The Price Advantage / Edition 2

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"This book is a treasure—a practical yet intellectually sound guide to pricing that is applicable to both large and small companies. Frankly, in all my years writing about economics and covering corporate decision making, I have not seen pricing strategy and tactics explained so clearly as in this book."
Michael Mandel, former chief economist, BusinessWeek, and Editor-in-Chief, Visible Economy LLC

"This book is both insightful and practical. Many companies overlook the substantial profit opportunities from smart pricing. The authors show you not only where to look for, but also how to capture and sustain those opportunities."
James M. Kilts, former chairman and CEO, The Gillette Company

"The Price Advantage is very straightforward and direct, with concise and easily applied coverage of each and every topic."
David J. Reibstein, Marketing Professor, The Wharton School

The Second Edition of The Price Advantage, written by three preeminent experts at McKinsey & Company, is the most pragmatic and insightful book on pricing available.

Based on in-depth, firsthand experience with hundreds of companies, as well as significant investments in new pricing research, this book is designed to be a comprehensive guide for managers through the maze of pricing issues.

The authors examine state-of-the-art approaches for analyzing and improving pricing performance, demonstrate those approaches with real case studies, and draw a pricing excellence blueprint for companies to follow. In good economic times or bad, achieving the price advantage is critical to corporate performance and profitability.

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  • Craig C. Zawada
    Craig C. Zawada  

Product Details

  • ISBN-13: 9780470481776
  • Publisher: Wiley
  • Publication date: 6/8/2010
  • Series: Wiley Finance Series , #535
  • Edition number: 2
  • Pages: 384
  • Sales rank: 705,189
  • Product dimensions: 6.30 (w) x 9.10 (h) x 0.90 (d)

Meet the Author

WALTER L. BAKER is a partner in the Atlanta office of the international consulting firm of McKinsey & Company. Since joining McKinsey in 1998, he has worked with clients across multiple industries in the areas of pricing, sales, marketing, and strategy. With particular focus on the technology and industrial sectors, he has authored articles on pricing in CMO magazine, the McKinsey Quarterly, and the Harvard Business Review.

MICHAEL V. MARN is a partner in the Cleveland office of McKinsey & Company. He joined McKinsey in 1977 and has developed some of the most widely used analytic approaches for identifying and capturing opportunities in pricing. He has written articles on pricing that have appeared in publications including the Wall Street Journal, the New York Times, and the Harvard Business Review.

CRAIG C. ZAWADA is a partner in the Calgary office of McKinsey & Company. Since joining McKinsey in 1997, he has worked with companies across multiple industries, helping them to identify and capture improvements in pricing. He is widely published in the area of pricing strategy, with articles appearing in the Harvard Business Review, Mergers & Acquisitions, and the McKinsey Quarterly.

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Table of Contents

Preface xiii

Acknowledgments xvii

Part 1 Pricing Fundamentals 1

Chapter 1 Introduction 3

The Power of 1 Percent 3

The Price/Volume Tradeoff 6

Market Forces Add Pressure 7

The Nobility of Pricing Excellence 10

Why the Price Advantage Is So Rare 10

Chapter 2 Components of Pricing Excellence 13

An Integrated Approach 15

An Interdependent Hierarchy 18

Applying to Your Company-Pinpointing the Opportunity 19

Part 2 Exploring the Levels 23

Chapter 3 Transactions 25

The Pocket Price Waterfall 26

The Pocket Price Band 29

The Soundco Radio Company Case 32

Pocket Margin Waterfall and Band 39

Alen Glass Company Case 40

Chapter 4 Customer Value 45

Mapping Value 46

Creating a Value Map 46

Making Moves on the Value Map 57

Putting Customers on the Value Map 67

Value Profiling 69

Chapter 5 Market Strategy 75

Profiting from Better Price Predictions 77

Planning for an Expected Price Change 78

Maintaining Optimal Production and Capacity 79

Improving Pricing Conduct 80

Influencing the Elements of Pricing Conduct 82

A Word on Followership 89

Chapter 6 Pricing Infrastructure 93

Processes-What Are the Most Critical Types of Pricing Decisions for Your Business? 95

Organization-Who Is Running the Pricing Profit Center? 99

Performance Management-How Should We Recognize and Reward Pricing Performance? 103

Systems and Tools-No Magic Bullet Exists 107

Part 3 Unique Events 113

Chapter 7 Postmerger Pricing 115

A Temporary Window of Opportunity 116

Tremendous Opportunities at Each Pricing Level 119

Avoiding Common Postmerger Traps 127

Antitrust Laws 130

Chapter 8 Price Wars 133

Why Price Wars Should Be Avoided 133

What Really Causes Price Wars 136

Staying Out of Price Wars 141

Getting Out of Price Wars 144

When a Price War Might Make Sense 145

Part 4 Expanding the Boundaries 149

Chapter 9 Legal Degrees of Freedom 151

Pricing Decisions That Raise Red Flags 153

Minimizing Risks While Meeting Pricing Objectives 156

Calling in the Attorneys 162

Chapter 10 Lifecycle Pricing 165

What Makes Lifecycle Pricing Tough 166

The Three Phases of Product Lifecycle Pricing 168

Sustaining Returns Across the Lifecycle 179

Chapter 11 Pricing Architecture 183

Managing Price Perception 183

Influencing Customer Behavior 185

Price Architecture Based on Supplier Role 191

Part 5 Advanced Topics 197

Chapter 12 Complexity Management 199

Section 1 Custom-Configured Products 199

Section 2 High-Count Product Lines 207

Section 3 Distributed Sales Models 212

Chapter 13 Tailored Value 221

Section 1 Price Segmentation 221

Section 2 Tiered Products and Services 226

Section 3 New Products 230

Section 4 "Razor/Razor Blades" Offerings 236

Section 5 Solutions 240

Chapter 14 Software and Information Products 247

Unique Characteristics That Impact Pricing 247

Exploring the Elements of Pricing 250

Part 6 Making Change Happen 265

Chapter 15 Pricing Transformation 267

Designing a Clear Change Program 268

Accelerating and Embedding Change 276

Chapter 16 The Monnarch Battery Case 287

The Monnarch Battery Company 287

Transactions 289

Customer Value 293

Market Strategy 296

Capturing the Monnarch Pricing Opportunity 298

Hard-Wiring the Change 302

Epilogue 305

Appendix 1 Pocket Price and Pocket Margin Waterfalls 307

Appendix 2 Antitrust Issues 327

U.S. Pricing Law 327

EU Pricing Law 335

Antitrust Information Sources 342

Appendix 3 List of Acronyms and Abbreviations 353

Appendix 4 About the Web-Based Tool: Periscope 355

About the Authors 357

Index 359

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