|On June 24, the Marketing & Sales Club hosted a conference on
the topic of “The New Efficient Frontier in Pricing”.
About 70 alumni attended presentations made by Dr. S. ROTHENBERGER,
Professor at the SBSEM, as well as Channie MIZE and Nicolas MAGNETTE,
from Periscope, a McKinsey Solution.
hard. It’s a process and it should be lean”
reminded us that, from all marketing levers, pricing is a very flexible
one with the highest short term impact potential. A 1% price change can
generate an average 11% increase in profit. It is still the first
buying criteria and an important marketing signal.
Pricing tactics have evolved from traditional company-imposed
approaches (fixed price…) to more collaborative pricing (dynamic,
auction) and even customer-imposed pricing, as in the famous Radio Head
“In Rainbows” album release. To adapt to this new reality, she suggests
we ask ourselves two questions: Does our pricing strategy provide us
with a competitive advantage? And is our pricing process one of our
She recommends that we make the pricing process a lean one, with the
objective of creating and capturing more value from/to the customer,
and building prices upon value rather than on costs and competition
prices. This obviously requires to measure the customer value we
create. As an example, she refers to the launch of Coke Life. An
in-depth customer analysis helped identify that consumers valued the
Stevia health impact to the point that they would be willing to pay 8c
more per can, an 11% benefits-based price premium.
Read the presentation by Dr. Rothenberger here.
started and keep going!”
Magnette and C. Mize
confirm the powerful nature of the pricing lever, pointing out to the
ability to get impact already in the short term, but, especially, huge
rewards in the long run. This is, however, a long and difficult process
of capabilities development. They therefore recommend to get started
without delay. And to keep moving.
You’ll need to build a supporting coalition and to assemble a dedicated
team. Clearly, one of the key elements is to create full transparency
on your profitability, taking into account every single “cost to
serve”. Big data and advanced analytical tools will help you there. But
don’t get stuck on waiting for perfect data. You need to shift the
balance from 100% Art to 70% Science. Human judgment will always
matter, but can be improved with better facts and insights.
Their final advice is to get expert help… You know who to call, right?
D. Bennert - Synthesix
|Suggested reading: “The Strategy and Tactics of Pricing: A
Guide to Growing More Profitably” by Th. Nagle, J. Hogan and J.
Zale, Prentice Hall
The New Efficient Frontier in Pricing - Periscope by
The New Efficient Frontier in Princing - Additional
materials by McKinsey Solutions