'Marketing Tribune'

Prijs je rijk - In antwoord op de vraag waartoe een event wordt georganiseerd, kun je het beestje ook gewoon bij de naam noemen, moet Pol Vanaerde, president van het European Pricing Platform, hebben gedacht. Pricing heeft niet echt een Nederlandse vertaling, maar het is véél méér dan prijszetting. Vanaerde licht toe.Allereerst het EPP.

Waar kennen we dat van?

Het European Pricing Platform is een not for profit-platform gericht op het ondersteunen van businessprofessionals die betrokken zijn bij het prijsbeleid en het implementeren ervan in een breed scala sectoren. Dit zijn in de eerste plaats uiteraard de pricingmanagers en het pricingteam, maar vanzelfsprekend ook marketeers en leidinggevenden. Het uitwisselen van pricingkennis staat centraal en we organiseren regelmatig workshops, PricingFuel Days, trainingen, webinars en congressen.

Pricing is die beruchte vierde P waar zo weinig over geschreven wordt. Waarom toch?

Het is inderdaad opmerkelijk dat de P die voor de inkomsten zorgt - de andere P’s zijn investeringen - het minst aandacht kreeg tot nu toe. Ook in het marketingonderwijs is pricing onderbelicht. Dat is opmerkelijk omdat wij in Europa toch met complexe prijsuitdagingen zitten, door bijvoorbeeld onze multichannel omgeving en specifieke landgebonden verwachtingen en gewoontes. Wellicht heeft pricing ook minder aandacht gehad omdat zowel de academische kennis als de verankerde praktijkkennis simpelweg vaak ontbrak.
Is pricing een specialistenvak of hoort een marketeer dat zelf in de vingers te hebben?

De verantwoordelijkheid voor pricing is in veel bedrijven versnipperd. Vooral in b-to-c-organisaties, waar marketeers meestal adviesprijzen opstellen, vaak op basis van een prijsstrategie die Europees wordt bepaald. De discountstrategie is dan dikwijls weer het domein van sales, als ook de prijsimplementatie natuurlijk. Monitoring van de prijseffectiviteit gebeurt minder, soms door controllers. General management beslist over de prijsverhogingen. In b-to-b-organisaties zie je pricing vaker als aparte afdeling, vaak naast marketing. Daar zie je dat de pricingafdeling echt als een specialiteit wordt gezien en als afstemmer van de vaak tegengestelde belangen met de marktstrategie.

Er worden de bezoeker cases in het vooruitzicht gesteld van onder meer McDonald’s en Dell. Wie van dat soort bedrijven komt praten over pricing-strategie?

Alle sprekers op onze seminars zijn ervaren pricingmanagers en -experts die bereid zijn om hun pricingkeuken tentoon te stellen in een interactieve vorm met casestudies, informele discussies en praktische tips.

€ 595,- voor de hele dag, u voelt ’m aankomen: hoe komt u aan zo’n prijs?
Waarom niet € 295,- of € 895,-?

Pricing is strategy. Om die prijs te begrijpen moet ik je vertellen over onze doelstellingen, ons businessmodel, onze waardepropositie, segmentatie. Maar waarom kom je niet gewoon en dan kun je meteen evalueren of de waarde in verhouding staat tot de prijs. Als het goed is, vertel je dat het misschien niet zo goedkoop is, maar veel méér waard. Kijk naar de bedrijven die deelnemen en je ziet dat de pricingdiscipline én de pricingfunctie in Europa binnen de bedrijven aan invloed winnen.
Wanneer: 28 SEPTEMBER

Waar: Hotel Schiphol A4

Hoeveel: € 595,-
MarketingTribune-lezers krijgen € 50,- korting. Stuur daartoe een mail aan brittdejager@pricingplatform.eu ovv MarketingTribune.

Source: Luuk Koos, Marketing Tribune


Analysis - Prices and savings shield food groups from milk surge

Price increases in emerging markets and cost-cutting will help Europe's biggest food groups avoid a profit hit similar to that of the last milk crisis of 2007 when their dairy costs soared.

Swiss Nestle and Paris-based Danone are more exposed to milk costs than to other commodities, and prices have been rising this year due to strong emerging market demand and lower production in Europe and North America.

Nestle is the world's biggest milk buyer for its products such as Nido milk powder, Coffee-Mate and Cailler chocolate, while Danone has nearly two-thirds of its sales in dairy products such as Activia yoghurt and Actimel drinks.
There are also some fears that rising grain prices due largely to drought and an export ban in Russia will add to the pressure on milk prices as European farmers feed more grains to dairy cattle during the colder winter months. But analysts say the rise in milk prices is showing sign of cooling and the highest prices this year were well below 2007's peaks, even if it pays to keep a careful eye on Danone as milk accounts for more of its input costs than in the case of rivals.

