Index
Aaker, David, 179
Acquisitions, 62–63
Actuarially based pricing, 12
Add-on elements, 88 (See also Bundling)
Advertising, 180 (See also Marketing)
Airbus, 48
Airline industry, 3, 12, 57n.4, 151–152, 248–249
Alchemy, 20n.4
Alice’s Adventures in Wonderland (Carroll), 47
Alliances, 141–143
Amazon, 3, 11–12, 105, 167, 177
America Online (AOL), 100, 161, 204n.6
American Airlines, 151
American Express, 136
American Museum of Natural History, 175
Angie’s List, 55
Angry Birds, 55
Antitrust lawsuits, 67n.3
AOL (see America Online)
Approval process, 244
Arc elasticity, 114n.1
AT&T:
calling pattern information, 129
capping of data usage by, 82n.1
competition with MCI, 100
contextual story of, 8
data services offered by, 159, 160
rollover minutes program, 72–73, 152
Attack bundles, 93–94
Avionics, 52
Banking industry, 75, 234 (See also Finance industry)
Bargains, 40
Barry, Dave, 205
Baseline prices, 15
Battleground sector, 136–139
Bear Hug bundling option, 94
Bell Atlantic, 146
Bell Canada Mobility, 36
Benefits calculator, 210
Berlioz, Louis-Hector, 187
The Black Swan (Taleb), 202
Black-Scholes option-pricing model, 149, 210
Bloomberg, 66
Boeing, 48
BP (British Petroleum), 144
Branding, 173–182
dimensions of brand, 175–177
function of, 38
and perception, 250
power of, 179–181
Braniff International, 152–153
Breadth, depth vs., 99–100, 162–164
British Petroleum (BP), 144
“Broken” list prices, 107
effects of digitization on, 52–53
in Homeland market sector, 135
long-term contracts with, 112
sales forces in, 147
use of coupons in, 252–253
Budgets, 35
Bundling, 85–101
of communications plans, 8
complementary components in, 88–91
defining, 86–87
of digital products, 54–56
innovation in, 98–100
and price pressure, 63–65
size of bundles, 95–96
for special purposes, 93–95
with third parties, 143
tiering vs., 96–98
unwanted, 53
Business operations, 242–243
Cable companies, 3
Calls to action, 164–166
Cantor Fitzgerald, 16
Capital, negotiation, 155n.12
Capital asset pricing model (CAPM), 146
Car Spa, 144
Carroll, Lewis, 47
Cash flow, 27
Cell phone manufacturers, 213
Cengage Learning, 16
Challengers, 99–100, 139 (See also Entrants)
Champions, 189–190
Chrysler Corporation, 126
Churchill, Winston S., 131
Clapton, Eric, 18n.7
Clausewitz, Carl von, 154n.2
Clorox, 180
Cloud computing software, 77
Cold War, 68n.4
Colgate-Palmolive, 170
Commercial lenders, 12
Compensation systems, 192
Competing for the Future (Hamel & Prahalad), 175
Competition, 21–31
being ahead of, 127–128
buying out contracts from, 163
costs of, 28–30
and decision contexts, 23–28
demand curve for pricing against, 215–216
devaluing offers by, 94
duopoly, 151–153
and list price, 12
as source of risk, 61–63
understanding your, 22–23
Competitive offers, 3
Comprehensive services, 209–210
Computing industry, 122–126, 163, 213
Construction industry, 97, 142
Consumers, 3 (See also Customer(s))
Content:
digitalization’s effects on, 48, 53
producers of, 50
Content pricing, 50
Context(s), 33–44
categorization of, 41–42
components of, 7–9
contextual logic chain, 124–127
defined, 33
effect of buying decision on pricing, 34–40
importance of, 11
segmentation as complementary to, 122–128
segmentation vs., 119–122
tools for identifying and evaluating, 42–43
and types of pricing capabilities, 41
value vs., 9–10
Context-specific pricing approval, 241–242
Contextual data (see Data)
Contextual pricing, 1–4
applications of, 3
defined, 2
program for, 13–17
See also specifi c headings
Contexture, 33
Continental Airlines, 151
Core users, 93
Corporate objectives, 24
Correlation, 101n.5
Cost positions, 24
Cost-plus contracts, 31n.5
Costs:
in branding and pricing, 180
in commodity and near-commodity markets, 28–30
industry pricing driven by, 64
in pricing waterfall, 234
of promotion, 27
Coupons, 252–253
