The document discusses pricing strategy and tactics. It argues that profitable pricing depends more on effectively communicating the value of products and services to customers rather than precise measurement. A customer-focused approach that understands customer values and needs is more effective than a product-focused approach. Key considerations for pricing include comprehending customer value drivers, creating and communicating value to convince customers of needing to pay for that value, and capturing value through effective pricing tactics.

1. Pricing Strategy and Tactics © By Nick Ursini Customer Driven Marketing, LLC Copyright 2003, all rights reserved Customer Driven Marketing, LLC

2. What is Pricing – Really! Pricing is the moment of truth -- all marketing efforts, product design, and service development comes to focus on the pricing decision. Professor Raymond Corey Harvard Business School As modified by Nick Ursini Copyright 2003, all rights reserved Customer Driven Marketing, LLC Adapted from the book, Strategy and Tactics Of Pricing, 1995 by Thomas T. Nagle & Reed K. Holden

4. Unspoken Needs & Wants This is the Marketing Challenge Customer Delight Customer Disappointment Excitement Quadrant Mediocrity Quadrant Significant Time or Money Limited Time or Money Insightful Market Input Mail/Phone Questionnaires Internal Perspective Only Failure Quadrant Surprise Quadrant Copyright 2003, all rights reserved Customer Driven Marketing, LLC Kano Chart

6. Challenges in Pricing Decisions The 5-Cs of Pricing  Comprehend the key value drivers for customers  Create value for customers  Communicate the value that you create 1. Tangible features 2. Intangible features  Convince customers that they must pay for value  Capture value with effective pricing tactics Copyright 2003, all rights reserved Customer Driven Marketing, LLC Adapted from the book, Strategy and Tactics Of Pricing, 1995 by Thomas T. Nagle & Reed K. Holden

8. Guidelines to Profitable Pricing 5. Make price changes to achieve sales growth & to grow profits. 6. If you must cut prices to gain sales, do so selectively , not across every product and service element. 7. Avoid cutting price to defend or gain market share unless you have a real cost advantage . 8. Always work to improve price competitiveness by lowering costs and increasing the customer’s perception of value . Copyright 2003, all rights reserved Customer Driven Marketing, LLC Adapted from the book, Strategy and Tactics Of Pricing, 1995 by Thomas T. Nagle & Reed K. Holden

10. Achieving More Profitable Pricing 4. Competitive Analysis: Evaluate the likely competitive responses then establish a strategy to minimize their adverse impact on profitability. 5. Segmentation Scheme : Implement tactics to segment the market by price where justified by incremental profits. 6. Judgment: Make price changes when customer & competitor responses are likely to generate sales in excess of breakeven levels. Copyright 2003, all rights reserved Customer Driven Marketing, LLC Adapted from the book, Strategy and Tactics Of Pricing, 1995 by Thomas T. Nagle & Reed K. Holden

11. Breakeven Analysis (simplifying model assuming linear relationships) Profits ($) Sales Volume ($) + _ S Profit Loss P Profit/Volume Ratio Fixed Costs Breakeven Sales Volume P/V Ratio = (FC + P)/S P/V Ratio = (S-VC)/S P/V Ratio = FC/BE Sales P = S -VC – FC P = S * P/V Ratio -FC Margin of Safety