The Price Advantage, 2nd Edition

“Pricing right is the fastest and most effective way for most businesses to grow profits,” explain Walter L. Baker, Michael V. Marn, and Craig C. Zawada, partners at McKinsey & Company, who have extensive experience in pricing strategies. It is also a key source of long-term competitive advantage. However, doing it correctly has proven illusive – and even high performing companies often fail to capitalize on the greater profits they could achieve by managing prices more skillfully. In the new, completely updated edition of THE PRICE ADVANTAGE, Baker, Marn, and Zawada provide a logical and 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 and sustain that opportunity.

Expert Insight Into How Companies Can Sharpen Their Focus On Pricing

With the continued growth of discount retailers, ever-increasing consumer access to price information, and Generation Xers exhibiting more price sensitivity than their predecessors, today’s economy faces unprecedented downward pressure on prices – making a rigorous focus on pricing more important now than ever before. The key to achieving the “price advantage” in this environment, the authors say, is taking an integrative approach that incorporates all three levels of price management they have identified – Market Strategy, Customer Value, and Transactions. In THE PRICE ADVANTAGE, they lay out these levels, and explain how to develop the high-performing pricing infrastructure necessary for fully realizing pricing opportunities.

Market Strategy -Understanding Shifts in Industry-Wide Prices

Excellence at the Market Strategy level demands that managers constantly watch for changes in costs, supply, and demand. “You must know market price levels, predict them better, and, if possible, independently influence them in a positive direction,” say the authors. Understanding how market structure, microeconomics, and conduct affect overall market price levels is essential.

Customer Value -Obsession with Customer Perceptions is Key

The primary issue at the Customer Value level is price positioning relative to competitors. “Companies that shine at this level obsess about customers’ perceptions of both their products and their price,” write the authors.

Transactions -Managing Prices Customer-By-Customer, Deal-By Deal

The Transactions level of price management examines the exact price to assign to each transaction – taking into account discounts, allowances, payment terms, volume bonuses, and other inducements. Too often, accounting systems fail to consider many off-invoice discounts, frequently leading companies to perceive unprofitable customers to be profitable, and vice versa. Aided by tools like McKinsey’s “Pocket Price Waterfall,” which details the on-and off-invoice discounts that impact the actual revenues ultimately left in a company’s “pocket,” the authors show how businesses can better manage transaction economics.

Pricing Infrastructure -How to Capture Pricing Opportunities

Ultimately, understanding the three levels of pricing is crucial – but insufficient. In THE PRICE ADVANTAGE, the authors explain what it takes for companies to develop the pricing infrastructure required to deliver and sustain pricing excellence. This infrastructure includes the processes, organization, performance management, and tools that support the pricing function. The authors detail where the pricing function should sit within the company, how it should be staffed, how to recognize and reward pricing performance, and how to collect and use pricing data. 

From Mergers to Price Wars, From Lifecycles to Legal Issues

Perhaps the most up-to-date book explaining how to make pricing a cornerstone for ongoing success, THE PRICE ADVANTAGE also addresses such crucial issues as:

•How to manage prices over a product’s lifetime in order to sustain returns;

•How to handle the complexity of pricing custom-configured products, and tailor value to specific customers and markets – including segmenting price, pricing product line tiers, and dealing with “razor/razor blades” offerings;

•How to tackle the unique challenges of pricing software and information based products;

•How to capitalize on the brief post-merger opportunity to review and change pricing without

the usual internal and external resistance;

•Why price wars are almost universally destructive, what causes them, and how to avoid them;

•What legal issues commonly arise when implementing pricing programs, including how pricing rules and the global legal landscape have evolved in the past five years. 

Comprehensive and cutting edge, THE PRICE ADVANTAGE shares the unsurpassed knowledge the authors and their team have developed, showing how any company can take the transformational steps necessary to harness the power of pricing, and gives today’s CEOs, marketers, and general managers a competitive advantage in any economy.