Pricing strategies for financial products ppt,how to download video from youtube program,marketing communication strategy definition deutsch,definition of marketing management information system - PDF 2016

Breakeven pricing means that the set price gives enough profit over production costs to cover fixed overhead.
To be sure, there are many more pricing strategies.  One thing to remember is that the higher the level in Maslow’s hierarchy of needs that a product or service is associated with, the higher can be the price level.
In the overall marketing mix, price is the most important item that can affect a company's profitability. If market constraints force development of sub optimal short-term strategies, how can we minimize the impact on positioning? Traditionally, marketing's role in developing pricing strategy has been to understand market acceptance of price changes to new and existing products and services. Pricing research typically focuses on a customer's preference for a specific offering and reports findings in terms of percentages.
Many organizations make pricing decisions based on secondary or syndicated data sources, internal costs, or competitive factors. While internal costs have a major impact on profitability, not linking them to market input on competitive pricing and customer willingness to pay can affect profits. Effective pricing strategy is best developed through a profitability model that incorporates market input on a competitive marketplace, current market conditions, and impact of advertising and promotions. The first step is to develop the market sensitivities associated with price, brand, features, channel, and packaging-shown in the "Modeling of Market Input" section. The last step in the model is to tie other marketing-mix items into the market response tool. An extremely important part of the model of pricing strategy is getting meaningful market input by collecting information in a way that parallels a customer's normal buying experience.
Properly designing a discrete choice exercise that allows a survey to match the customer's actual purchasing experience is probably the single most important part of extracting market input to develop a model of strategic pricing.
In general, the key components of the design involve multiple price levels for the company's and key competitor offerings, along with testing of certain products and services both in and out of the marketplace. It's important to understand how the market values the different components of an offering. Once the survey has been properly designed and executed, market sensitivities need to be derived from customer input.
To increase the accuracy of the survey model, and to link market shares to total units in the marketplace, the market response tool derives a base case that reflects current prices and availability of products and services.
If only market shares are considered, and a new offering completely cannibalizes from the existing company set of products and services, then a decision might be made not to launch. Consider Exhibits 2 and 3, which show the impact that changes in a company's price have on share, sales, and contribution.
Not only does optimization based on contribution increase overall profitability, but these strategies will be more stable over time compared to those developed based on sales. To enhance the results from modeling market input, management must be able to adjust forecasts based on assumptions of levels of advertising and promotion. In many cases, ascertaining the relationship between advertising and promotion and their market responses might require comprehensive studies. In addition to integrating marketing-mix items into the model of pricing strategy, certain internal and marketplace constraints might affect pricing strategy. These are integrated into the model through the addition of secondary optimization criteria. This case study involves a leading pharmaceutical product that was approaching the end of its patent protection. To meet the research objectives, the modeling of market input was based on a two-step procedure.
The modeling of market input provided measures of price sensitivity, affinity for prescribing a generic, and preference for prescribing new products with higher safety claims. Because the client had no prior experience with a private label, a relatively simple relationship was developed to forecast what percent of the generic market the client's private label offering would achieve. Interest in the new products with higher safety claims was very high, and the client's offering was projected to be twice the size of the other entrants. A five-year planning tool was integrated into the market response tool that allowed entry of assumptions associated with each of the six items mentioned here. To overcome these difficulties and develop a model of strategic pricing, it's important to communicate the benefits of this model so everyone shares a similar goal in terms of pricing strategy.
Whether you’re marketing a product or service, one of the major determining factors in the success of your company or brand is going to be the price you are able to command and the corresponding impact on your profitability.
Your pricing tactics can be based on the different roles of each product or service within your total portfolio. Entirely different pricing tactics can be effectively combined within an overall pricing strategy. Capacity – Based on your internal infrastructure, what level of volume can you effectively manage and what level of profitability must it deliver? Differentiation – What level of pricing can you reasonably expect based on the attributes of your products and services? Competition – What offerings does your competition have and how does their pricing structure align or conflict with your plans?
Market Trends – At what level of the pricing matrix are there opportunities for success based on your offering capabilities?
If possible, you should try to have appropriate representation of products and services within each price tier that you plan to compete. Finally, regardless of your resources or capabilities, we never recommend any sort of pricing strategy that involves any long-term pursuit of being at, or very near, the lowest price in the marketplace.
Over the past few days we have been discussing several different pricing strategy models that are available to home based business owners.
The freemium model is great for service based products such as online games, software, web services and other media.
1.    You have the potential to get a large base of users hooked on your service because it is free. 2.    If your service is extremely useful or addicting, many users will naturally want to pay.
1.    Traditional markets may respond better to this pricing model than to unusual ones they may not understand or they may be wary of.