Courage, 145
Crandall, Bob, 19n.10
Creative pricing, 247–253
Credit Suisse, 73
CRM (see Customer relationship management)
Customer(s):
analysis of behavior by, 193
awareness of, 104
and buying decisions, 1–2, 36–40
characteristics of, 106–108
data on, 239
diversity of, 250
effects of digitization on, 48
forecasting of costs by, 76
inertia of, 140
interviews with, 148
mind of, 9–11
price sensitivities of, 97
product adoption by, 158–162
purchasing behavior of, 111
seeking insights from, 3
Customer relationship management (CRM), 16, 191, 192, 239
Customization, 205
Dangerous price moves, 103–113
and customer characteristics, 106–108
and demand curve, 105–107
lowering prices, 103–105
Data, 223–230
about customers, 239
availability of, 121
balanced view of, 226–228
on competition, 224–226, 228–229
databases for, 223–224
unstructured, 240
Data analysis techniques, 200–202
Data communications industry, 122–126
“Deal” pricing, 199
Deal-specific pricing, 65
Decision-cycle-based pricing, 132
Defensive bundles, 94–95
Deflation, 113
Dell Computer, 145
Demand curve, 105–107, 207, 213–218
Demand-management systems, 12, 152
Departmental Computing phase (computing/data communications), 123
Depth, breadth vs., 99–100, 162–164
Descriptive analytics, 235, 236, 238, 246
Differential value, 24–26
Differentiation, 85
Digital piracy, 54
Digitization, 47–56
and bundling products, 54–56
and price structure, 51–54
product innovation with, 152
and supply and demand, 47, 50–51
tweaking pricing strategy to match, 49
Discount scorecard, 207, 211–212
Discounting:
cumulative, 136
market conditions for, 40
precision in, 60–63
as sole focus of managers, 78
tactical, 165
Discriminate function analysis, 201, 210
Disintermediation, 48
Disneyland, 154n.6
Distribution pricing, 50
Domain, brand, 176
Downstream market facing pricing, 198
Downturns, 109–113
Doyle, Arthur Conan, 202, 223, 227
Drivers:
in discount scorecard, 212
identification of, 38
Dun & Bradstreet, 43
Duopolies, 151–153
Ease-of-use, 162
Eco systems, 141–143
Economics, 7
Einstein, Albert, 1, 114n.6, 204n.8
Eisenhower, Dwight D., 247
E&J Gallo, 145
Electricity markets, 213
E-mail-blast services, 196
EMI, 105
Enterprise pricing, 126
Enterprise resource planning systems (see ERP systems)
Entertainment industry, 81, 141–142
Entrants, 150, 152 (See also Challengers)
Entrants/Opportunistic Raiding sector, 139–141
Equity analysts, 8
Equity holders, 28
ERP (enterprise resource planning) systems, 18n.6, 242–243, 245
Estée Lauder, 217
Ethical standards, 21
Evaluation organizations, 110
Evolutionary segmentation, 129 (See also Segmentation)
Executional capabilities, 149–151
Facebook, 142–143
FDA regulations, 86
Federal Paperboard, 125–126
Ferchat, Bob, 36
Finance departments, 242
Finance industry, 142–143, 248 (See also Banking industry)
Financing, 35
Firestone Tire, 98
Flat-rate pricing, 64, 71, 74, 75
Floorboards, 87
FOB (free off board) shipping, 101n.1
Food Network, 133–134, 143, 175
Ford, Henry, 154–155n.7
Ford Motors, 197
Free off board (FOB) shipping, 101n.1
Free products, 49, 54, 165–166
Front-end choice, 190–192
Frontier Airline, 151
Galilei, Galileo, 230n.3
Gasoline prices, 8–9
General Electric (GE), 10, 61, 228
General Motors (GM), 114n.2
Gillette, 183n.8
Global sourcing, 126
GM (General Motors), 114n.2
Godwinson, Harold, 67n.1
Google, 202
GPS devices, 215
Grand Strategy, 153
Grey Poupon, 204n.6
Hamel, Gary, 175
Hancock, Ellen, 146
Harcourt, 153
Harris, Deb, 200
Harrison, George, 248
Hedberg, Mitch, 19n.8, 45n.4, 173
Hertz, 98
Hierarchical Proprietary stage (computing/data communications), 123, 126
Hierarchical tiering, 96–98
High risk level, 62
High-affinity brands, 175
Home Depot, 87
Homeland sector, 135–136
“Hooks” (bundling), 97–98
Hotel industry, 12
Iacocca, Lee, 197
If-then tables, 211
