Capture More Value from Your Products and Capabilities: Pricing for a More Profitable Product Portfolio
You've developed a competitive advantage, now how do you profit from it? Do you create one product or three? Do you price high or price low? Do you target mass market or specific customers?
The better understanding you have on how your customers use price to make their decisions, the better you will be able to make these decisions.
Pricing is the most powerful yet least understood of the marketing mix variables. However, it's especially critical for product managers who want to capture more of the value of the products they manage.
Mark Stiving (San Jose, CA) is a pricing expert with a Ph.D. in Marketing (Pricing) from U.C. Berkeley and more than 15 years of experience helping companies increase profits with value based pricing strategies. Although employed full time as Director of Pricing at Maxim Integrated, Stiving's avocation is evangelizing the power and beauty of pricing. A speaker, coach, and consultant, Stiving has worked with esteemed companies such as National Semiconductor, Cisco, Procter and Gamble, Grimes Aerospace, Rogers Corporation, as well as many small businesses and entrepreneurial ventures. He is the author of "Impact Pricing: Your Blueprint for Driving Profits" blog: http://www.PragmaticPricing.com site: http://www.markstiving.com
Upcoming Training: March 30, 2013
Pricing for Entrepreneurs and Product Managers
use code "startupprod" for $250 off full day training
http://markstiving.com/pricing-for-entrepreneurs/
Join the Startup Product movement for product excellence!
@startupproduct #startupproduct
http://startupproduct.com
http://www.meetup.com/StartupProductTalks/
http://www.meetup.com/StartupProduct/
8. Mark Stiving
• Director of Pricing at Maxim Integrated
• Ph.D. in pricing from UC Berkeley
• 1996-2000 Professor of Marketing at Ohio State
– Pricing, market research, marketing models
• Currently teach pricing with UC Irvine
• “Impact Pricing: Your Blueprint for Driving Profits”
• Blogger at PragmaticPricing.com
• Frequent speaker and coach on pricing
8
10. Pricing is …
Dependent Grading Complex Customizable
Secret Powerful Information Instantaneous
Psychological Dynamic Important Emotional
A process Quantitative Fun Risky
Qualitative Never perfect Common Specific
11. Pricing is …
Dependent Grading Complex Customizable
Secret Powerful Information Instantaneous
Psychological Dynamic Important Emotional
A process Quantitative Fun Risky
Qualitative Never perfect Common Specific
12. Pricing is …
Dependent Grading Complex Customizable
Secret Powerful Information Instantaneous
Psychological Dynamic Important Emotional
A process Quantitative Fun Risky
Qualitative Never perfect Common Specific
13. Pricing is …
Dependent Grading Complex Customizable
Secret Powerful Information Instantaneous
Psychological Dynamic Important Emotional
A process Quantitative Fun Risky
Qualitative Never perfect Common Specific
14. Pricing is …
Dependent Grading Complex Customizable
Secret Powerful Information Instantaneous
Psychological Dynamic Important Emotional
A process Quantitative Fun Risky
Qualitative Never perfect Common Specific
15. Pricing is …
Dependent Grading Complex Customizable
Secret Powerful Information Instantaneous
Psychological Dynamic Important Emotional
A process Quantitative Fun Risky
Qualitative Never perfect Common Specific
16. Pricing is …
Dependent Grading Complex Customizable
Secret Powerful Information Instantaneous
Psychological Dynamic Important Emotional
A process Quantitative Fun Risky
Qualitative Never perfect Common Specific
17. Pricing is …
Dependent Grading Complex Customizable
Secret Powerful Information Instantaneous
Psychological Dynamic Important Emotional
A process Quantitative Fun Risky
Qualitative Never perfect Common Specific
18. Pricing is …
Dependent Grading Complex Customizable
Secret Powerful Information Instantaneous
Psychological Dynamic Important Emotional
A process Quantitative Fun Risky
Qualitative Never perfect Common Specific
51. Portfolio
Google - $1.70 per Android device
Apple - $576.30 per iOS device
Source: CNN Money – Asymco: Google makes
only $1.70 a year per Android device
52. Getting Paid for Free
• Free samples
• Free trials
• Free information (like now)
• Pay as you wish
• Free network membership
• Ad supported (sponsors)
• Freemium
The Certified Innovation Leader body of knowledge and credential is aligned with The Association of International Product Marketing and Management. AIPMM was founded in 1998. It provides professional development, training, and certification to those involved in product management, such as product managers and developers, marketing managers, brand managers, project managers, and many more. The certified innovation leader credential is one of four certifications provided by AIPMM. The others include: certified product manager, certified product marketing manager, and agile certified product manager.