Out of the two pricing strategies, which one appeals most to you – freemium or the one time model. Tomorrow we are going to learn how to test, track, and analyze which pricing strategy will be the best fit for your business. Compared to the other work you need to do on pricing, however, choosing a pricing strategy is actually pretty easy.
Penetrate: Setting a low price, leaving most of the value in the hands of your customers, shutting off margin from your competitors. Skim: Initially setting a relatively high price to reinforce your value and capture the profit you need to invest in more innovation. Follow: Setting price based on your largest competitor or a dominant input so that you track changing market conditions. In others it is the interest rate — pricing strategies for solutions for financial services companies are very dependent on interest rates.
Adopt a penetration pricing strategy when market share (first mover advantage) is the most important thing about your market.
Adopt a skim strategy when you have a compelling value differentiation and have identified a well-defined and relatively small market entry segment.
Adopt a market following strategy when there is a dominant incumbent that you are going to be compared to, or if there is some input that determines the value of your offer. Pricing strategy can change as you move across Geoffrey Moore’s technology adoption cycle (see B2B Pricing Black Magic).
Normally, companies have a Penetration strategy while targeting Early Adopters and in the Bowling Alley, move to Skim for the Tornado, and then slip into Market Following for Late Majority Markets. You Can’t Price Software Without FocusPicking a number is actually the last step in a successful pricing process.
The Secret to Boosting Your Software Pricing PowerSteven explores the surprisingly powerful role emotion plays in setting the right price for your software. Read more.


How to Disrupt Your Market with an Innovative Pricing ModelGoing up against an established competitor? Steven Forth has more than 10 years of experience in B2B software pricing and specializes in SaaS pricing models. Join over 95,000 professionals and get the best new ideas for building B2B software companies. Cost plus means that a certain profit margin is added to the cost of a product to achieve the desired return on equity.
Premium pricing sets a price level that is above market or those of immediate competitors to support the premium brand positioning. A Rolex watch can easily be associated with the level of self-esteem while a Timex watch is at the level of social belonging. How to set prices and measure their impact on a company's business model, however, is less clear. Through the use of conjoint-type studies, researchers have learned about the trade-offs between brand, price, and features and leveraged customer value to develop pricing strategies. Given the lack of a complete set of competitive offerings of all products, services, and prices in the marketplace, it's hard to integrate preference measures to current market conditions and then accurately project changes in the marketing mix, especially in financial terms.
While each of these items needs to be considered, profit potential and product equity can erode significantly with strategies based on these items alone. It's unwise to develop a pricing strategy based on a reaction to customers leveraging one supplier over another to get the best possible price or a reaction to competitive price changes, internal sales goals, and inventory levels.
The results from this type of model will give specific direction on which new and existing offerings should be in the marketplace, how they should be packaged and priced, and how marketing investment should be allocated between advertising and promotion. The top half of the exhibit shows the model inputs of the customer and current market levels, and the bottom half represents the marketplace and the items a company has control over to optimize their offering. These sensitivities relate to how the marketplace will react to changes in new and existing company and competitive offerings. This step converts market shares to total dollars in the market by using industry sales from the current market. This step involves developing relationships that relate advertising and marketing expenditures to market levels of awareness and distribution.
The critical step in this process is to review with management all possible scenarios they'd want to consider in the marketplace and then designing the study to allow testing for these different scenarios. Products and services are tested in and out of the marketplace to determine which offerings will lose share when a new product or service is added as well as which offerings will gain share when a product or service is no longer in the market. For certain studies, part of the design needs to include options for de-bundling an offering, as well as the combination of multiple products and services combined in a package offering.
As indicated in Exhibit 1, the modeling of market input must analyze the choices the respondents gave to specific market conditions and convert them into measures of price sensitivity, brand loyalty, feature affinity, channel, and packaging preference. It's then compared to known market shares and market sizes at the same prices and availabilities. However, if the new offering has a higher profit contribution, then it may be beneficial to launch it. Unless the offering is priced so low that customers question its quality, the lowest price will always produce the highest share.
The price that maximizes company contribution is $27, which projects a contribution of $7.7 million.
To begin with, just redirecting the focus of the marketing program to maximize contribution vs.
Some measures that need to be considered include (1) level of advertising and its impact on awareness, (2) level of distribution and its impact on volume, and (3) level of dealer incentives and promotions and its impact on channel response. Whether these relationships exist or not, the pricing model must allow management to at least be able to enter assumptions as to how the market will react to changes in their advertising and promotion. Types of constraints that might need to be considered include (1) supply constraints, (2) impact of major price changes on competitive responses, (3) difficulty in changing current prices in marketplace, (4) order of entry for new products, and (5) external regulation. In most cases, the primary optimization is associated with overall company profitability in the category.
