Comments on: Pricing in (and out of) a recession http://pricingconnection.com/?p=1 the Simon School talks pricing Tue, 06 Jul 2010 17:55:48 -0700 http://wordpress.org/?v=2.9.1 hourly 1 By: Gregory T. Farrell http://pricingconnection.com/?p=1&cpage=1#comment-5 Gregory T. Farrell Thu, 11 Feb 2010 14:58:55 +0000 http://pricingconnection.com.s85688.gridserver.com/?p=1#comment-5 Having the benefit of a career in B2B, with a very large B2C component, for a major Fortune 100 company, I have been able to see the effects of pricing strategies over a long time. As the author and resource from Deloitte pointed out, discounting is not the answer. As a matter of fact, we used to use the competitions discounting as a sign of weakness, and henceforth turned it against them as a sales tool by indicating to our consumers that discounting was a signal of instability. A company discounting is advertising to the world it needs money - hence it will lower its price to keep the doors open. While selling against that is difficult, if you have the luxury of a value add service (delivery, consulting), a company can market successfully against discounting. Furthermore, a key to all this is demand (need). If you have a product which is needed, then you can obviously maintain pricing, however be it, you must be fair and ethical to your end user. The final comment is actually incorporating bundling of products as mentioned in another Simon Pricing article by Zachary Freed, Simon 2010. Mr. Freed's article was in reference to professional sports ticket pricing. My experience has shown if you can tie in products with large differences in margin, the result is averaging out returns and silently discounting (while maintaining profit levels). A case in point would be the packaging, or bundling, of a higher cost hamburger with a large soft drink. The hamburger obviously has a higher price (and thinner margin) due to the cost of ingredients as well as a consumer price ceiling due to alternative food options (taco, fried chicken, sandwich, etc.). However, the soft drink is water, hence margin galore. You get the idea...and now you’re hungry to boot! In summary, pricing is a difficult "art" with significant science behind its implementation. Thank you Simon for these series, very educational. Having the benefit of a career in B2B, with a very large B2C component, for a major Fortune 100 company, I have been able to see the effects of pricing strategies over a long time. As the author and resource from Deloitte pointed out, discounting is not the answer. As a matter of fact, we used to use the competitions discounting as a sign of weakness, and henceforth turned it against them as a sales tool by indicating to our consumers that discounting was a signal of instability. A company discounting is advertising to the world it needs money – hence it will lower its price to keep the doors open. While selling against that is difficult, if you have the luxury of a value add service (delivery, consulting), a company can market successfully against discounting.

Furthermore, a key to all this is demand (need). If you have a product which is needed, then you can obviously maintain pricing, however be it, you must be fair and ethical to your end user.

The final comment is actually incorporating bundling of products as mentioned in another Simon Pricing article by Zachary Freed, Simon 2010. Mr. Freed’s article was in reference to professional sports ticket pricing. My experience has shown if you can tie in products with large differences in margin, the result is averaging out returns and silently discounting (while maintaining profit levels). A case in point would be the packaging, or bundling, of a higher cost hamburger with a large soft drink. The hamburger obviously has a higher price (and thinner margin) due to the cost of ingredients as well as a consumer price ceiling due to alternative food options (taco, fried chicken, sandwich, etc.). However, the soft drink is water, hence margin galore. You get the idea…and now you’re hungry to boot!

In summary, pricing is a difficult “art” with significant science behind its implementation. Thank you Simon for these series, very educational.

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