1.
How to Identify your Optimum Price
An Introduction to Value
Based Pricing
Copyright Margin2 2011
price at the moment of truth

2.
Why is Pricing so important?
Those companies that ‘achieved true excellence in their price execution
capabilities . . . earned operating profits 24% higher than their industry peers’
Hogan 2011
Copyright Margin2 2011
price at the moment of truth

3.
The moment of truth
In every sale, the The price you offer
buyer makes a is therefore
mental or physical fundamental to
calculation of the
Value Price your customers
value they will gain value calculation,
from making a it’s a moment of
purchase truth where theory
becomes practice
Every purchase is therefore a balance
between the price offered and the value
delivered, there is the constant risk of losing
the sale or missing out on vital profit.
Copyright Margin2 2011
price at the moment of truth

4.
So, if its about ‘Value’, what does that mean?
• Its judged in unquantifiable terms
• It is judged from a range of perspectives
• It is always placed in the context of today’s sale
Copyright Margin2 2011
price at the moment of truth

5.
Strategic Price Positioning
Customer
Value
Identify
Strategic Price Competitive
Minimum
Position Anchors
Price
Sales Channel
Source: Hinterhuber 2010
Copyright Margin2 2011
price at the moment of truth

6.
Equation for Customer Value
Benefit
- Effort
- Risk = Value Price
Copyright Margin2 2011
price at the moment of truth

7.
Types of Customer Benefit
Service Level +
Economic Functional Intangible
Commodities Uniqueness & Image, brand,
with price ability to meet unique
based appeal consumer experience
needs
+ Price Sensitivity
‘They saved me ‘They processed ‘My friend
£10,000 in tax’ my accounts in referred them
2 days’ to me’
Copyright Margin2 2011
price at the moment of truth

8.
Activity Value Mapping
Value Integral Market Margin
Destroyers Features Benefits Drivers
High
Value
Cost Benefit Break Even Point
Low
Common Unique
Differentiation
Copyright Margin2 2011
price at the moment of truth

9.
price at the moment of truth

10.
How much would you pay for this car?
Ford Focus 1.6 Zetec 2007 45,000 miles
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price at the moment of truth

11.
This Ford This Ford
Focus 1.6 Focus 1.6
Zetec 2001 Zetec 2011
with 139,000 miles is with 22 miles is
advertised for £695 advertised for £12,000
How much would you pay How much would you pay
for this Ford Focus 1.6 for this Ford Focus 1.6
Zetec 2007 with 45,000 Zetec 2007 with 45,000
miles on the clock? miles on the clock?
Copyright Margin2 2011
price at the moment of truth

12.
How Coca Cola exploits different
sales channels
Price per 100ml
0.7
0.6
0.6
0.5
0.4
0.3 0.25
0.2
0.09
0.1
0
2 Litre in Tesco 500ml in Coop 250ml in a Pub
£1.78 £1.25 £1.50
Copyright Margin2 2011
price at the moment of truth

13.
Understand your customers customer
through sales chains
e.g. Food & Drink Sales Channel
Research, Marketing
and Advertising
Farmer Manufacturer Retailer Shopper Consumer
Farmers
Markets
Copyright Margin2 2011
price at the moment of truth

14.
3 Points to Remember about Pricing
• Getting it right has a huge impact
• Its about understanding what your Customers are
willing to pay
• To exploit the opportunity you need to understand
your customers, competitors and channels
Copyright Margin2 2011
price at the moment of truth

15.
Thank you
Copyright Margin2 2011
price at the moment of truth