Application of Price to Demand Curve: Incentive Curves

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來自 University of Virginia 的課程

Customer Value in Pricing Strategy

92 個評分

University of Virginia

Customer Value in Pricing Strategy

92 個評分

課程 2（共 4 門，Specialization Pricing Strategy Optimization）

The traditional approach to pricing based on costs works to pay the bills, but it leaves revenue on the table. You can, in fact, price your products in a way that increases sales--if you know what your customers are willing to pay and can leverage psychology to create better deal and discount plans. In this course, we'll show you how to price a product based on how your customers value it and the psychology behind their purchase decisions. Led by Darden faculty and Boston Consulting Group global pricing experts, this course provides an in-depth understanding of value-based pricing and how to use it to capture more revenue. By the end of this course, you'll be able to... -- Apply knowledge of customer value to price products -- Leverage core value-based pricing techniques to inform pricing decisions -- Measure customer willingness to pay using models (surveys, conjoint analysis, other data) -- Use knowledge of consumer psychology to set prices beneficial to both consumers and sellers

從本節課中

Implementing Value-based Pricing

Now that you have an understanding of customer value, let's dive into value-based pricing in greater depth. This week, we'll show you how to price to the demand curve using three tools: the price piano, the price ladder, and incentive curves. We'll take a look at customer value drivers in a B2B context and walk through a process to price a new product. Then Ron and Thomas will show you how price elasticity plays into value-based pricing. Implementing value-based pricing requires detailed analysis. Let's get started!

Module Introduction1:25

Price to Demand Curve6:40

Application of Price to Demand Curve: Price Piano6:58

Application of Price to Demand Curve: Price Ladder6:44

Application of Price to Demand Curve: Incentive Curves4:49

Customer Value Drivers in a B2B Context3:58

與講師見面

Jean Manuel Izaret
Senior Partner and Managing Director, Leader of BCG’s Global Pricing Practice
Thomas Kohler
Associate Director, Pricing
Marketing, Sales & Pricing Practice
Ronald T. Wilcox
NewMarket Corporation Professor of Business Administration & Senior Associate Dean for Degree Programs
Marketing

The third tool,

I would like to show you on how to price the demand better on the incentive curves,

and they really talk about what is the optimal pocket size and the price per use.

We talked about incentive curves in course one, so here is a quick recap.

On the x-axis you have all your products.

And on the y-axis you show the price per unit.

Now, the unit can be depending on the product can be the weight in grams or

ounces.

It can be in volume, liters or gallons.

Or simply the number of count of units in your package.

And the basic shape of an incentive curve is

sloping downwards because you want to create an incentive for

the buyer who considers product A to upgrade to product B.

Spend more money in absolute but pays less on a per unit basis.

There is a lot of debate what is the right slope for an incentive curve.

So here are two examples that help you in thinking about it.

Let's start with toilet paper.

Toilet paper usually is packed in multiple rolls pre-packed and

you can buy maybe two rolls, you can buy six rolls or you can buy 12 or 36 rolls.

And, I'm not sure whether I would use a lot more toilet paper

If I buy a lot of in a single pack.

So, the curve here is probably pretty shallow.

Now potato chips, very different case.

Once I start eating very hard to stop for me, so what you want to have is a pretty

steep curve because if you get me to buy the bigger one,

you can almost bet that I finish it all in one sitting and I just consume more.

And here's a trick how to avoid it.

Buy the biggest pack you can get to pay the lowest price per ounce.

And then put it on small plate, a single serve so

that you don't fall into the trap and outsmart yourself.

Now back to the hotdogs.

For hotdogs, looking at package size doesn't really make sense.

You buy one or two and then you're full.

So, but there's something very important going on with food in general

that is how well does it taste,

what's the value you provide in terms of enjoyment of good flavors.

And think about wine,

you have a lot of wine trading systems out there to guide consumers.

In our case New Food did extensive customer research and

asked them how do you like our hot dogs on a scale from one to 10?

One being very bad and 10 being excellent and they created this matrix

called Hot Dog Taste Points and our organic hot dogs too pretty well.

The entry level hotdog just the plain hotdog has 5 points,

the one with adding cheese has 6, the one with cheese and onions has 6 as well and

the one with everything loaded including chili has 8 points.

So, how does our incentive curve look like?

It is going down with the exception of line with the onions.

That is a little bit out of the line here so in other words,

there's very little incentive for, a customer who likes the cheese to also

add the onions if it really doesn't add anything on flavour here.

Now, maybe this calls for a change in recipe for a new food.

The onions they're using right now are raw.

Maybe fried onions will do the trick.

There's another way to use incentive course that's when you start

comparing to compare those.

Here we are adding our competitor Frankie and you can see that.

On a cost per taste point they are actually higher and

that is the charge the same price absolute a very similar price but

the consumer ratings for them are not as favorable.

So in other words we are undercharging for the taste we are providing.

And there could be a strategic debate whether we price up to close into our

competitor.

Let's do a quick recap on the incentive curves.

It'd really helps you to understand the impact of the package size and the usage.

And of course, for the business the question is,

can you drive incremental usage through larger package size?

Second and thirdly.

It helps you to understand what are the appropriate targets lobes between

the sizes to maximize profitability.

And what are the price unit relationships?

And where are they out of place on the marker or in your own lineup?

And with both of them, you can think about can we introduce or

change our incentive curves to optimize our profitability.

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