HINTERHUBER - RETHINKING PRICING STRATEGY

Question 1

COMPONENTS OF PRICING

Answer 1

1. Price Setting = methods used to determine final selling prices
2. Price Getting//Realization = capabilities & processes to ensure getting the price which was set beforehand // ability to translate list prices into realized prices

Question 2

PRICING METHODS

Answer 2

1. Cost-based = match a certain ROI or reach a specific profit
   - simply method, without considering customer value & competition
2. Competition-based = orientated at competitor prices (movements)
   - simply, risk of price war, no demand orientation
3. Value-based = sophisticated approach, requires deep understanding of customer needs, perception of value, price elasticity & wtp
   - difficult to obtain data

Question 3

PRICING GRID

Answer 3

1. Pricing Power Zone = high capabilities in price orientation & getting
   - pricing culture, sophisticated tools to quantify WTP & elasticities
   - dedicated personal for pricing
   = manage costs/complexity, ensure sustainability/innovation
2. White Flag Zone = low capabilities in price orientation & getting
   - no significant attention to pricing, price doesn’t reflect customer value & wtp
   - discounting is widespread and chaotic - no pricing power
   = increase executive awareness, improve capabilities
3. Value Surrender Zone = high price orientation, low price getting
   - strong in value creation, but significant amount of value left on the table due to poor negotiation skills
   = focus sales personal on price realization
4. Price Capture Zone = low price orientation, strong price getting
   - strong in negotiations, but prices do not reflect full customer value
   = target customer value-based pricing
5. Zone of good Intentions = average price orientation & getting
   - slightly more advanced approaches for setting prices & orientation
   = increase customer orientation, improve pricing capabilities