Coordinating the drivers of

profitability
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 Economic Forces
Profitability
• Technology
• Regulation
• Market information
• Consumer preferences
• Relative costs
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The high rate of
technological
change in many
industries has
created new
sources of value
for customers

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 WHERE & HOW
TO DISCOUNT PRICES
 • the coordination of otherwise
independent activities to
achieve a common objective
(profitability)

• Translating the differentiated

Quadrant 3 benefits your company offers
into customer perceptions of a
fair price premium for those
benefits
Principles of pricing strategies

Quadrant 3
Value-based Proactive Profit-driven
 Value-based pricing is a strategy of setting prices
primarily based on a consumer's perceived value
of a product or service. Value pricing is customer-
focused, meaning companies base their pricing on
how much the customer believes a product is worth

Some industries subject to value-based pricing

models include:
•Fashion
•SaaS- software as a service
•Cosmetics
•Technology

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 • Benefits of a value-based
pricing strategy
Potentially higher price points

Perceived value can increase

Helps you develop higher-quality products

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 Downsides of value pricing
• Harder to set a price than other strategies
• Requires more time and resources
• Lower markups
• Not 100% reliable
• Changes based on cultural, economic, and
technological factors

Quadrant 3 Value-based pricing example Coffee shop

 • Proactive pricing enables retailers to
anticipate both market and rival
changes prior to when they're
supposed to happen based on data-
driven market insights and event-
driven automated repricing.

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 • Profit-driven means that the
company evaluates its success at
price management by what it earns
relative to alternative investments
rather than by the revenue it
generates relative to its competitors.

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 is a strategic challenge with a
direct impact on profitability.

It requires a breadth of information and the

right perspective, as well as the ability to
balance competing agendas.
The impact of pricing on profits
• Value

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 The indirect
effect
derives from
the influence
Profit
of price demonstrates the impact of a small change in
changes on price on profits.
customer
demand

Price changes have both direct & indirect

effects on profits.

The direct effect is seen in linear

relationship between profits and prices.