"In terms of size Nestle has most exposure to milk. However, given the concentration of its portfolio Danone will be impacted most from higher milk prices," said analyst Jon Cox at Kepler Capital Markets in Zurich. Danone has recognised the rise in milk prices by raising its forecast of milk cost inflation in July to 10 percent for 2010 from 5-7 percent previously, but has also added that prices had peaked in the early summer and were now trending down. Analysts say milk accounts for 38 percent of Danone's raw material costs, 23 percent at Nestle and 6 percent at Unilever Plc/NV, and buying forward is quite difficult for liquid milk and companies often buy directly from farmers.

This means liquid milk prices can be more volatile than the more widely traded skimmed milk powder, and here Danone is the most exposed as the need for fresh milk is greater at the French yoghurt group, while Nestle is able to buy half of its requirement as milk powder for its milk drinks and chocolates.

Nestle, the world's biggest food group, spent 5 billion Swiss francs on milk in 2009.
"Dairy is one of the areas where we are seeing an escalation in costs and therefore it's one of the areas where you are likely to see some pricing action," Nestle finance director Jim Singh told an investor roadshow this month.
European Union milk powder prices peaked at around $5,500 (3,529 pounds) a tonne in 2007 falling to around $1,700 in early 2009 before edging back to just below $3,000 currently, and analysts say milk powder does give a pointer to future liquid prices.

"On the whole, milk prices have become much more volatile over the last two years which is due to the fact that the European Union intervenes less on milk prices," said Dieter Mirbach, manager of industry group European Dairy Farmers.
NOT SUCH A BIG ASK Danone raised its prices following the 2007 milk price surge, only to cut them in the middle of 2009 when costs fell, so analysts say investors are right to be wary when Danone starts raising prices in such a volatile market.

Analyst Alex Molloy at Credit Suisse said 40 percent of Danone's dairy sales are in emerging markets where general inflation runs at around 5 percent and so pushing up price is not such a big ask. Analyst Pablo Zuanic at Liberum Capital said United States liquid milk prices are starting to come down and West European prices are also peaking, and an LTO Nederland survey of European milk prices for July due on Sept 3 may confirm this.

The survey showed average European milk prices in June were up 23 percent year-on-year at 30.26 euros per 100 litres to reach an 18-month high. However, if prices have peaked then Zuanic says a Danone price rise of just 2 percent in Western Europe in the second half of 2010 will be needed.

"We continue to argue the price increase "needed" by Danone in Western Europe for the second half is quite manageable," he said. Pressure on Danone may intensify if grain prices continue to rise with Orianne Segaud at Natixis saying, "If wheat prices continue to rise, Danone has the least protection as it is the most exposed to liquid milk prices with no hedging mechanism." But New Zealand, the world's largest milk exporter largely through butter and milk powder trade, produces its milk from grass-fed livestock without any cereal-based supplement so any grain price rise will not affect production costs.

Barry Callebaut, the world's largest chocolate maker which counts Nestle and Hershey among its clients, is one of the top three users of milk powder in Europe but has been relatively insulated from price rises as it uses no fresh liquid milk in its chocolate production. Anglo-Dutch Unilever's main milk usage is at its world leading Cornetto, Magnum and Ben & Jerry's ice cream operation but it is a smaller milk buyer compared to Nestle and Danone.
Source: Reuters


E-book price war "absurd"

The e-book pricing war sparked by the launch of Amazon’s UK Kindle e-book store, which has seen the retailer price some bestselling books at less than £3, has been branded "absolutely absurd" by a top publisher.

Concerns have been raised that the UK market could be set for a battle over the headline price of e-books similar to that waged in the US over the past year. However, other publishers claimed the low prices would not affect the future pricing model of e-books.

Amazon.co.uk launched its Kindle e-book store two weeks ago, promising to offer the lowest prices on the market. In response, W H Smith dropped the price of its top 100 fiction e-books to a third of their original level, and then said that it would sell all e-books at a 50% discount.

Amazon has consistently priced some of the bestselling titles in the market at less than £3, leading to publishers and rival retailers accusing it of selling the titles as loss leaders. Stieg Larsson’s Millennium trilogy is among those available at less than £3. Iain Miller, marketing and digital publishing manager at Larsson’s publisher Quercus, declined to comment on Amazon’s pricing tactics.

