Needs formatting clean-up by Integreon

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ricing identifies the part of the value generated for the customer
that we can capture, given competitive considerations

romise Differentiation rice

Support Effort Risk

Value roposition Can Be Adjusted

With Benefits And/Or rice



  




Customer Competition Company

u ow do we provide good u that is better than the u and meets our

value to customer at an competition«. profitability goals
attractive price«.

u ow do we use pricing u anticipating competitive u while building one of the

to establish and keep responses«. most valuable assets for
customer our business
relationships«.

u What aspect of price is u knowledge of which u enabling us to leverage

my customer particularly gives a competitive edge that to our advantage
sensitive to «.
Ô
 
 
u
he biggest driver of profitability

u Central to competitiveness

u ey to penetrating markets and segments

u Directly linked to brand equity

ricing is Critical For Growth

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ricing is
u
he biggest driver of profitability
u Central to competitiveness
u ey to penetrating markets and segments
u Directly linked to brand equity

Improve 1% rofit improvement (%)

17.5%
rice 11.0

Variable cost 7.3 rice Decrease

Break-Even
Volume 3.7 Volume Increase
-5.0%

Fixed cost 2.7

ricing Is the #1 Lever
o Drive Margins

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ricing is
u
he biggest driver of profitability
u Central to competitiveness
u ey to penetrating markets and segments
u Directly linked to brand equity

Fastest Globally 3rd

Growing Most largest
Major Auto rofitable property &
Insurer in US Insurer in US casualty
insurer

X15 minutes could save Leveraging price psychology to beat

you 15% or more on your larger and experienced competitors
car insurance.X
   |
ricing is
u
he biggest driver of profitability
u Central to competitiveness
u ey to penetrating markets and segments
u Directly linked to brand equity

4th largest global
op-seller in Most reliable

luxury brand US ahead of brand (12
« years)

Value pricing to successfully penetrate

luxury car market
   |
ricing is
Retailers insist on matching
u
he biggest driver of profitability Europe
u Central to competitiveness
1992 ³Buy 1, Get 1 Free´ promotion
u ey to penetrating markets and segments
u Directly linked to brand equity
FRE
E

u
anked sales
u Customer perception
suffered
u
ook 5 years to
recuperate
urt brand equity through ill-conceived
promotion strategy
 x Ô
Mistake 
 Lesson

u Using ³rules of thumb´, 1u Don¶t use as first response or

assumptions and half-truths lever to competitive actions
u Different internal perspectives

Response by established
brokerage houses to discount
brokerage
u urt entire business in knee-
jerk response to ³day-trader´
segment
x Ô
Mistake 
 Lesson

1u Don¶t use as first response or

lever to competitive actions

u Cost-plus pricing
u rice change uncorrelated with 2u ricing should include
external view (not just
customer behavior internal)
x Ô 

Mistake Lesson

1u Don¶t use as first response or

lever to competitive actions

2u ricing should include

external view (not just
internal)
u rice change without considering
customer perceptions 3u Not relating price to brand
equity
u Over use of price promotions

d


 
 d

   
   
 
d





 d 

    
x Ô 

Mistake Lesson

80¶s 1u Don¶t use as first response or

lever to competitive actions

2u ricing should include

external view (not just
internal)
  d
   
 
dd d

  

 3u ricing should be consistent

  with brand equity & image

u Focus on channel or product,

not customer 4u Consider customer
u No consideration for elasticity or segmentation & elasticity
cost to serve