SIMON & KUCHER LECTURE

Question 1

PROFIT GROWTH

Answer 1

Profit = Revenue - Costs

Revenue = Volume x Price

=> price increase leads to biggest profit growth compared to cost reduction & sales (volume) increase

Question 2

ADVANTAGES OF PRICE IMPROVEMENT

Answer 2

1. Lower up-front investment
2. Faster effect
3. Higher profits (sustainable)

Question 3

PRICING METHODS

what is a value based correct price -> willingness to pay

Answer 3

• price sensitivity -> price elasticity> volume/price change in %
• price-value mapping > differential value map
• economic value > takes potential savings into account (solar panels)
• conjoint analysis

Question 4

PRICING MODELS

Answer 4

From low to high flexibility

1. fixed price for unlimited use (All-you-can-eat//flatrate)B2C
2. fixed price for different options (low-medium-high) B2B/B2C
3. fixed base price + additional options (Ryanair)
4. customized options (Pick n choose) B2B

Question 5

SURCHARGE MODELS

Answer 5

• price elasticity for surcharges usually lower compared to base price elasticity
  = lower awareness, lower in absolute terms, often related to costs

Question 6

BUNDLING MODELS

Answer 6

• bundle when moderate differences in willingness to pay for two or more products are given
• „leader“ product -> WTP surplus (higher than current price)
• „filler“ product -> medium value product („nice to have“)
• NO „killer“ product -> low WTP -> high discount wouldn’t make sense