The Pricing Puzzle

What’s your strategy? January 2012

Download Now --- to see full ---

Speaker Notes

January 2011 | The Pricing Puzzle

0

Did you know…

1% reduction in fixed costs improves profitability by 2.3% BUT 1% increase in pricing can boost profitability 11% Source: McKinsey & Company Impact study of 2,400 companies

January 2011 | The Pricing Puzzle

1

Puzzled? How do you put the pieces together?

January 2011 | The Pricing Puzzle

2

Puzzle Pieces The six strategies for pricing • Competition Based • Loss Leader • Penetration Strategy • Premium/High End • Cost-plus

• Predatory

January 2011 | The Pricing Puzzle

3

Competition Based Striving to meet and or beat the prices your competitor is charging. A competition based pricing strategy focuses solely on what the competition is charging. It is: •challenging for a small business to maintain •provides very narrow profit margins. Think of this strategy as rock-bottom pricing.

January 2011 | The Pricing Puzzle

4

Loss Leader Give it away to get more in the future Historically, printers have done “pro-bono work” to win customers. Make sure you look at the entire picture, before aligning yourself with a freebie client. Remember all of your competition has been asked to do the work for free also.

January 2011 | The Pricing Puzzle

5

Penetration Strategy Increasing the value to your customers, build loyalty and enter the market. Unless you are “blood brothers” with your customers, loyalty in the our business is a very difficult thing capture. Offering value-added services can help secure the relationship and build your brand loyalty – storefronts, fulfillment, promotional premiums or database management.

January 2011 | The Pricing Puzzle

6

Premium – High End Exceptional reputation, quality, and distinction. In order for you to implement this type of pricing strategy, you must have built your brand recognition to a high end, premium level. Image courtesy of Rosebrook Meyer

January 2011 | The Pricing Puzzle

7

“Cost plus” strategy: Full cost and Direct cost Two types of “cost plus” pricing: Full cost pricing includes both

Fixed costs

variable and fixed costs and adds a %

• Equipment Leases

markup.

• Your building

Direct cost pricing uses the variable

Variable

costs plus a % markup. Usually only

• Paper

used when competition is high as it usually leads to a loss over time.

• Toner/ElectroInk

January 2011 | The Pricing Puzzle

8

Predatory A carnivorous cousin, Deinonychus, about the size of a man, leaped on its prey, wrapped its long arms and three-fingered hands around it, and kicked it to the death with sickleshaped toenails.

January 2011 | The Pricing Puzzle

9

Market Environment

Differentiate

Competition

Pricing

Demand

Income

January 2011 | The Pricing Puzzle

10

What is the important piece? A puzzle is not complete without all the parts. Be systematic and strategic in your decisions. Do not set the pricing and then just forget it. All pricing strategies can make sense one time or another (except predatory!), but none alone are always sufficient. Your goal must be to stay one step ahead of your competition.

January 2011 | The Pricing Puzzle

11

Market Strategy: No, not this type!

January 2011 | The Pricing Puzzle

12

We can help…

Mohawk MakeReady provides practical tools and actionable information for digital printers like you. Visit: www.MohawkMakeReady.com to browse content, request a meeting, or join the community.

January 2011 | The Pricing Puzzle

13