Besides the potential for generics to come into the market, there were some safety concerns fueling new product development. First, the survey collected prescribing behavior based on a market with and without a generic at different prices for the key products in the market. Through comparison of base cases with no generic, initial shares for all products in the market were calibrated to match known market shares. A straight-line relationship emerged between two price points: A low price that would ensure the client private label would get 100% of the generic market and a high price so expensive the client private label wouldn't get any part of the generic market.
In addition, if generics are introduced in the marketplace, then they'll be priced as a percent of the client's branded product.
Before making a decision on moving ahead with the new product offering, management needed to consider the following items: (1) impact on market size due to introduction of product with safer product claim, (2) impact of DTC advertising, (3) impact on cannibalization on current branded product, (4) cost to develop and test new product, (5) impact of generic and branded product pricing, and (6) impact of competitive responses. Basically, your pricing must be structured in such a way that it reflects both your internal requirements and the external needs and expectations of your customers. If you establish a reliable process to manage pricing, you can maintain a fluid and effective pricing model that allows you to maintain profitability while reacting to market pressures. You must have a realistic view on the value of your products and services as well as a pretty good understanding of your industry and the competitive landscape. Clearly this will be somewhat dependent on the size of your organization and the resources you can bring to bear. Unless you’re the very largest and most efficient company or brand in your industry, this is impossible to achieve with any degree of financial success.
A graduate of the University of Iowa, John had more than 20 years of professional experience in Sales and Marketing prior to founding FMG.
Lisa Thompson is a social media marketing coach who helps people attract leads and sales using social media.
This used to mean finding a dominant competitor and setting prices at a premium or discount to their price (in practice usually the latter). The price that makes sense in a low interest rate environment can be very different from what works in a high interest rate environment. When utilization ratios are low you would price based on how much you decrease input or process costs. You have to be in close touch with the market, be able to change prices quickly, and be able to communicate the logic of the price change, and why the price change is in the customer’s interest. As you move from Early Adopters to Bowling Alley to Tornado you may want to change your pricing strategy at each phase.
A disruptive pricing model can be one of the most effective tools you use to differentiate yourself.
He is currently a Partner at market strategy and consultant firm Rocket Builders and co-founder and CEO of TeamFit. You can’t understand how you create value unless understand both the customer and their business model and the alternatives that they have. Mark up on the other hand simply applies a percentage to cost to arrive at the selling price.
In contrast, discount pricing is pricing below market or immediate competitors just to generate volume sales.
Too many times, the focus of pricing is related to short-term competition or internal cost structure. While this is valuable information, these types of research approaches don't do a good job of replicating the complexity of current marketplaces and extracting the real impact of price and price sensitivity. This tends to lower the value of research because management can only make decisions on a relative "percentage" basis, rather than on an absolute "profit" basis.
Some companies get input on customer's willingness to pay from measurements based on observed marketplace behavior. These factors need to be considered in developing pricing strategies, but these strategies can hurt long-term profitability and product equity if they don't estimate market response and impact on sales channels and profitability. The overall process is broken down into four basic components: (1) modeling of market input, (2) calibrating model sensitivities to current market, (3) developing contribution measures, and (4) integrating with the overall marketing mix and developing profitability measures. This is especially important when making pricing decisions in light of total R&D and marketing investments.


Now the market response tool can optimize pricing and packaging strategies based on the total contribution rather than just share or sales.
Also included here are any market or production constraints that need to be considered in developing pricing strategy. In addition, experiments can accommodate new brands, features, prices, and channels that currently don't exist in the marketplace.
For example, if management wants to test a new offering, they may want to consider multiple scenarios of (a) adding it to its current portfolio, (b) having it replace one or more existing products and services, or (c) not introducing it at all because it might cannibalize their more profitable current offerings. Prices can be different for all products and services being tested and should reflect current market prices. In both cases, multiple levels of price would need to be tested for each de-bundling and package offering. Developing segments of respondents who exhibit similar market sensitivities helps discrete choice maintain a high level of heterogeneity, and better understanding of the unique needs of target segments. This is a very important step in bridging the richness of market input with the accuracy of known market information.
If the optimization criterion is based on sales, rather than share, the price that maximizes sales is $22.50. By entering "worst case" to "best case" ranges for these relationships, along with varying levels of advertising and promotion, the market response tool can determine what impact these items have on pricing strategy and overall profitability.
However, because the model can provide a list of alternative pricing and packaging strategies sorted by profitability, it can identify the best alternative by locating the highest profitability subject to the necessary optimization criteria. Overall market size had been growing due to initial direct-to-consumer (DTC) advertising and anticipation of lower priced alternatives and safer products.
Then for each initial question, an additional question was asked to determine how the prescribing behavior would change based on the availability of new products with higher safety claims.
