The world’s foremost expert on pricing strategy shows how this mysterious process works and how to maximize value through pricing to company and customer.
In all walks of life, we constantly make decisions about whether something is worth our money or our time, or try to convince others to part with their money or their time. Price is the place where value and money meet. From the global release of the latest electronic gadget to the bewildering gyrations of oil futures to markdowns at the bargain store, price is the most powerful and pervasive economic force in our day-to-day lives and one of the least understood.
The recipe for successful pricing often sounds like an exotic cocktail, with equal parts psychology, economics, strategy, tools and incentives stirred up together, usually with just enough math to sour the taste. That leads managers to water down the drink with hunches and rules of thumb, or leave out the parts with which they don’t feel comfortable. While this makes for a sweeter drink, it often lacks the punch to have an impact on the customer or on the business.
It doesn’t have to be that way, though, as Hermann Simon illustrates through dozens of stories collected over four decades in the trenches and behind the scenes. A world-renowned speaker on pricing and a trusted advisor to Fortune 500 executives, Simon’s lifelong journey has taken him from rural farmers’ markets, to a distinguished academic career, to a long second career as an entrepreneur and management consultant to companies large and small throughout the world. Along the way, he has learned from Nobel Prize winners and leading management gurus, and helped countless managers and executives use pricing as a way to create new markets, grow their businesses and gain a sustained competitive advantage. He also learned some tough personal lessons about value, how people perceive it, and how people profit from it.
In this engaging and practical narrative, Simon leaves nothing out of the pricing cocktail, but still makes it go down smoothly and leaves you wanting to learn more and do more—as a consumer or as a business person. You will never look at pricing the same way again.
Author(s): Simon, Hermann
Edition: 1
Publisher: Springer International Publishing
Year: 2015
Language: English
Pages: 242
Tags: business;pricing;sales;advertising;marketing
1. My First Painful Encounters with Prices
Pricing Student: The Journey Begins
Pricing Professor: Academia Was Still My Only Option
Pricing Consultant: We Take Theory into the Real World
2. Everything Revolves Around Price
What Does “Price” Actually Mean?
“Price” Goes by Many Aliases
Price = Value
Creating and Communicating Value
What Smart Pricing Can Achieve: The 2012 London Olympics
What Smart Pricing Can Achieve: The BahnCard
Supply and Demand
Scarcity and Boom-and-Bust Cycles
Price and Government
Price and Power
Pricing Pushes Its Boundaries
3. The Strange Psychology of Pricing
The Prestige Effect of Price
Price as an Indicator of Quality
The Placebo Effect of Price
Price as a Defused Weapon
Price Anchor Effects
The Magic of the Middle, or the Story of the Padlock
Neither the Cheapest nor the Most Expensive Wine
A Profit-Generating Product No One Ever Buys
Creating Scarcity
Selling More by Offering Additional Alternatives
Price Thresholds and Odd Prices
Prospect Theory
Prospect Theory and Price
Business or Economy?
Free or Paid: A Big Difference
Better to Pay in Cash
The Temptation of Credit Cards
“Cash Back” and Other Absurdities
Moon Prices
Price Structures
Mental Accounting
Neuro-Pricing
In Conclusion: Be Cautious!
4. Price Positioning: High or Low
Success Strategies with Low Prices
Aldi
IKEA
H&M and Zara
Ryanair
Dell
Less Expensive Alternatives
Amazon and Zalando: Revenue vs. Profit
Success Factors for a Low-Price Strategy
Ultra-low Prices: Can You Go Lower than Low?
Dacia Logan and Tata Nano
Honda Wave
Ultra-low Price Positioning in Other Consumer and Industrial Goods
Ultra-low Price Products Also for Sale in Highly Developed Countries?
Success Factors for an Ultra-low Price Strategy
Success Strategies with High Prices
Premium Pricing
Apple vs. Samsung
Gillette
Miele
Porsche
Enercon
“Bugs” Burger Bug Killers
Premium Strategies Can Also Backfire
Success Factors for a Premium Price Strategy
Success Strategies for Luxury Goods Pricing
How Much Does a Luxury Watch Cost?
