Strategic Movements: May 2017

timjsmith

Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published May 16, 2017

BMW Demonstrates Strong Management Skills

BMW AG’s earnings before interest and taxes (EBIT) rose to EURO 3.0 billion from EURO 2.4 billion for the first quarter 2017 over same quarter last year.  The profit growth was attributed to the release of the 5-series sedan, strong sales in China, and the sale of Here, a mapping venture, to Intel Corp. Product and price management underlies the achievement in two out of three of the attributions.  Well done BMW management.

Grainger’s Challenging Price Action

Let me get this right:  Grainger’s “pricing action” was to lower prices. The result was higher volumes and lower gross profits.  The aim was a clear market share take.  And CEO Donald Macpherson is happy with the result?

This a horrible business idea resulting in horrible business results – and the stock value plummet told the CEO as much.

It might be defensible on the basis of a new competitive threat or positioning for an acquisition, but that wasn’t the defense.   Donald stated that, although Grainger creates a lot of value for their customers, they lowered prices to reduce dissatisfaction customers have with their pricing.  Well, sure enough, he has satisfied them by giving away the value Granger creates.

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About The Author

timjsmith
Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.

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