The Price Advantage, 2nd Edition

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

• ISBN13: 9780470632987
• ISBN10: 0470632984
• Format: eBook
• Copyright: 2010-05-01
• Publisher: Wiley

Summary

A comprehensive look at creating pricing strategies that work in both good economic times and badWritten by three preeminent pricing experts at McKinsey & Company, the Second Edition of The Price Advantage is a practical pricing guide for the executive or pricing practitioner who wants to identify, capture, and sustain substantial pricing gains in their business.Pricing is by far the most powerful profit lever that managers can influence. Yet few companies approach pricing in a way that fully capitalizes on its value. This Second Edition, a major revision and extension of the first book, shows you what it takes to achieve the price advantage in today's competitive and complex business environments. Based on in-depth, first-hand experience with thousands of companies, this book provides managers with a pragmatic guide through the maze of pricing issues. It reinforces why pricing excellence is more critical than ever today and then explains state-of-the-art approaches to analyzing and improving your own pricing strategy and execution. Explores the fundamental role of pricing infrastructure in achieving the price advantage Includes new topics such as software and information products pricing, lifecycle pricing, custom-configured products pricing, pricing of high-count product lines, pricing in distributed sales environments, "razor/razor blades" pricing, and tiered products and services pricing Revisits the full range of classic McKinsey pricing tools, including the pocket price waterfall and value mapsEngaging and informative, the Second Edition of The Price Advantage will put this essential discipline in perspective.

Table of Contents

Preface

Acknowledgments

Pricing Fundamentals

Introduction

The Power of 1 Percent

The Price/Volume Tradeoff

Market Forces Add Pressure

The Nobility of Pricing Excellence

Why the Price Advantage Is So Rare

Components of Pricing Excellence

An Integrated Approach

An Interdependent Hierarchy

Applying to Your Company-Pinpointing the Opportunity

Exploring the Levels

Transactions

The Pocket Price Waterfall

The Pocket Price Band

The Soundco Radio Company Case

Pocket Margin Waterfall and Band

Alen Glass Company Case

Customer Value

Mapping Value

Creating a Value Map

Making Moves on the Value Map

Putting Customers on the Value Map

Value Profiling

Market Strategy

Profiting from Better Price Predictions

Planning for an Expected Price Change

Maintaining Optimal Production and Capacity

Improving Pricing Conduct

Influencing the Elements of Pricing Conduct

A Word on Followership

Pricing Infrastructure

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

Organization-Who Is Running the Pricing Profit Center?

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

Systems and Tools-No Magic Bullet Exists

Unique Events

Postmerger Pricing

A Temporary Window of Opportunity

Tremendous Opportunities at Each Pricing Level

Avoiding Common Postmerger Traps

Antitrust Laws

Price Wars

Why Price Wars Should Be Avoided

What Really Causes Price Wars

Staying Out of Price Wars

Getting Out of Price Wars

When a Price War Might Make Sense

Expanding the Boundaries

Legal Degrees of Freedom

Pricing Decisions That Raise Red Flags

Minimizing Risks While Meeting Pricing Objectives

Calling in the Attorneys

Lifecycle Pricing

What Makes Lifecycle Pricing Tough

The Three Phases of Product Lifecycle Pricing

Sustaining Returns Across the Lifecycle

Pricing Architecture

Managing Price Perception

Influencing Customer Behavior

Price Architecture Based on Supplier Role

Advanced Topics

Complexity Management

Custom-Configured Products

High-Count Product Lines

Distributed Sales Models

Tailored Value

Price Segmentation

Tiered Products and Services

New Products

"Razor/Razor Blades" Offerings

Solutions

Software and Information Products

Unique Characteristics That Impact Pricing

Exploring the Elements of Pricing

Making Change Happen

Pricing Transformation

Designing a Clear Change Program

Accelerating and Embedding Change

The Monnarch Battery Case

The Monnarch Battery Company

Transactions

Customer Value

Market Strategy

Capturing the Monnarch Pricing Opportunity

Hard-Wiring the Change

Epilogue

Pocket Price and Pocket Margin Waterfalls

Antitrust Issues

U.S. Pricing Law

EU Pricing Law

Antitrust Information Sources

List of Acronyms and Abbreviations

About the Web-Based Tool: Periscope

About the Authors

Index

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