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Pricing Strategy For Competitive Advantage

2011/8/15 13:32:00 58

　　 price war More and more common and cruel. Price seems to be the only way for enterprises to win in the market competition, and the pricing strategy to formulate and implement the winning strategy will be to establish lasting advantages and get rid of the low level. compete The important means are also placed in enterprises. Controller An urgent task ahead of us

"If you earn a penny in three years or a net profit in five years, I will dismiss all your department members!" this is the price war command of Jingdong mall in March 17th of this year. In the first 4 days, Dangdang announced that it would carry out an unprecedented sales rebate promotion on March 15th and 16, and the book purchase amount to 200 yuan to 100 yuan. "This kind of promotion is the biggest strength in Dangdang's establishment in 12 years, and it will make the competitors tremble with fear." The competition here is Jingdong mall and Amazon. Jingdong mall immediately launched a counterattack, and implemented a promotional activity of 100 to 50 and 200 to 100 for similar products at the same time. For this contest, Dangdang said, "price war is still the main means of China's e-commerce competition". Dangdang should not only fight, but also "continue to fight for three years". Jingdong, however, did not show any weakness.

The dispute between Jingdong and Dangdang is only a microcosm of China's market competition. From household appliances to automobiles, from industrial products to consumer goods, with the increasing commercialization of products and services and the increasing number of competitors, such price war scenes are common, and for enterprises, they are also suffering from water.

The formulation and implementation of the winning pricing strategy will help enterprises get out of the misunderstanding and get rid of the low level competition with price as the sole means of competition, and actively manage the price actively at the strategic level. The winning pricing strategy should be based on three basic principles: (1) based on customer value: starting from customers, making prices reflect the value of customers' acquisition; (2) taking the initiative: formulating strict price policy, communicating effective value, gaining the main action in the pricing process; (3) profit driving: making a wise trade-off between price and sales volume, so as to maximize profits.

Then, how can we set a winning pricing strategy?

Pricing strategy: Trilogy

1. deeply understand the value of customers from product services, and develop price strategies based on customer value.

This kind of customer value includes not only quantifiable economic value, but also psychological value and social value. At the beginning of Starbucks's entry into China, the price of a latte was around 30 yuan, which is 3~4 times the price of an ordinary coffee shop. What is the support of such an expensive price? In addition to quality coffee beans, varied flavors and professional services, Starbucks is trying to create an atmosphere of "third best places" outside the home and workplace. Whether it's relaxing alone, chatting with friends or informal business talks, Starbucks is the first choice for white-collar workers to meet when they meet. It has gradually become a synonym for "petty bourgeois" lifestyle, and is regarded as a symbol of "taste, fashion, success and status" by consumers. The price of Starbucks coffee is based on the recognition of this customer value and has achieved great success in China.

2. market segmentation based on customer value, pricing according to different needs of different customer groups, avoiding one size fits all pricing mode and maximizing profits.

While positioning high-end, Starbucks also distributes various coupons to distinguish different consumer segments, such as vouchers for students or other low purchasing customers, and marketing vouchers for corporate customers, so as to effectively achieve differential pricing and profit maximization. In the industrial sector, Dow Corning, a well-known chemical company, found that the company had two types of customers. A group of higher requirements for technology and after-sales support often require suppliers to carry out product development and application production together with themselves, while the other group mainly purchases general products, which requires higher delivery timeliness and is sensitive to product prices. In response to the different needs of the two types of customers, Dow Corning launched a dual channel strategy in 2002. For the first group of customers, traditional sales and technical services are still used. For the second types of customers, the Xiameter online ordering system is launched, which sells online products at a lower price for general products and dilute the concept of service. This way not only enables Dow Ning to concentrate more on serving the first class customers, but also restricts customers who do not need such services to eat "buffet", at the same time, greatly reduces the cost of services, and truly achieves the value appeal of the two categories of customers. {page_break}

3. through system data analysis, real-time grasp the actual situation of customer structure, and determine the promotion strategy.

Here, an effective tool is the four quadrant analysis tool for customer structure (Figure 1). The sales volume and profit margin of all customers are drawn on a chart, and the four quadrant customer classification is established on the basis of certain indicators. The customers of different quadrants are clear about the profits and sales contribution of the enterprises, and then the development priorities are determined according to the specific conditions of each quadrant customers, and the promotion strategy is formulated, and a trade-off is made under the principle of profit driving.

Pricing implementation: quick wins and systems engineering

1. the focus of the pricing strategy at the executive level is to plug the price gap.

From the potential maximum profit to the final bag profit (that is, the real income after all the discounts and service costs), the profit leakage occurs in many places. A variety of reasons for leakage, including order size discount, rebate rebate, acceptance bill and account period, coupons, returns, urgent orders, small orders, free training and various special services, etc. An effective tool to analyze price leakage is the price gradient tool (Figure 2). Through careful data analysis, enterprises can make all kinds of leakage data and provide detailed descriptions of actual profits. In practice, we can often see the surprised expression of enterprises after seeing this real bag profit analysis. The data analysis of this system will help enterprises find the key points to be paid attention to. Next, what enterprises need to do is to find out the root causes of various price leaks and formulate a strategy for plugging leakage.

2. eliminate enterprises' arbitrariness in pricing execution.

This arbitrariness is manifested in many aspects: Although enterprises provide bottom price limits for salesmen, these base prices are often broken down in the struggle of salesmen to balance sales and profits; the executive power is not clear in price enforcement, and salesmen need to ask repeatedly to determine the final price. They often miss the opportunity. They do not consider the impact of various invisible costs on profits, resulting in a huge gap between bag profits and potential maximum profits, and so on. Formulate strict price policy, clear the price authority of sales personnel at all levels, and earnestly implement it, making it a daily habit of salespeople, and an important guarantee for effective implementation of pricing strategy.

3., in the implementation of pricing strategy, we should establish various push and pull measures.

The promotion measures include: the improvement and supervision of various pricing management processes and policies, the corresponding adjustment of organizational structure, the perfection of knowledge and experience transfer mechanism, and the effective support of various systems and tools. The pulling measures include: top leaders' attention and strong support for pricing strategy and pricing management system, promotion and publicity of demonstration projects, incentive mechanism in place, and so on.

Create competitive advantage through pricing strategy

Far sighted enterprises have gradually abandoned the passive pricing strategy to deal with market price and customer pressure, instead of adopting a proactive pricing strategy, and supporting pricing objectives through systematic product strategy and marketing strategy. Procter & Gamble and general electric have made clear decisions to focus on the growth of profit margins by focusing on sales growth. DELL, WAL-MART and other world-class leading enterprises have also adopted pricing models to guide price setting, and accordingly improve the service mode. Our long-term tracking of the implementation effect of the pricing strategy shows that the effective implementation of the pricing strategy can increase the profit of enterprises by an additional 5%~50%, from the small commodity differentiation industries, such as paper, forest products, chemical products, industrial products, telecommunications voice services, to the pharmaceutical, software and hi-tech industries with larger differentiated services.

From the value creation, value communication, price policy to the final price implementation, sales organization optimization and performance incentive mechanism reform, and the formulation and implementation of the winning pricing strategy is a complex systematic project, which requires managers to master scientific methods and implement them with firm determination and unremitting efforts.