However, another senior publisher attacked the pricing strategies of W H Smith and Amazon. He said: "It’s absolutely absurd to devalue our product but I’m not surprised because our industry is populated by nincompoops." He said Amazon’s move could make the agency model less attractive to publishers. He said: "In this instance, on the wholesale model, publishers are fine because it is retailers taking the pain. If we say a book is £10 and you get 40% discount, we get £6. If the retailer chooses to sell it for £2, we’re still all right."

A review of e-book prices undertaken by The Bookseller shows that Amazon and WHS are offering the lowest prices. Kindle and WHS e-books are also significantly cheaper than their counterparts on Apple’s iBookstore, where prices are set by the publisher.

Before the Sony Reader launch in 2008, publishers argued that the value of e-books needed to be at parity with the print edition. Some publishers contacted this week claimed Amazon’s move would not lead to expectations of low e-books prices. One said: "It’s a minuscule market and early doors for e-books in the UK. There’s no way the stable door has closed in terms of the size of the business in 10 years’ time."


Verizon Trying to Leverage iPad and Testing New Pricing Strategies

On Wednesday, Verizon demonstrated the power of the app, announcing plans to make it generally available by next year. If this happens, the carrier’s FiOS TV service will be available on the iPad, making the TV experience as mobile as the tablet device from Apple.

According to a Daily Tech piece highlighted that the biggest obstacle for Verizon right now is getting content providers on board. Verizon doesn’t plan to offer the app until it has a powerful portfolio of content providers agreeing to the benefits of its service.

Once the new service is in place, Verizon subscribers will be able to rent or buy movies and content through the company’s website or a set-top box. They can also download and watch the content on as many as five PCs and/or mobile devices such as the Droid X, Droid 2, BlackBerry Stor, and Windows Mobile 6.5 devices. While we wait out the news on the iPad app, Verizon has announced a carrier test of a $99 unlimited everything plan. The plan is designed to directly compete with Sprint’s Simply Everything plan, also priced at $99 per month.

According to a Verizon spokesperson, the limited-time promotion will be available only on single lines. Once tiered data plans are rolled out, don’t expect the unlimited aspect of the deal to stick around.

Regardless of the outcome, the fact that Verizon is testing options means that it is experimenting with some changes to its pricing strategies. The company has often been branded as the “luxury mobile provider” compared to players like T-Mobile, which offers an unlimited everything plan on its no-contract Even More Plus for $79.99 per month.Verizon also appears worried about competition from discount carriers like MetroPCS, Cricket and Boost as the company is testing a $50 unlimited prepaid plan in the Southeast.

In other Verizon news, the company is making headway in cloud computing for credit card transactions. Verizon Computing as a Service, or CaaS, the company's cloud computing solution delivered from Verizon cloud centers in the U.S. and Europe, is the first cloud-based solution to successfully complete the Payment Card Industry Data Security Standard audit for storing, processing and transmitting credit card information.

Source: TMCnet.com


Pricing Strategies for your travel and tourism products.

Do you have a pricing strategy for your travel products? I believe that the pricing of your travel products is both an art and a science.

This Spring, I read Smart Pricing by Jagmohan Raju and Z. John Zhang. It is an interesting book that covers multiple pricing strategies for businesses. The book got me thinking about how travel businesses should price their products and how I priced travel products in the former travel businesses I operated and the strategies I used to successfully build two travel companies.

I have recently published a marketing strategy I developed called the Automated-Booking Markup Strategy, that combines a proven website marketing tactic with a pricing strategy. I discuss this strategy at the end of the article.

Zhang says, “that when it comes to pricing, some estimated that only 8% of American businesses can be considered sophisticated players.” So most businesses don’t have a pricing strategy for their products.

There are three types of traditional pricing strategies in business. Cost + pricing, competition-based pricing, and consumer-based pricing.

In summary; cost + pricing takes the average cost of the product then adds a markup, competition-based pricing confirms the prices of its competitors, then sets the price of the product at the same price of the competition or either a little above or below, consumer-based pricing looks at a target customer and tries to determine how much that client type will pay for the product, then prices according to how much that target customer will pay. In 1994 my wife and I operated a bed & breakfast-fly fishing lodge called the Yellow Breeches House in Boiling Springs, Pennsylvania. The house was modern inside and decorated in fly-fishing decor. The Allenberry Resort a high-end resort with 75 rooms and cottages was located ¾ a mile from the house. Three traditional B&Bs within walking distance of the house were located in the village.