Incentives, 219n.1
Increasing prices (see Price increases)
Incremental pricing, 214
Incumbents:
and customer behavior, 140
and innovation, 98–100
pricing levels and structures of, 150
product development by, 162
Information management, 123
Information sources, 192–196, 214 (See also Data)
In-kind services, 81
Innovation:
in bundling, 98–100
price structure, 73
Integrated Computing stage (computing/data communications), 124, 126
Intel, 202
Intellectual property, 218, 252 (See also Patent program)
Internet services, 196
Internet telephone providers, 8, 88–89
Intrinsic value, 8
Introductory pricing, 157–172
breadth vs. depth in, 162–164
calls to action with, 164–166
and capabilities, 169–170
importance of knowledge in, 157
and negative usage pricing, 167–168
and phases in customer product adoption, 158–162
role of guided sales in, 166–167
for synthetic products, 168–169
timing of, 157
top management’s involvement in, 171
Inventory-turnover adjusted pricing, 12
iPods, 11
Isdell, Neville, 153
IT departments, 123–126, 170, 251
J. D. Powers, 110
Jackson, Jess, 145
Jackson, Michael, 57n.2
Johnson & Johnson (J&J), 67n.2, 190
Kendall-Jackson, 145
Kenrick, Roger, 181
Kriging, 202
Learning phase (product adoption), 158–159
Leasing, 81–82
Legacy product pricing, 55
Legal departments, 251–252
Legal publishing industry, 49, 97–98, 216
L’eggs, 104
Lehman Brothers, 153
Lennon, John, 71
Leonardo da Vinci, 200
Liddell Hart, B. H., 154n.2
Life insurance industry, 12, 209
Lifecycles, 216–217
“Limited time offers,” 132
Linking bundles, 97
Lipton, Stephen, 67n.1
advocates for, 197–199
benefits of not using, 11–13
factors in death of, 7
fixing “broken,” 107
as untenable price, 17
L. L. Bean, 165
Location, 9
Long-term contracts, 112
Los Angeles International Airport, 98
Loss history, 12
Low risk level, 62
Lowering prices, 103–105
Lucent, 26
Management: and brand pricing power, 179–181
compensation of, 24
and digitization, 49, 50, 52, 55
documentation of potential drivers by, 38
and effects of pricing, 30
and introductory pricing, 169–171
and overbundling, 96
and segmentation, 121
Marginal users, 93
Market analysis, 191
Market conditions: changes in, 8, 195
as context, 2
demand curves for analyzing, 215
and digitization, 55–56
for discounting, 40
downturns, 109–113
Market factors, 135
Market power:
assessment of your, 76–77
differences in, 140
and pricing strategy, 131
Market research, 193–195
Market strength, 41–42
Marketing:
and creative pricing, 252–253
four P’s of, 38–39
and list price, 199 See also Branding
Martin, George, 248
McDonald’s, 213
MCI, 100
“Me too” products, 164
Meatpacking industry, 238
Medium risk level, 62
Meili, Barbara, 155n.12
Mercedes-Benz, 178
Merck & Company, 123–124
Merrill Lynch, 145
Miller, Arthur, 7
Min-max analysis, 201
Mission Internet phase (computing/data communications), 124, 126
Mobil Oil Europe, 144
Mobile technology industry, 51
Model T, 11
Modeling:
Monopolies, 11–12
Moore’s Abridged, 216
Moore’s Federal Practice, 216
Morgan Stanley, 125–126
Morningstar, 8
Multielement sale, 49
Myhrvold, Nathan, 218
NBC News, 52
Near-commodity markets, 28–30
Negative usage pricing, 167–168
“Negotiation capital,” 155n.12
Neumann, John Von, 231
Nevins, Mark, 188
New products, 28, 158 (See also Introductory pricing)
New-product development tool, 214–215 (See also Product development)
Nike, 204n.6
Nonprice fees, 40
Nortel Siemens Networks, 13–14, 26
Novartis, 220n.8
Oi, Walter, 154n.6
Oil and gas industry, 112, 179, 236
Oil Price Information Service (OPIS), 236
Oligopolies, 151–153
On War (Clausewitz), 154n.2
OPEC, 111
Opening price, 234
Operational risks, 151
OPIS (Oil Price Information Service), 236
Overbundling, 95–96
Overextended products, 162–163
Overseas expansion, 139
Ownership rights, 35
Pain points, 189–190
Paktiv, 2
Panasonic, 26
