Archives posted in: Pricing
In Freshman Land, economic price optimization can be done with simple models and equations. But Freshman Land doesn’t reflect reality, and hence we have to move to the next level. We have to have the right mental model of demand.
More In the age of big data, sales velocity has become a metric for guiding pricing decisions. Pricing software vendors all cite sales velocity as an important factor in guiding pricing decisions. Fortune 500 and mid-tier firms alike are known to practice it. But what does velocity-based pricing mean? Why should sales velocity influence pricing decisions? How should firms use sales velocity to inform pricing? And are there serious pitfalls to this approach, or is it a sound business practice?
More Theoretically, if you know the elasticity of demand you can optimize the price through economic price optimization. You may think that this approach would give the best price in practice as well since the word “optimal” is implied in its name alone. But dig beneath its sexy title you will generally find an ugly mess. So what do we do with it?
More The much-anticipated Bombardier CSeries commercial airplane line provides a uniquely positioned offering, boasting 20% fewer CO2 emissions, 20% fuel savings, and 15%…
More A study conducted by Reims Management School (RMS) reveals that consumers are often put off by promises of lowest prices which are coupled with high refund guarantees – contrary to the usual strategies of many top retailers.
More Economic price optimization has a lot to tell us, but not necessarily the price which optimizes the firm’s profits. Economic price optimization relies on a defined demand curve. Unfortunately, defining the demand curve with sufficient precision and reliability for decision making can be done for only a subset of challenges. So if this method is not useful for pricing in many cases, what use is it?
More Thales SA and Panasonic Corp. have recently begun marketing Wi-Fi-enabled iPad in-flight entertainment systems alongside traditional wired and seatback entertainment systems. Does handing out iPads to passengers and going Wi-Fi make sense for other airlines or is this a frivolous luxury for the elite that commoners will never see? A modeling of the Exchange Value can determine.
More The ever-so-dreaded prisoner’s dilemma outcome achieved in most pricing wars can be avoided in some instances by applying games of coexistence. In particular, the Hawk-Dove game offers a unique result that fosters mutual benefit and healthy market competition. The value contributed by the Hawk-Dove model involves understanding the cost of waging a price war, the potential strategy-dependent profit realized, and the managerial security expressed.
More “Sellers don’t control their product, quality, marketing, customers, competitors, or pricing. What they do control is, what they know, and how and when to apply what they know.“ Read a controversial approach to sales and price quoting from Spider Lockhart and ask yourself: when should prices be transparent and when should they stay opaque?
More After engaging in a brief conversation on “promotional pricing” with a business operations executive at a global manufacturer in consumer goods industry, I was inspired to address some misconceptions discussed and provide further insight on how firms in the B2B space implement profit-enhancing promotional pricing tactics. First of all, promotional pricing should be viewed as a means to price segment according to consumers’ willingness to pay, not as a pure promotional strategy. Case in point, consider Remington Arm’s Promotion of Nitro-Steel Load.
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