My target market client was business-executives from Washington DC/Baltimore, Philadelphia, and NYC areas that loved to fly-fish. I wanted to cater to the suits on the weekends and the die-hard fly-fishermen during the middle of the week. At the time the three local B&B’s sold rooms for $60-$80 a night. The resort sold rooms from $75-$100 a night.

We had 5 rooms at our B&B and I priced the rooms in our first year of business at $99, $109, $139 and $195 (2 room suite). Remember this was 1994 and everyone told me I was crazy for pricing the rooms so high. Our prices were way above the local B&B’s that were literally right next door to us. My pricing strategy was a combination of competition-based and consumer-based pricing.

My pricing strategy was pure positioning. I wanted to position the house against the resort and sell rooms slightly higher than the resort making our lodging the most expensive in the area. My sole reasoning for this pricing strategy was that “executive” type buyers pay first class prices. I knew from research that my target client from the three cities/areas I was targeting with my marketing and advertising, paid for rooms that cost $100-$200 per night. My target client rarely paid under $100 per night. My pricing strategy worked and we successfully acquired the type of client we wanted and we sold out every weekend and we acquired the die-hard fly-fishermen during the mid-week. Sometimes we discounted the rooms during the mid-week to reach the non-executive types but this wasn’t our #1 focus.

If you don’t have a pricing strategy take time out from your business to review just exactly how and why you price the products the way you do. Review the traditional pricing models above and see if you can find a model that one reaches your target client and two positions you how you want to be positioned against your competition. The easiest way to grow sales and or increase profitability in your travel business is by changing your pricing. The Automated-Booking Markup Strategy is a proven website marketing tactic and a pricing strategy combined. The Automated-Booking Markup Strategy increased annual profits in my last online travel business by more than 10% and in the last three years prior to acquisition of the company we increased sales by 33%, 74% and close to 100% respectively.

The Automated-Booking Markup Strategy will increase bookings and profits for your travel business and I guarantee it. The power behind the Automated-Booking Markup Strategy is that it creates urgency for buyers to return to your website and buy your travel products. Literally every week ON-schedule you will receive new reservations.

The Automated-Booking Markup Strategy works for online travel businesses, tour operators, travel agencies, travel portals, hotels, motels, B&Bs, guides, and any business in the travel and tourism industry that accepts reservations or bookings online.

Source: Tips from the T-lists by Mark Zitto

Uncovering Billions in 'Hidden Profits' for Airlines

Pricing is one of the most powerful -- yet underutilized -- strategies available to businesses. A McKinsey & Company study of the Global 1200 found that if companies increased prices by just 1%, and demand remained constant, on average operating profits would increase by 11%. Using a 1% increase in price, some companies would see even more growth in percentage of profit: Sears, 155%; McKesson, 100%, Tyson, 81%, Land O'Lakes, 58%, Whirlpool, 35%. Just as important, price is a key attribute that consumers consider before making a purchase.

At most companies today, pricing is a mix of marking up costs, matching competitors, and doing things "the way that they have always been done." A simple change in the way that managers think about pricing can reap a financial windfall. The key to better pricing is to "think like a customer" and set prices to capture the value that consumers place on a product or service. The beauty of focusing on better pricing is that prices can be changed on Sunday night and new profits can start rolling in as early as Monday morning.

Consider airline travel. On a packed cross country airline trip, how much would you pay for the benefit of not having someone sitting next to you in the middle seat? No airline has been able to capitalize on the tremendous value that passengers reap when someone is not squeezed in next to them. For me, an empty middle seat equates to enjoyable flight: no jabs and plenty of room to spread out my work materials. It's almost as good as first class.

Today, it's generally luck that determines which middle seats remain vacant at take off. When a flight is not sold out (which is often), some passengers are "luckier" than others. Why not start charging passengers for this added value?

One way to essentially guarantee that no one will sit in the middle seat is to simply purchase the middle seat, as some travelers do on international trips. However, there is another, lower priced, "no middle seat" option that may make sense to both airlines and consumers.

Here's my thinking: suppose two people book a trip and take the window and aisle seats. For, say, $100, the airline will "hold" the middle seat and designate it as one of the last seats to be sold. If demand ends up high, the airline will sell the middle seat to reap full revenue and refund the initially paid $100 option fee. If the plane is not sold out, the middle seat remains open. The benefits of offering a "no middle seat" option are two-fold: consumers have the opportunity to boost their chances of enjoying a relaxing flight and airlines reap revenue from unused capacity.

