Global Marketing Bachelor’s Degree – Price &

Cost Management – 07/02/2023

Technological
Disruption & Price
Management
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Successful Pricing Strategies reflect 3 principles

The price should reflect Companies manage Price management

the real value of the price continuosly, success is measured by
product; antecipating disruptive what a company earns
Differences in prices events instead of relative to alternative
across customers and reacting to market investments, instead of
changes overtime, pressure (eg. Major comparing revenue to its
should reflect changes in accounts negotiation; competitors;
the value to customers; market threats;
Exception made, if a technological changes);
competitor cuts the
price on the exact same
product;

Value-based Proactive Profit-driven

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5 Choices behind a Successful Pricing Strategies

Price Level

Pricing Policy

Price & Value Communication

Price Structure

Value Creation

The Strategic Pricing Pyramid – The strategy and tactics of pricing; Nagle, Hogan, Zale
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5 Choices behind a Successful Pricing Strategies

Value Creation
Defy the concept of “that the value of a product, is what I am willing to pay for” – customers may not repeat the purchase and word
of voice will do the remaining bad publicity (innovative products)… Listen to your customer (avoid over performing unnecessarily)

Price Structure
Pricing decisions follow Value Creation; Several options are allowed, accordingly to it’s segment (e.g.- commodities or services tend
to have a (fixed) unitary price

Price & Value Communication

Failing this step can result in poor sales, because customers will not be able to recognize the intrinsic value of a product; Adapting
the message to purchase context is critical

Pricing Policy
Set of rules or habits, explicit or cultural, underneath a company's pricing decisions; Poor pricing policies will incentive customers,
sales reps or competition, to act in a certain pattern.

Price Level
Pricing should be an interactive and cross-functional process, following a set of procedures and actions; Companies that master
pricing strategies increase their revenues by 2% to 8%.
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•Value: refers to the overall satisfaction that a customer receives when using a
product/service;

• Economic value: the value of an offer, limited to what competitors charge for a similar
product (commodities);

• Monetary value: cost saving or income enhancements that a customers receives when
buying a product;

• Psychological value: refers to the many ways that a product creates innate satisfaction
for the customer;
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The Design-to-Value Advantage: Developing Winning Products with the Best Economics; Myerholtz, B., Tevelson, R., Wood, E. (2016)
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Technological disruption & Price management

Adding features to a product or improving performance will not necessarily lead to a
better sales performance – features must translate higher monetary and/or
psychological value to the customer (value for money);

Price premium products must have a story behind its value;

Always empower your organization with the knowledge (the story) behind your price;
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The challenges of pricing

Higher prices can signal that a product or service is
more valuable to customers (than it’s competitors) or
that a company’s costs are rising;

If pricing is a language, then acquiring fluency should

be our target;

Companies that are “native” in the language of

pricing have accurate strategy, execution tactics,
tools, insights and organization;
Banerjee et al., Four steps to becoming fluent in the language of pricing, BCG, (2015)
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4 Steps becoming fluent in pricing

Strategy: +50% companies surveyed didn’t have a strategic approach to pricing, stablished by the company;

Execution: many companies fail to extract better profits from their offerings; pricing policies varies from industry to
industry (large scale industries use project-based pricing / subscription-based industries usually use bundling). 2/3
update prices, once or twice per year!

Tools & Insight: 80% of companies struggle to organize the analytics necessary for prices conclusions;

Organization: many companies lack HR with the profile needed for this task; also, there is no clear report line for
pricing teams inside an organization;

Banerjee et al., Four steps to becoming fluent in the language of pricing, BCG, (2015)
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How leaders became fluent

Consider (and act) different mindset when it comes to pricing as an enabler of growth;

Move from Reactive to Dynamic pricing (this will lead you to increased profit gains);

Develop a pricing strategy that creates value (fluent “pricers” have a well-defined and well-communicated pricing
strategy, meaning fully aligned with business targets);

Value based pricing strategies focus on willingness to pay, geography, customer segments,…

Execute in a consistent and long-term way (consider all variables such as discounts, rebates, payment terms, target
bonus… )
Banerjee et al., Four steps to becoming fluent in the language of pricing, BCG, (2015)
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Banerjee et al., Four steps to becoming fluent in the language of pricing, BCG, (2015)
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Banerjee et al., Four steps to becoming fluent in the language of pricing, BCG, (2015)
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“build” the right organization

Define and Communicate strategy (senior management must

be involved);

Start with why -- how great leaders inspire action | Simon Sinek |
TEDxPugetSound - YouTube

Set a pricing team (or managers);

Train them (as necessary) into the task;

Measure results accordingly to your initial target;

Banerjee et al., Four steps to becoming fluent in the language of pricing, BCG, (2015)
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4 Steps becoming fluent in pricing

Once an indicator of a Company’s confidence in a

product´s value, it’s now overemphasized or
obsolete;

Intense scrutiny and easy access has left price

under pressure from stakeholders;

How will we evolve Price role ?

Banerjee et al., Four steps to becoming fluent in the language of pricing, BCG, (2015)
 Price and Cost Management
Beyond Price

16 Ana Ferreira/Internal use

 Price and Cost Management
Evolving the Role of Price

• Deemphasizing list price is the way to adress divergent

customer and partner segments;

• Is the way to adapt to market dynamics, extracting full value

with balanced propositions and yet without resorting
(always) to price;

• Create multiple price lists;

• Soften the impact of list price through discounts and/or

rebates (other incentives can be considered);

• Phase out list price and replace it with means that convey a
price-value relationship;
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 Price and Cost Management
Optimizing Price Communication

• Companies can use endeless approaches to reinforce

their communication and focus on value added products;

• They can enhance their engagement with customers,

build their confidence and overcome the list price;

• In the end, they will be limited by costs and by the

prevailling market situation ;

Izaret, JM. et al, Beyond List Price, BCG (2018)

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 Price and Cost Management
Optimizing Price Communication – possible approaches

• Encourage peer comparisons: “People who bought this, also bought” – Amazon masters peer
comparison, this type of communication makes use of the judgment of a relevant peer group;

• Make direct competitive comparisons: many companies use this tool to turn their price irrelevant –
either they have a better product or if the same, a better price (price transparency favours this kind of
approach);

• Emphasize discounts: some brands depend exclusively on this (JC Penney, …); research demonstrates
many shoopers pay more attention to discounts % than to the selling price;

Izaret, JM. et al, Beyond List Price, BCG (2018)

19 Ana Ferreira/Internal use
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Optimizing Price Communication – possible approaches

• Revisit dynamic pricing: eg uber or airline companies (the price the passengers see is based on an
algorithm that has processed a large number of variables – demand & supply); Customers have grown
accustomed to price variation;

• Change the pricing model and reset expectations: as time goes by, a list price can lose its link to the
underlying value of the product or service;

• Differentiate prices on the basis of deep customer databases: use your customer insight and develop
different list prices;

Izaret, JM. et al, Beyond List Price, BCG (2018)

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 Price and Cost Management
Evolving the Role of Price

• Price differentiation according to volume

(or other metrics, eg market share) will
atomatically translate into a profit earning
and a better management of your
commercial approach;

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Obrigado
Thank You