Swiss Watches
LVMH and Richemont
Stumbling Blocks in Luxury Goods Marketing
Maybach
Are There Limits to Prices of Luxury Goods?
The Challenge of Creating Enduring Value
Observing Volume Limits
Success Factors for Luxury Goods Price Strategies
What Is the Most Promising Price Strategy to Pursue?
5. Prices and Profits
Chasing the Wrong Goals?
How Does a Price Increase of 2 % Affect Profits?
Price Is the Most Effective Profit Driver
Now … Let’s Change Your Prices and See What Happens
Back to the Future: The General Motors Employee Discount Program
Prices, Margins, and Profits
Price Is a Unique Marketing Instrument
6. Prices and Decisions
Who, What, Where, When, Why … and How?
The Effects of a Price Decision
Price and Volume
Using Costs to Set Prices
Following the Competition
Market-Based Price Setting
Sharing Value Fifty-Fifty
How to Determine Demand Curves and Price Elasticities
Expert Judgment: Making Direct Estimates of Price Elasticities
Asking Customers About Prices Directly
Asking Customers About Price Indirectly
Price Tests
The Big Data Myth: Using Market Data for Demand Curves and Price Elasticities
So … What About the Competitors’ Prices?
The Prisoner’s Dilemma: Let the Game Begin
Price Leadership
Signaling
Competitive Reaction and Price Decisions
Inflation: What It Is and Why It Matters for Price Decisions
Price and Inflation: A Lesson from Brazil
7. Price Differentiation: The High Art
Going from the Profit Rectangle to the Profit Triangle
What Does a Can of Coca-Cola Cost?
The Difference Two Prices Can Make
Why the First Beer Should Be More Expensive
Nonlinear Pricing for a Cinema
Price Bundling
Price Bundling for Optional Accessories
Unbundling
Multi-Person Pricing
The More, the Cheaper? Be Careful!
Differentiation or Discrimination?
Price and Location
Price and Time
Perishable Goods
Patents for Dynamic Pricing
Juggling Capacities and Prices
Price and Scarcity
Hi-Lo vs. EDLP
Advance Sale Prices and Advance Booking Discounts
Penetration Strategy: Toyota Lexus
Skimming Strategy: The Apple iPhone
Information and Profit Cliffs
Fencing
Pay Attention to Costs
8. Innovations in Pricing
Radical Improvements in Price Transparency
Pay Per Use
New Price Metrics
Introducing a New Price Parameter: The Case of Sanifair
Amazon Prime
Industrial Gases
ARM
Freemium
Flat Rates
Prepaid Systems
Customer-Driven Pricing
Pay What You Want
Profit-Oriented Incentive Systems
Better Price Forecasts
Intelligent Surcharges
à la Carte Pricing
Harvard Business Review Press
Auctions
9. Pricing in Crises and Price Wars
Crisis: What Does That Mean?
Cut Volume or Cut Price?
Making Intelligent Price Cuts
Offer Cash or Goods Instead of Lower Prices!
Staying Off the Customers’ Radar Screen
The Arch-Nemesis: Overcapacity
Price Increases in Times of Crisis
Price Wars
10. What the CEO Needs to Do
Price and Shareholder Value
How Price Can Increase Market Capitalization
$120 Million More Through Pricing
Price and Market Capitalization
The Day the Marlboro Man Fell Off His Horse
20 % Off on Everything: The Praktiker Case
The Devastating Effect of Price Wars: The Potash Oligopoly Case
Pride Before the Fall: The Netflix Case
A Failed Attempt to Trade Customers Up: The J.C. Penney Case
Discounts and Promotions: The Abercrombie & Fitch Case
Price Discipline Increases a Company’s Market Value: A Telecom Case
Pricing and Financial Analysts
Price and Private Equity Investors
The Key Role of Top Management
Name Index
Companies and Organizations Index
Subject Index