Source: The Streets by Rafi Mohammed


Amazon keeps prices on Ebooks artificially low with new loyalty system

One of the success factors of the Kindle ereader, is that many American bestellers are available in a digital version for less than 10 dollars. At first, Amazon determined the ebookprices themselves, using the wholesaler model. However, the pressure of the publishers made the retailer decide to switch to the agency model where the publisher determines the prices. Amazon is trying to find another way to keep the ebookprices low.

The American publishers want to master their own price policy, as price is a complete part of the marketingmix. Amazon-boss Jeff Bezos has every interest in keeping the prices for ebooks low, so he can move consumers into choosing the Kindle platform for their ebooks. The retailer came up with a smart move. He offers the publisher 70% of the royalties that Amazon makes on the sales of the ebooks. But to get 70% of the royalties the price for an ebook needs to be under $10.

It is nice to see that different kinds of mechanisms are being brought to life, that forces publishers to think about their pricestrategy for ebooks. Otherwise it is also weird that retailers can enforce this way such a market power!

Eén van de succesfactoren van de Kindle ereader is dat veel Amerikaanse bestsellers in digitale vorm voor minder dan 10 dollar verkrijgbaar zijn. Aanvankelijk stelde Amazon onder het wholesaler model zelf de ebookprijzen vast, maar onder druk van uitgevers besloot de retailer over te gaan op het agency model, waarbij de uitgever de prijzen bepaalt. Amazon probeert nu op een andere manier de ebookprijzen laag te houden.

Toen de Kindle eind 2007 op de markt kwam waren er direct al tientallen boeken uit de bestsellerlijst van de New York Times voorhanden als ebook, de meesten onder de ‘magische’ tien dollargrens. Veel mensen verbaasden zich over deze lage prijzen, vooral in vergelijking met de hardcover versies, die vaak meer dan het dubbele kosten. Het waren echter niet de uitgevers die deze lage ebookprijzen entameerden, maar Amazon, die als wholesaler de ebooks inkocht van uitgeverijen en die tegen een zelf vast te stellen verkoopprijs ging aanbieden.

Dat zette echter kwaad bloed bij Amerikaanse uitgeverijen, die hun eigen prijsbeleid willen hanteren, prijs is immers een integraal onderdeel van de marketingmix. Onder druk van een paar van de grootste uitgevers die dreigden hun ebooks terug te trekken besloot Amazon daarom over te stappen op het agency model, waarbij de uitgever de verkoopprijs van de ebooks kan vaststellen.

Amazon-baas Jeff Bezos heeft er echter alle belang bij de ebooks niet te duur aan te bieden, om zoveel mogelijk consumenten ertoe te bewegen te kiezen voor het Kindle platform. Daarom heeft Amazon een slimme list bedacht, om het gros van de ebooks toch onder de tien dollar te kunnen blijven aanbieden: vanaf vandaag keert de retailer namelijk 70% royalty’s uit over de door hen verkochte ebooks, in plaats van de 30% die eerst van toepassing was. Maar om in aanmerking te komen voor dit verhoogde royaltypercentage moet de verkoopprijs van het ebook wel onder de $10 liggen. Voor ebooks met een hogere verkoopprijs geldt nog steeds het oude 30% tarief. Dit is niet de enige voorwaarde die de internetreus oplegt; zo moeten uitgevers de ebooks beschikbaar maken in alle regio’s waar ze de rechten voor hebben en de verkoopprijs van het ebook moet minstens 20% lager zijn dan de laagste prijs die voor het fysieke boek wordt gevraagd. Naast nog enkele andere voorwaarden worden ook nog de digitale verzendkosten afgetrokken van de opbrengst (15 dollarcent per MB).

Enerzijds is het goed om te zien dat er mechanismen in het leven worden geroepen die uitgevers nog eens goed laten nadenken over hun prijsstrategie voor digitale boeken, aan de andere kant is het uiterst merkwaardig dat een retailer op deze wijze zoveel marktmacht kan afdwingen.

Sommige boeken – of ze nu op papier of digitaal worden uitgegeven – vragen nu eenmaal meer tijd en onderzoek, om over redactie en vertalen nog niet te spreken, dan andere boeken. Dat moet zich kunnen vertalen in een hogere verkoopprijs, maar dat wordt nu bestraft door een marktpartij die alle (soorten) ebooks op één lijn zet – chicklit naast literaire meesterwerken, scripties naast gedegen wetenschappelijke onderzoeken. En dat is uiterst kwalijk. Het is dus wachten op een nieuwe revolte, of op partijen die Amazon met gunstiger voorwaarden de loef gaan afsteken.

