The Price Advantage / Edition 2

The Price Advantage / Edition 2

by Walter L. Baker, Michael V. Marn, Craig C. Zawada
     
 

For all the advantages businesses pursue, there is one powerful advantage that is accessible to virtually every business—but realized by very few. That advantage is the price advantage. Pricing is far and away the most sensitive profit lever that managers can influence. Very small changes in average price translate into huge changes in operating profit, yet

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Overview

For all the advantages businesses pursue, there is one powerful advantage that is accessible to virtually every business—but realized by very few. That advantage is the price advantage. Pricing is far and away the most sensitive profit lever that managers can influence. Very small changes in average price translate into huge changes in operating profit, yet few companies are as disciplined and deliberate about pricing as they should be.

In the most comprehensive and insightful treatment of pricing management available today, this Second Edition of The Price Advantage shows companies how to use pricing excellence to outperform competitors and increase profitability in both good and bad times. Drawing on more than three decades of client success, three preeminent McKinsey & Company experts demonstrate why pricing is critical to bottom-line profitability and explain state-of-the-art approaches to analyzing pricing and building distinctive pricing capability. Working with colleagues and companies across the globe, they have helped develop leading-edge practical knowledge in pricing for clients in all major industries.

Written in pragmatic terms, this Second Edition of The Price Advantage continues to be the practical pricing guide for thoughtful general managers who have been tempted by the unrealized promise of improved pricing and, perhaps, even frustrated by attempts to translate pricing theory into bottom-line impact. It provides a structured approach for identifying where the most precious sources of untapped pricing opportunity reside in a business, along with practical, case-illustrated guidance on how to capture that opportunity.

Updated throughout to reflect changes in the global pricing environment and advances in McKinsey's pricing knowledge, this Second Edition covers a host of new topics including software and information products pricing, lifecycle pricing, custom-configured products pricing, pricing of high-count product lines, pricing in distributed sales environments, and tiered products and services pricing. Also, the building of a sustainable pricing capability and a high-performing pricing infrastructure is covered in much greater detail than ever before.

With emphasis on translating pricing theory into real improvements and bottom-line performance, the Second Edition of The Price Advantage is designed to give today's CEOs and business managers a competitive advantage in any economy.

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Product Details

ISBN-13:
9780470481776
Publisher:
Wiley
Publication date:
06/08/2010
Series:
Wiley Finance Series, #535
Pages:
384
Sales rank:
912,699
Product dimensions:
6.30(w) x 9.10(h) x 0.90(d)

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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