What is pricing? There is not an easy answer to this question. My family doesn’t really know what I do. I tell them I’m a pricing expert and they think that mean I’m really good at The Price is Right. And my mom is thrilled about that.
Complex – Many moving partsPowerful – The marketing mix variable with the biggest impact on profitImportant – to CEO, CFO, Marketing, sales, product lines, everyoneFun – Need I say more?Psychological – 99 centsQuantitative – Soft marketing variables and attach a number to itQualitative – Requires creative thought, and being in touch with your customersNever perfect – There is always room for improvementSpecific - to Industry/Market/CompanyCustomizable – Segmentation is importantDependent – on competitors products and other product in your own portfolioEmotional – Good deals and gougingFuture oriented – Changing the futureSecret – Companies don’t shareSecond to last step – Captures everything else. Last step is customers’ choice.Instantaneous – Very fast changesGrading – Chance for marketers to say how much value they createdCommon – Every product or service has one.Dynamic – Markets changeA Process – Create processes
Complex – Many moving partsPowerful – The marketing mix variable with the biggest impact on profitImportant – to CEO, CFO, Marketing, sales, product lines, everyoneFun – Need I say more?Psychological – 99 centsQuantitative – Soft marketing variables and attach a number to itQualitative – Requires creative thought, and being in touch with your customersNever perfect – There is always room for improvementSpecific - to Industry/Market/CompanyCustomizable – Segmentation is importantDependent – on competitors products and other product in your own portfolioEmotional – Good deals and gougingFuture oriented – Changing the futureSecret – Companies don’t shareSecond to last step – Captures everything else. Last step is customers’ choice.Instantaneous – Very fast changesGrading – Chance for marketers to say how much value they createdCommon – Every product or service has one.Dynamic – Markets changeA Process – Create processes
Complex – Many moving partsPowerful – The marketing mix variable with the biggest impact on profitImportant – to CEO, CFO, Marketing, sales, product lines, everyoneFun – Need I say more?Psychological – 99 centsQuantitative – Soft marketing variables and attach a number to itQualitative – Requires creative thought, and being in touch with your customersNever perfect – There is always room for improvementSpecific - to Industry/Market/CompanyCustomizable – Segmentation is importantDependent – on competitors products and other product in your own portfolioEmotional – Good deals and gougingFuture oriented – Changing the futureSecret – Companies don’t shareSecond to last step – Captures everything else. Last step is customers’ choice.Instantaneous – Very fast changesGrading – Chance for marketers to say how much value they createdCommon – Every product or service has one.Dynamic – Markets changeA Process – Create processes
Complex – Many moving partsPowerful – The marketing mix variable with the biggest impact on profitImportant – to CEO, CFO, Marketing, sales, product lines, everyoneFun – Need I say more?Psychological – 99 centsQuantitative – Soft marketing variables and attach a number to itQualitative – Requires creative thought, and being in touch with your customersNever perfect – There is always room for improvementSpecific - to Industry/Market/CompanyCustomizable – Segmentation is importantDependent – on competitors products and other product in your own portfolioEmotional – Good deals and gougingFuture oriented – Changing the futureSecret – Companies don’t shareSecond to last step – Captures everything else. Last step is customers’ choice.Instantaneous – Very fast changesGrading – Chance for marketers to say how much value they createdCommon – Every product or service has one.Dynamic – Markets changeA Process – Create processes
Complex – Many moving partsPowerful – The marketing mix variable with the biggest impact on profitImportant – to CEO, CFO, Marketing, sales, product lines, everyoneFun – Need I say more?Psychological – 99 centsQuantitative – Soft marketing variables and attach a number to itQualitative – Requires creative thought, and being in touch with your customersNever perfect – There is always room for improvementSpecific - to Industry/Market/CompanyCustomizable – Segmentation is importantDependent – on competitors products and other product in your own portfolioEmotional – Good deals and gougingFuture oriented – Changing the futureSecret – Companies don’t shareSecond to last step – Captures everything else. Last step is customers’ choice.Instantaneous – Very fast changesGrading – Chance for marketers to say how much value they createdCommon – Every product or service has one.Dynamic – Markets changeA Process – Create processes
Complex – Many moving partsPowerful – The marketing mix variable with the biggest impact on profitImportant – to CEO, CFO, Marketing, sales, product lines, everyoneFun – Need I say more?Psychological – 99 centsQuantitative – Soft marketing variables and attach a number to itQualitative – Requires creative thought, and being in touch with your customersNever perfect – There is always room for improvementSpecific - to Industry/Market/CompanyCustomizable – Segmentation is importantDependent – on competitors products and other product in your own portfolioEmotional – Good deals and gougingFuture oriented – Changing the futureSecret – Companies don’t shareSecond to last step – Captures everything else. Last step is customers’ choice.Instantaneous – Very fast changesGrading – Chance for marketers to say how much value they createdCommon – Every product or service has one.Dynamic – Markets changeA Process – Create processes