Source: Eburon Academic Publishers


Raise your Prices!

By now, we're all aware of the slash-your-prices scenario many companies take as a given these days: Your customers demand more and have online access to product comparisons from multiple sellers; you face global competition from rivals that have labor-cost advantages; and the financial crisis has accelerated the commoditization of more and more markets.

The solution? Cut your prices to gain volume and scale. That definitely works for a few companies. But the reality is a very few—think Wal-Mart or Costco or Southwest Airlines. In fact, the very success of these business models makes it difficult for their competitors to duplicate—think Kmart or Sears, or any number of bankrupt budget airlines.

This article is for everybody else: those who choose not to compete on the basis of cost and low price. This article is for companies that can and should compete on the basis of performance, for which their customers willingly pay higher prices. By competing on performance instead of price, you shift the battle to where your company's strengths lie—in the ability to deliver unique benefits. So-called performance pricers are adept at three core activities: identifying where they can do a superior job of meeting customers' needs and preferences; shaping their products and their business to dominate these segments; and managing cost and price in those areas to maximize profits. If you can find these performance segments, manage them cost-effectively, and communicate to the customer the extra value being delivered, then as long as your offering is superior to the competition or other alternatives, you will be able to boost both prices and profits.

For an idea of how to become a master of performance pricing, let's consider a global chemical company we studied. For years the company had a pretty typical sales rule: It would take any order at any acceptable price. That sounds familiar, no doubt. But by 2003, it had recognized this wouldn't generate acceptable shareholder returns or growth. So the company switched to performance pricing, using a continuing four-step process that any company can duplicate: Identify value opportunities, choose which ones to prioritize, align their value and price, and constantly communicate to customers the value being provided. Here's a look at each of their four steps.

Identify Value Opportunities

The leaders of the company started out by repeatedly asking in meetings across functions: What can we do to help our customers succeed or be happier? Every product, service and benefit the company delivered to its customers was examined to better understand all of the ways in which it had some impact on the customer, and how the offering could be improved.Take a simple example: The company sells rubber stoppers to packagers of pharmaceuticals that use the stoppers to cap containers of injectable drugs. The company had long viewed the stoppers as a commodity. They're easy to make, perform a simple function and cost very little. But looking at them afresh, from the customers' perspective, it recognized that the stoppers could deliver multiple benefits to customers, and that these benefits could be quantified and ranked in terms of the value they produced for the customer. The stoppers' low price was only the first benefit. Their design could be tweaked to improve customers' packaging-line speeds, lowering their operating costs. And because the customers used the stoppers to seal vials with different contents, making stoppers in different colors was recognized as a way to help hospitals and doctors reduce errors by making each vial more recognizable, and thus lower their insurance costs.

Set Priorities

After detailing the benefits, the company had to decide which products to develop further and how to invest its resources accordingly. To be considered for performance pricing, an offering had to meet two basic tests. First, it had to have either a strong competitive position in its market or a highly ranked benefit to the customer (benefits were ranked, from low to high, in three groups: offering low acquisition price, helping reduce operating costs, and improving sales by enhancing quality). And second, the product had to be manufacturable at a cost that yielded attractive profit margins. Thus, any product whose main benefit was its low sale price was likely to be rejected. But so were premium products if their costs were high and their projected total market too small. For example, the company had done well with a certain dental-filling product, but the total potential market was extremely limited and the investment costs would have included long, expensive testing of the product on people. The stoppers, by comparison, looked promising. They offered highly valued benefits to customers, and could be produced at low cost.

Align Price and Value

The next step was to set higher prices in line with what the customer was willing to pay. The key here is being able to document and quantify the precise nature of the benefits that your products offer, and to figure out what their tangible value is to the customer, in terms of acquisition cost, operating cost and added value to the end user. Once the supporting data are in hand, then you sit down with the customer to discuss what the new price should be. In the case of the rubber stoppers, the company used the data to successfully argue to a customer that two products, while nearly identical in appearance, should be priced very differently because of the different ways they were used. One stopper sealed vials of a vaccine for chickens that the customer sold for less than $5 a vial; the other sealed vials of an anticancer medication that sold for more than $1,000. While the stoppers looked alike, the higher-value application had tighter tolerances and came with significantly more technical assistance, service responsiveness and quality-control data, due to the difference in the costs and risks associated with the two stoppers. Indeed, failure of the seals on a few of the anticancer vials would have far greater impact on the customer's bottom line than a few ruined vials of the chicken vaccine. And, while both kinds of stoppers helped production—in terms of high packaging-line run efficiency and low scrap rates—higher efficiency for the anticancer vials, resulting from the technical assistance and tighter tolerances, translated into increased profits for the customer. Thus the chemical company proposed a significantly higher price for the anticancer-vial stopper, and presented reams of data from the tracking system to support its argument. The customer later came back with figures of its own that painted a lesser impact than the company had suggested. But the customer's figures were in the ball park, the chemical company said. The two companies agreed on a new price for the anticancer stoppers that was a multiple of the price for the chicken-vaccine stoppers, and both parties felt like winners.

