Question

1. Pick a company and describe how they’ve delivered a product to consumers by relating their approach to the 5 steps of the Pricing Pyramid.

2. Give real world examples of each of the 3 Price Structure Strategies along with their subcategories.

a. Price-offer configuration (includes bundling)

b. Price Metrics (include one example for performance-based and one for tie-in)

c. Price Fences (include one example for each: buyer identification fence, purchase location, time of purchase, and purchase quantity)

Answer 1

(1.) Pick a company and describe how they have delivered a product to customers by relating their approach to the 5 steps of the Price Pyramid.

        Price a product is one of the most challenging and complex task. The following are the 5 steps price piramid

1.Choose the right Pricing strategy

       Pricing strategy should be value- based

       a. Evaluate customer needs and value

       b. set target price to reflect customer value

       c. Determine costs and competitive differentiation

       d. Deliver a product that meets and exceeds value

2. Quantify buyer personas

       a. Conceptualize most important personas

   b. Determine what data need about each persona.

       c. Collect the data

       d. Analyze the data

       e. Target the high-value personas

3. Calculate the average customer's life time value

          Life Time value is the total revenue a customer will add to products bottom line, minus the total costs of acquiring and keeping that customer. Understanding the customer Life Time Value will help price the products more accurately and strategically.

4. choosing a pricing model

        When selecting preferred pricing model that aligns with customer's goals and ability to pay. If possible we should also use a pricing model that allows to stand out from our competition..

5. Experiment and Learn

       At this point, identified value-based pricing strategy. developing a picture of most valuable buyer personas,built an estimate of customer life time value, and chosen a specific model for pricing.

(2.) Give real world examples of each of the three price structure Strategies along with their subcategories.

      1. Determine your business goals. this includes the following:-

          a. Increase profitability

          b. Improve cash flows

        c. market penetration

         d. Large market share

         e. Increase revenue per customer

         f. Beat the competition

         g. Fill capacity and utilize resources

        h. New product introduction

         i. Reach a new segment

        j. Increase prospect presence

       k. Increase prospect conversion

2. Conduct a thorough market pricing analysis:-

          This step is ensure that pricing strategy considers the context of the market in which product or service will complete.

   3. Analyze your target Audience

   4. Profile your competitive landscape

   5. Create a Pricing strategy and execution plan:-

           a. Penetration pricing:- Price is artificially low to break into the market

           b. Economy Pricing :- Everyday low price with the focus on low manufacturing or delivery cost

           c. Premium Pricing:- Go into the market with a high price , but once your competitors follow, lower your cost and implement other pricing strategies.

         d. Promotional Pricing:- Discounts over a period of time, one time deals.

          e. Psychological pricing :- Price products or services with triggers action . example , charging .99 instead of $ 1.00.

a.) Price - offer configuration (include bundling)

       When difference in the value of an offer across segments is caused by differences in the value associated with features, services, or both, a seller can segment the market by configuring different offers for different segments Using offer design to implement segmented pricing requires minimal enforcement of the segments because the customers self-selected the offers that determine their prices.

   Bundle pricing is retailers selling a set of products for a lower price than each of these products separately. Examples are Microsoft Office ,offering set of features with most customers using a small fraction, but paying for all of them McDonald's meal , which usually includes the inseparable mix of fries, a coke, and a hamburger.

b. Price Metrics ( include one example for performance based and one for tie-in)

      Price Metrics are the units to which the price is applied. They defined in the terms of exchange- what exactly will the buyer receive per unit of price paid. In Pricing , a price Matrix is a pricing structure that offers flexible criteria to define and retrieve prices and discounts .

c. Price Fence (include one example for each : buyer identification fence,purchase location purchase and purchase quantity)

       Price Fences are key components of segmentation and revenue management. They are designed such that those who can afford and willing to pay higher prices are not tempted by the lower priced versions. Price fences are fixed criteria that customers meet to qualify for a lower price .

Example: At theaters , museums and similar venues, price fence are usually based on age ( with discounts for children under 12 years of age and for seniors) but are some times also based on educational status ( full time students get discounts) or possession of a coupon from a local paper (benefiting "locals" who know more alternatives ). All three types of customers have the same needs and cost to serve them, but perceive a different value from the purchase.