Complex – Many moving partsPowerful – The marketing mix variable with the biggest impact on profitImportant – to CEO, CFO, Marketing, sales, product lines, everyoneFun – Need I say more?Psychological – 99 centsQuantitative – Soft marketing variables and attach a number to itQualitative – Requires creative thought, and being in touch with your customersNever perfect – There is always room for improvementSpecific - to Industry/Market/CompanyCustomizable – Segmentation is importantDependent – on competitors products and other product in your own portfolioEmotional – Good deals and gougingFuture oriented – Changing the futureSecret – Companies don’t shareSecond to last step – Captures everything else. Last step is customers’ choice.Instantaneous – Very fast changesGrading – Chance for marketers to say how much value they createdCommon – Every product or service has one.Dynamic – Markets changeA Process – Create processes
Complex – Many moving partsPowerful – The marketing mix variable with the biggest impact on profitImportant – to CEO, CFO, Marketing, sales, product lines, everyoneFun – Need I say more?Psychological – 99 centsQuantitative – Soft marketing variables and attach a number to itQualitative – Requires creative thought, and being in touch with your customersNever perfect – There is always room for improvementSpecific - to Industry/Market/CompanyCustomizable – Segmentation is importantDependent – on competitors products and other product in your own portfolioEmotional – Good deals and gougingFuture oriented – Changing the futureSecret – Companies don’t shareSecond to last step – Captures everything else. Last step is customers’ choice.Instantaneous – Very fast changesGrading – Chance for marketers to say how much value they createdCommon – Every product or service has one.Dynamic – Markets changeA Process – Create processes
Complex – Many moving partsPowerful – The marketing mix variable with the biggest impact on profitImportant – to CEO, CFO, Marketing, sales, product lines, everyoneFun – Need I say more?Psychological – 99 centsQuantitative – Soft marketing variables and attach a number to itQualitative – Requires creative thought, and being in touch with your customersNever perfect – There is always room for improvementSpecific - to Industry/Market/CompanyCustomizable – Segmentation is importantDependent – on competitors products and other product in your own portfolioEmotional – Good deals and gougingFuture oriented – Changing the futureSecret – Companies don’t shareSecond to last step – Captures everything else. Last step is customers’ choice.Instantaneous – Very fast changesGrading – Chance for marketers to say how much value they createdCommon – Every product or service has one.Dynamic – Markets changeA Process – Create processes
Everything your company does either creates or destroys value. Pricing captures the net value.
This is obvious. We are all pricing people. Do your product managers know this? Do your prices change over time? Your customers WTP certainly does.Do you price on a volume curve? Do you think when a customer buys the 10,000th unit they are willing to pay less?As pricing people we know this to be true, but how well do we educate our companies and spread the message? How do we effect change on the People, processes, systems and data to come closer to this goal?
We all have R&D creating “Will I?” products. How are we valuing these? We only get our monopolistic position for a short while. It is not about a target margin, it’s about WTP.
My brother is a luddite.
I’ve talked to Product Managers who create high value products, release them at high prices, and then say they can’t hold their value when competition enters. Of course not. Once the competitors enter you have no choice but to price relative to the competition. That doesn’t mean match their prices as we will see in the next section. But we can’t maintain monopoly level pricing. Here’s what’s funny. From what I can tell most Semiconductor manufacturers spend all of their pricing efforts on the new released products, on the Will I? decision where price has much less impact. And they spend very little time on the Which one? Pricing, the price maintenance.
This may be the most important slide in the presentation. Do your product managers, your marketers, your company understand this? If you are different you do not have to match your competitors prices.
This is obvious. We are all pricing people. Do your product managers know this? Do your prices change over time? Your customers WTP certainly does.Do you price on a volume curve? Do you think when a customer buys the 10,000th unit they are willing to pay less?As pricing people we know this to be true, but how well do we educate our companies and spread the message? How do we effect change on the People, processes, systems and data to come closer to this goal?
Video gameBriefcaseHaircut
As pricing people, this deserves a big DUH. Of COURSE.
Video gamePair of shoesCell phoneHaircut
RegionSpendSizeGrowth
VolumeLead timeCompetitor PNPurchasing agent# times quoted in channelBought this part before
Versioning
Quarter end purchasing
Brilliant strategy, horrible execution. For almost all price segmentation, charge high prices and offer a discount when it’s deserved. IMPORTANT POINT – Always start with a high price and offer discounts. Photo creative commons by TheChristianAlert.org:http://www.flickr.com/photos/7712070@N04/2689674271/
Space level parts.
As pricing people, this deserves a big DUH. Of COURSE.