Get Cooperation

Such a system relies on a lot of help from the customer, and getting that cooperation takes work. The chemical company had to display a thorough understanding of all the issues the packager faced to win its case for the differently priced stoppers. After such increases are won, continuing efforts to communicate why higher prices are justified can bring other benefits as well. By adopting performance pricing throughout the firm, over the next five years, the chemical company's profits grew 10% annually in a market growing less than 2% a year. The approach also provided a strategy that allowed the company to weather the recession better than competitors: In 2009, industry volume declined more than 20%, compared with 14% for the company. But, despite lower volume, the company's return on sales increased by more than 40% due to its ability to identify value opportunities, prioritize requirements, align value and price, and communicate value to cost-conscious customers.

Source: By Frank V. Cespedes, Elliot B. Ross and Benson P. Shapiro.


Romtelecom changes Pricing Strategy

The Romanian incumbent telco Romtelecom has introduced differential pricing for fixed line internet services in order compete more effectively with its main rivals UPC and RCS/RDS.

According to ZF, the company has abandoned its policy of charging everyone the same, regardless of local context. As a result, some clients will pay €3.50 a month for 2 Mbps internet access, while others will be charged between €4.20 and €4.90. At the same time, the number of internet packages has been reduced from seven to three in order to bring it into line with the 2-4 offered by UPC and RCS/RDS.

Romtelecom has seen a surge in internet subscriber numbers in the last three years – up from 170,000 in 2007 to today’s 800,000, with 300,000 signing up in 2008 alone.

Many of the latter are on two-year contracts than come up for renewal this year, and Romtelecom, according to Ovidiu Ghiman, its executive director of strategy and business development, is keen to retain them.

Source: Broadband TV News


Succes factors in pricing - Reaching the next level

Pricing is one of the key success factors to increase profitability. Therefore it is crucial for managers to know, which elements of the pricing process have the highest impact on the overall success of the company. Knowing the key success factors in pricing enables every company to improve their pricing process in a well-directed and systematic way.

The European Pricing Platform conducts this year a European study among European managers on the key success factors in pricing. It is aimed at discovering in which phase of pricing development European organizations are. As well as discovering which factors are being experienced as successful.

This survey is the result of a cooperation between the ePP and prof. Oliver Roll of the 'University of Applied Sciences Osnabrück - Germany'.

The value of this study increases with the number of the participants. Everyone can participate for free on www.pricing-survey.eu ! Results will follow as soon as the survey is closed.

European Pricing Platform announces new partnership with SPMG

Lendelede, April 30, 2010 - The European Pricing Platform (ePP), serves as the first 'Not for Profit' network for cross-industrial pricing decision makers in Europe. Through various on-and offline media, ePP is dedicated to develop and share pricing best practices, effective tools, methodologies and populate technological solutions assisting in successful definition and implementation of Strategic Pricing.

ePP has recently added SPMG as a new Pricing Expert, but also as an exhibitor and sponsor of upcoming ePP events throughout Europe.

The European Pricing Platform is very pleased to have SPMG as a new Pricing Expert partner and looks forward to working closely with them in the near future.

About SPMG:
SPMG has over 15 years of consultative pricing experience through innovation, research and hands-on management, which made their consultants specialists in value-based pricing & revenue strategies. Each of their assignments are carefully managed using proven customized methodologies and techniques to meet specific client needs. SPMG processes the necessary pricing tools to evaluate the success or limitations of their client's strategic & tactical pricing efforts in order to determine wether value is being created or destroyed. They work within a diverse range of industries on strategic pricing, tactical pricing revenue and pricing process reengineering issues.

The President of SPMG, Michael Hurwich, has consulted to major Fortune 500 and mid-sized firms for the past 15 years. Michael has developed numerous corporate and business strategies for a broad range of industries. He has also written numerous articles on pricing and marketing strategies, and gives lectures all over the world.

