Pricing as aStrategic Capability<br />S. Dutta (Marshall, Univ. of Southern California),M.Bergen (Carlson, Univ. of Minnes...
How is it a Capability ?<br />Companies can invest to build capability of routinely setting prices that fit with:<br />its...
So where exactly do we invest ?<br />Invest in the 3 corners of our organization:<br />Human Capital<br />Systems Capital<...
Example: Polaroid<br />4<br />source: Giorgio Verdiani on Flickr<br />Rotman School of Management<br />
Example: Polaroid vs. Fuji & Kodak<br />5<br />Depended on razors & blades model<br />Failed to fit digital technology in ...
Example: Sun Country Airlines<br />6<br />source: Bill Shemley on Flickr<br />Rotman School of Management<br />
Example: Sun Country vs. North West<br />7<br />Pricing based on immediate demand<br />Skimming strategy but NW had differ...
Example: Roche<br />8<br />source: Greg Wake on Flickr<br />Rotman School of Management<br />
Example: Roche<br />9<br />Human Capital: hiring pricing experts<br />Systems Capital: internal center of learning + new s...
Human Capital<br />Understand the company in all its complexities i.e. strategy, range of products/services, customers, su...
	“ Companies that don’t have people who deeply understand dynamic pricing, auction theory, bundling, game theory, and so o...
Systems Capital<br />Sears: Absence of infrastructure to set prices differently for different stores  inflexible in respo...
Social Capital<br />is the “internal glue” that coordinates & holds participants in the pricing process. Hard to build and...
	“ Most CEOs will never set a single price. They can, however, give their managers the ability to win price wars, maintain...
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Pricing as a strategic capability

Published on: Mar 4, 2016
Published in: Business      Education      
Source: www.slideshare.net


Transcripts - Pricing as a strategic capability

  • 1. Pricing as aStrategic Capability<br />S. Dutta (Marshall, Univ. of Southern California),M.Bergen (Carlson, Univ. of Minnesota),D.Levy (Bar-Ilan University, Israel),M.Ritson (London Business School),M.Zbaracki (Wharton, Univ. of Pennsylvania)<br />Rotman School of Management<br />
  • 2. How is it a Capability ?<br />Companies can invest to build capability of routinely setting prices that fit with:<br />its positioning,<br />its customers,<br />its suppliers and<br />evolving market conditions<br />If not investing, capability becomes liability with:<br />angry customers &<br />competition seizing the opportunity<br />2<br />Rotman School of Management<br />
  • 3. So where exactly do we invest ?<br />Invest in the 3 corners of our organization:<br />Human Capital<br />Systems Capital<br />Social Capital<br />Leads to *ORGANIZATIONAL CAPABILITY* of always pricing correctly!<br />Competitors find this is hard to copy -> so we have now strengthened our Sustainable Competitive Advantage!<br />3<br />Rotman School of Management<br />
  • 4. Example: Polaroid<br />4<br />source: Giorgio Verdiani on Flickr<br />Rotman School of Management<br />
  • 5. Example: Polaroid vs. Fuji & Kodak<br />5<br />Depended on razors & blades model<br />Failed to fit digital technology in that model<br />Pricing capability could no longer support its strategy<br />source: Giorgio Verdiani on Flickr<br />Rotman School of Management<br />
  • 6. Example: Sun Country Airlines<br />6<br />source: Bill Shemley on Flickr<br />Rotman School of Management<br />
  • 7. Example: Sun Country vs. North West<br />7<br />Pricing based on immediate demand<br />Skimming strategy but NW had different goals, costs, needs<br />No investment on organizational glue & on pricing capability<br />source: Bill Shemley<br />Rotman School of Management<br />
  • 8. Example: Roche<br />8<br />source: Greg Wake on Flickr<br />Rotman School of Management<br />
  • 9. Example: Roche<br />9<br />Human Capital: hiring pricing experts<br />Systems Capital: internal center of learning + new software systems<br />Social Capital: involve various departments to reduce conflict & build consensus <br />source: Greg Wake on Flickr<br />Rotman School of Management<br />
  • 10. Human Capital<br />Understand the company in all its complexities i.e. strategy, range of products/services, customers, suppliers, competitors<br />Train internal staff to increase pricing expertise e.g. Roche Marketing University<br />Package to help negotiate a good deal<br />Info on co.s’ net profit before taxes, fixed costs, variable costs & freight expenses  immensely helps sales people<br />Hire the talent with sophisticated pricing knowledge<br />10<br />Rotman School of Management<br />
  • 11. “ Companies that don’t have people who deeply understand dynamic pricing, auction theory, bundling, game theory, and so on, are going to be involved in a daily game of catch-up with rivals who have invested in human capital. ”<br />11<br />Rotman School of Management<br />
  • 12. Systems Capital<br />Sears: Absence of infrastructure to set prices differently for different stores  inflexible in responding to competitors market by market  lagged behind the curve on pricing. <br />Electronic Pricing<br />Tools to tracking customer purchase history, price-sensitivity and category management systems to improve profitability<br />Tools to relay prices to salespeople in the field with real-time comparison to competitor prices<br />Human Capital & Systems Capital reinforce each other<br />12<br />Rotman School of Management<br />
  • 13. Social Capital<br />is the “internal glue” that coordinates & holds participants in the pricing process. Hard to build and hard to copy!<br />Build teams:<br />to not over-focus on the changing pricing process<br />anticipate consumer reactions by involving lead users<br />conduct market research &<br />analyze reactions to previous price changes<br />Helps to prevent a meltdown of customer relationships<br />13<br />Rotman School of Management<br />
  • 14. “ Most CEOs will never set a single price. They can, however, give their managers the ability to win price wars, maintain price leadership, and hold a competitive edge in pricing. ”<br />Rotman School of Management<br />14<br />