Smarter pricing: how to capture higher margins from your market

233 Pages·1.335 MB·English

by  Cram, Tony

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ABOUT THE AUTHOR ARE YOUR PRICES S b o o k, S o ciety A SMARTER PRICING
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Metropolitan at operating company board level,later moving to course none of your customers will tell you this, as H u g T
Pricing is the most powerful profit driver and the convincing
TSB Bank,where his final position was Director of Marketing R T
Services. His early career was in the motor industry and the competitors tempt them with promises of lower prices R element in product positioning.Unfortunately,pricing is too often
the most neglected element of the marketing mix. With
leisure sector.
and the media trains them to be bargain-hunters. profitability and competitive stakes high, pricing decisions are
P too important to leave to rules of thumb.There is another way.
Publications include Customers that Count – How to build living
A
G This book will help you to understand the value delivered to
relationships with your most valuable customers(2001) and The
All this price pressure is one way. Downwards. This R your customers and show you how to increase it, how to
Power of Relationship Marketing (1994) both published by
communicate it and most importantly,how you can capture an
Financial Times Prentice Hall.He has also contributed chapters
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to the Financial Times Handbook of Management(2000 & 2004). book will help you to move your customers and your I increased proportion of this value.
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Tony Cram speaks internationally at conferences and business in the other direction. Upwards. It’s all about Smarter Pricing is designed to be a short, sharp companion to
intelligentpricing.Built around three core elements:customers–
seminars and has an enthusiasm for helping organizations
create competitive advantage through long-term customer commanding the right price, and the right price is, more I S I smarter ways to understand them,competitors– smarter ways to
N outwit them and company success – smarter ways to capture
relationships.
value,this book will guide you to more profitable possibilities and
than you would imagine possible, a higher one. C
support more decisive pricing.
G
“With margins for companies becoming more and more
This is Smarter Pricing, and these are the rules of Use the advice and it will deliver excellent value to you.
squeezed, efficient pricing is a key lever companies must
I
get right to succeed and prosper within their marketplace.
commanding a higher price and capturing more value.
Setting the 'right' price is extremely difficult and can be R
instrumental in defining the position of a product along its T “Smarter Pricingoffers marketers a multitude of ways to think
O creatively about the trickiest part of the marketing mix.Whatever
lifecycle.Tony Cram helps cut through some of the issues with
price you pay for this book,it will deliver outstanding value.”
a practical framework to help businesses optimize the value “Tony Cram's book is a must-read for executives who want to break the shackles N
from any product.” P Hugh Burkitt,Chief Executive,The Marketing Society
of cost-based approaches to pricing and harness the opportunities afforded by Y
Matthew Stanton,Finance Director,Inbev UK
value-based pricing. Smarter Pricing provides the reader with a clear and very “A thought-provoking insight to the psychology of strategic
C pricing.Tony Cram's study into this sensitive commercial area is
insightful approach to understanding the impact of customers, channels, and e packed full of intelligent and practical evaluations.
R r
o
competitors on their firm's abilities to enhance their value extraction processes m This book will become a must-read for all business managers
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using creative pricing strategies.” e k e involved in competitive,consumer-facing commerce.”
M r r Steve Knott,Managing Director,HMV UK & Ireland Ltd
u a
Das Narayandas,Professor of Business Administration, p t m
Harvard Business School c a u r “bAefno reex cbeelleenn ta bnoaolyks,eodn s au fcfirciiteicnatlly .arTehae oafn satlryastiesg oyf thvaaltu he aasn nde vtheer
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t y destructivenessof price wars is particularly valuable.”
Visit our website at BUSINESS w n Miles Templeman,Director General,Institute of Directors
o i
Visit our website at www.pearson-books.com H e
ISBN 0-273-70613-6 u
www.pearson-books.com l
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9 780273 706137
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SMPR_A01.QXD 25/10/05 10:38 am Page i
Smarter
Pricing
SMPR_A01.QXD 25/10/05 10:38 am Page ii
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Smarter
Pricing
How to capture more value in your market
Tony Cram
London (cid:127) New York (cid:127) Toronto (cid:127) Sydney (cid:127) Tokyo (cid:127) Singapore (cid:127) Hong Kong
Cape Town (cid:127) New Delhi (cid:127) Madrid (cid:127) Paris (cid:127) Amsterdam (cid:127) Munich (cid:127) Milan
SMPR_A01.QXD 25/10/05 10:38 am Page iv
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First published in Great Britain in 2006
© Pearson Education Limited 2006
The right of Tony Cram to be identified as author of this work has been asserted
by him in accordance with the Copyright, Designs and Patents Act 1988.
ISBN-13: 987-0-273-70613-7
ISBN-10: 0-273-70613-6
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For Joe, Ben, Jessica and Peter
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Contents
Acknowledgements/ ix
Upwards not downwards/ xi
1 Pricing by voodoo or bingo? – there’s a better way/ 1
part 1 Customers: smarter ways to understand
them
2 When they say price, they really mean value/ 11
3 What would you pay for this? Perils and pitfalls of
pricing research/ 23
4 Price discrimination – segmenting by price sensitivity/ 39
5 Customers behaving badly – how pricing can help/ 59
part 2 Competitors: smarter ways to outwit
them
6 Standing out from the crowd – pricing’s role in
positioning and differentiation/ 71
7 Competing with value players – hit back with benefits/ 91
8 Fighting price wars – planning to escape pain/ 107
part 3 Company success: smarter ways to
capture value
9 Fixing the right price – structures, segments and
stairways/ 127
10 Communicating prices – creating positive perceptions/ 153
SMPR_A01.QXD 25/10/05 10:38 am Page viii
viii Contents
11 Why pay more? How to get higher prices/ 167
part 4 Pricing success and executive summary
12 Pricing success – keeping discipline, measuring results/ 185
13 Smarter pricing – the five-minute version/ 201
14 The last word on price/ 205
Index/ 207
SMPR_A01.QXD 25/10/05 10:38 am Page ix
Acknowledgements
My first acknowledgement goes to the many authors and great minds
behind the books, articles and publications listed under ‘Going further
– references and additional reading’ at the end of most chapters in this
book. Three books in particular sparked my original interest in the
subject of pricing and my thanks go to Thomas T. Nagle and Reed K.
Holden for The Strategy and Tactics of Pricing, to Robert J. Dolan and
Hermann Simon for Power Pricing and finally to Michael V. Marn, Eric
V. Roegner and Craig C. Zawada of McKinsey & Company for The Price
Advantage. Any reader wishing to go further should begin with these
books. I have also drawn inspiration from the many pricing articles
published in the McKinsey Quarterly.
Second, I must recognize the contribution of the Master of Business
Administration (MBA) classes at Ashridge Business School. They ever
impress with their ability to pose challenging questions about pricing
and throw new light on the issues under discussion. Perhaps their
enthusiasm for this demanding subject led me to go further.
Third, I owe thanks to James Pickford of the Financial Timeswho invited
me to capture current thinking in an article for his newspaper,
published in August 2004. As a result of this article, Richard Stagg of
Pearson Education called me and the conversation led to this book.
Throughout the project, Richard has given me timely encouragement
and well-founded support. The editorial guidance I received from
Benjamin Roberts was perceptive and motivating. I enjoyed working
with him.
I was eager to build on the ideas of the best thinkers on pricing and so
my fourth acknowledgement goes to Lorraine Oliver and Rachel Piper