About European Pricing Platform:

The ePP offes your company to have the right pricing tactics in place to guarantee customer loyalty and deliver sustained margin growth to your business. Enhance your pricing know-how and be succesful in it by joining this dynamic and yet resourceful pricing platform.


Check the right Price in the B2B Market

Current research has shown that there is a new pricestrategy rising in the B2B market. Setting the highest price possible is the most executed strategy for the moment. A strategy that doens't seem effective at all.

Value Based Pricing has been a popular instrument in the B2B market for quiet some time. It is a method where they look at the competition their prices for a similar product. However, there are also some disadvantages! For instance, the relationship with the client doesn't get stronger. On the contrary, it gets weaker.

The new rising pricing strategy, is one where the collaboration between vendor and client serves as the starting point. This is a strategy which does right at the changing ratio between these two parties. Definetely important for the B2B market, where there is a big dependence amongst both these parties.

'Check de juiste prijs in de b-to-b markt'

Een nieuwe manier van prijsbepaling in de business-to-business markt is in opkomst, zo blijkt uit onderzoek van de Universiteit van Twente naar best practices in value based pricing. De onderzoekers publiceerden een korte checklist om tot de juiste prijs te komen.

'Vraag wat de klant nog net wil betalen' was tot nu toe het prijsmotto in de business-to-business markt. Met andere woorden: maak de prijs zo hoog mogelijk. Maar die strategie blijkt lang niet altijd effectief.­

Uitgaan van de waarde van het product, oftewel value based pricing, is al een tijdje een populair prijsinstrument in de b-to-b markt. Daarbij wordt meestal gekeken wat de concurrentie voor een vergelijkbaar artikel vraagt, waarna de producent vervolgens een zo hoog mogelijke prijs vaststelt. En als het om een superieur product gaat, komt daar nog eens een premiumbedrag bovenop.

Op zich is er niets mis mee om de waarde in de prijs te verdisconteren, maar aan deze ‘eenzijdige' vorm van value based pricing zitten twee belangrijke nadelen: 1. Andere en meer winstgevende manieren om te profiteren van de superioriteit van een artikel worden niet bekeken en benut. 2. De relatie met de klant wordt niet sterker, maar eerder zwakker bij deze prijsstrategie.

Een nieuwe manier van prijsbepaling is in opkomst, eentje die uitgaat van samenwerking tussen leverancier en klant, en daarmee recht doet aan de veranderde verhouding tussen de partijen. Zeker in de business-to-business markt is de onderlinge afhankelijkheid groot, dus zijn er tegenwoordig nog maar weinig producenten die het zich kunnen veroorloven om eenzijdig de hoogte van de prijzen te dicteren. ­Leveranciers die verantwoorde marges willen halen, zullen iets anders moeten verzinnen. De voorbeelden zijn gelukkig al voorhanden.­Neem bijvoorbeeld chipmachinefabrikant ASML, die zich onder andere dankzij nauwe samenwerking met afnemers en een slimme prijsstrategie verrassend snel herstelde van de crisis. Het bedrijf laat zijn klanten om te beginnen zien hoe zij hun omzet kunnen verhogen met de technologie van ASML en calculeert vervolgens zijn prijzen mede op grond van die omzetverhoging, zonder daarbij de afnemer het vel over de oren te halen. Resultaat: tevreden klanten die begrijpen hoe de prijs tot stand is gekomen en die weten dat ze niet teveel betalen.

De onderzoekers hebben managers uit Amerikaanse, Europese en Aziatische bedrijven geïnterviewd, en uit hun bevindingen een zestal vragen gedestilleerd waarmee elke producent in de b-to-b markt zelf kan bepalen of zijn prijzen ‘slim' en voldoende onderbouwd zijn:

Welk doel streef ik als bedrijf na in dit marktsegment? Wat is de transparante meerwaarde van mijn product voor de afnemer? Transparant betekent dat de klant begrijpt hoe er gecalculeerd is en dat hij de waarde van het product kan vergelijken met concurrerende aanbiedingen. Wat is de prijs van het beste alternatieve product? Wat zijn de daadwerkelijke kosten van het product? Welke prijsstrategieën zet ik in, op korte en op langere termijn? Wat is volgens de afnemer een eerlijke prijs?

De kern van deze checklist is volgens de onderzoekers dat slim prijsbeleid vooral een kwestie is van in de huid van de klant kruipen. ‘De essentie is dat je snapt hoe de afnemer tot zijn besluitvorming komt'.

[ Bron: Kluwermanagement.nl ]