Total market size, in terms of prescriptions, was overlaid into the market response tool so total prescriptions and sales could be shown. Therefore, by raising prices, the generic pricing would also be higher, which would improve the margins for the client's private label offering.
Then, based on these assumptions, the planning tool determined the five-year net present value associated with the overall company's contribution in the category. At times, the company and industry information needed to design and implement them aren't readily available. Management must then create an environment that encourages marketing managers, product managers, and finance managers to develop the necessary inputs and to work together to develop the optimum strategies. It is absolutely essential that you take an objective view and not be influenced by internal desires. At the very least, you should try to have offerings in at least two price tiers so you can adjust to market conditions and not have all your eggs in one basket. Even if you are the largest and most efficient, it’s still a bad idea because it limits your profit potential and will virtually guarantee you won’t be the largest for long. His corporate background included a number of companies, industries and roles including National Account Manager, Product Manager, Brand Manager, Director of Trade Marketing, Director of Marketing and Vice-President of Marketing. A choice is a decision between alternatives, whereby deciding to do one thing you are also deciding not to do another.
But when utilization rates are high, you price based on how much you increase the capacity of existing facilities, thereby helping companies avoid or defer capital investments.
Your pricing strategy cascades into your marketing communication strategy and your sales execution. How you may need to be prepared to change it over time as you climb and ride the technology adoption curve.
Even if a company analyzes existing market data or collects new market input, this information usually doesn't provide links to profitability and other marketing-mix items.
For example, conjoint creates an artificial marketplace that forces competitive offerings to contain similar features and prices, when, in reality, many unique products and services have different features and prices. To develop a meaningful pricing strategy, researchers must integrate customer input on a complete competitive marketplace with how it interfaces with the distribution channel and variable costs.
However, such measurements are limited because they only reflect existing product and service characteristics.
With the calibration, the measures reported in the market response tool can show the impact on total sales as well as share. This step, along with the step relating to contribution, increases the value of market input because results are stated in direct financial terms and deal with the interaction between pricing and other items in the overall marketing mix.
Discrete choice provides the best tools for developing pricing strategy in a designed experiment. At the same time, management wants to know which prices and specific features, along with any packaging alternatives, will optimize their portfolio. The ranges of prices must be wide enough to allow proper sensitivity testing and future use of the market response tool.
Another consideration for the design is allowing respondent choices to be recorded in a way that matches how customers would normally make choices.
As an example, a certain segment may be defined as customers who prefer a certain feature or package and are rather insensitive to price.
No matter how good the sampling and however realistic the survey matches the actual buying experience, this step ensures all projections are based on an agreed-upon starting point. This increases total sales to approximately $23 million, as opposed to $22 million at a price of $21.
This focus ensures the pricing strategies are optimized based on a company's overall offering, costs, and prices, rather than on what price is going to be more attractive than that of the competitors. In addition, production costs for clients' products were included so total contribution could be shown for all clients' products.
Based on a 15% lower price for the generic alternative, generics were projected to get 50% of the branded product's share. At the proposed $.65, the impact of a generic offering that was originally priced at 50% lower than the client's product would now be a 20% reduction in contribution based on the higher price and the private label offering.
Even though the company's new product offering was better than the other new offerings in the market, the company was projected to attain higher contribution by not making the investment in this new product. In addition, multiple disciplines need to come together to integrate current market conditions, market sensitivities, and profitability into one model. This is a large mountain to climb, but the benefits of a comprehensive pricing strategy compared to on-going reactive pricing can be tremendous. Here are a five of the most important factors you’ll want to consider as you work through your pricing process.
Only adopt a Market Following strategy if there is so much volatility in the market that any other strategy would rapidly leave you with pricing that did not make sense. To develop an effective pricing strategy, it's important to first analyze a method of integrating meaningful customer input based on the entire company and competitive offerings within a category.
Conjoint typically underestimates the impact of price and doesn't provide a value of price sensitivity by brand, but rather only in aggregate. In addition, observational data doesn't involve controls, so it can be difficult to separate the trends and sensitivities in the observed data from external items like product availability, promotion and advertising for the company, and competitive offerings. When properly executed, it allows the researcher to present a complete portfolio of products and services that parallels current marketplace offerings.
The key for the survey is to derive sensitivities from market input and then to put this information into a context that management can understand and then use to develop an effective pricing strategy. Even if the competitors lower their prices, in most cases, original pricing based on profitability will still be the optimal price as compared with a lower price that meets the competitor's price.
With a $.25 private label offering, the client's projected share loss of 50% would be reduced to only 30%.
The recommended strategy was to focus on DTC advertising for the category and implement suggested pricing strategies and the private label offering. In addition, combinations of new and existing products and services can be tested in and out of the current marketplace, as well as changing prices and specific features for any offering in the marketplace.



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