Partial sets, 35
PBX (private branch exchange) equipment, 26
P&C insurers, 12
Per-barrel services, 81
Perception, 250
Peterbilt trucks, 99
P&G (see Procter and Gamble)
Phlogiston, 30
Pioneer, 140
Piracy, digital, 54
Planck, Max, 85
Platts Global Petrochemical Index, 236
Point elasticity, 114n.1
Postpurchase economics, 78
Prahalad, C. K., 175
“Prediction markets,” 202
Predictive analytics, 235, 236, 246
Premium pricing, 29–30
Premium products, 40
Prescott, Phebe, 155n.8
Price benchmarking, 56
Price comparison, 40
Price disruption, 28
Price elasticity, 105, 114n.1, 214
Price opacity, 136
Price pressure, 59–67
contextual pricing as antidote to, 3
and discounting, 60–63
killer tactics and bundling approaches to, 63–65
and knowing level of play, 65–66
as normal obstacle, 59
and segmentation, 42
Price realization, 108
Price reductions, 103–105
Price sensitivity, 35
Price structure, 71–82
addressing, 137
at AT&T, 72–73
changes in “unit of purchase,” 78–81
defining, 19n.11
developing, 16
and digitization, 51–54
fundamentals of, 74–78
of incumbents vs. entrants, 150
permanent, 164
as potential pricing driver, 38
and price levels, 15–16
Price variation, 42, 51, 146–147
Priceline.com, 218
Pricewitch.com, 220n.2
Pricing:
actuarially based, 12
complexity of, 45n.5
content, 50
contextual (see Contextual pricing)
“Deal,” 199
deal-specific, 65
decision-cycle-based, 132
defining, 249–250
distribution, 50
enterprise, 126
introductory (see Introductory pricing)
inventory-turnover adjusted, 12
legacy product, 55
negative usage, 167–168
premium, 29–30
scientific bundle, 92 (See also Bundling)
segment-specific, 65
simplicity of, 1
uniform, 65
Pricing hypotheses, 196
Pricing strategy, 131–153
costs in, 143–145
determining strengths and weaknesses for, 133–135
and duopolies, 151–153
estimating risk of loss in, 147–148
executional capabilities in, 149–151
front end of, 190–191
introductory (see Introductory pricing)
market sectors for, 135–141
and price variation, 146–147
reducing risk in, 148–149
risk as part of, 145–146
role of third parties in, 141–143
writings on, 131
Pricing tools, 205–219
cost of, 206
discount scorecard, 207, 211–212
implementation of, 205
product price tool, 206–208
product value tool, 206, 208–211
Pricing waterfall, 234–235, 242–243, 245
Principles of Political Economy and Taxation (Ricardo), 213
Private branch exchange (PBX) equipment, 26
Probability, 202
Process improvement, 197
Procter and Gamble (P&G), 13, 139, 170
Product(s):
digital, 51–56 (See also Digitization) focus on, 9–10
new, 28
overlapping, 94
as potential pricing driver, 38
premium, 40
relaunch of, 199
sold in super-sets, 35
Product development, 3
and bundle modeling, 212
by incumbents, 162
upstream, 198
Product innovation (see Innovation)
Product portfolios, 217–218
Product price tool, 206–208 (See also Pricing tools)
Product value tool, 206, 208–211
Profit objectives, 21
Promotion: costs of, 27
and elasticity curves, 214
as potential pricing driver, 38
as sole focus of managers, 78
Proxies, identification of, 216
Publishing industry, 52–54, 72, 81
Purchase unit, choice of, 35
Purchase volume, 76
Quality premium, 25–26
Quotron, 66
Rate cards, 113
R&D (research & development), 242 (See also Product development)
Real estate investment trusts (REITs), 61
Reassess phase (product adoption), 161–162
Recession of 2008-2009, 112
Recession of mid-1970s, 111
Recognition, brand, 176–177
Regan, Don, 145–146
Reimbursement opportunities, 110
REITs (real estate investment trusts), 61
Relative value, 24
Relaunch, 199
Rental car companies, 75
Reputation, brand, 177
Research & development (R&D), 242 (See also Product development)
Retailers, 12
Retention tactics, 165
Reward points, 165
Ricardo, David, 213
Risk:
causes of, 146
competition as, 61
level of, 61–63
of loss, 147–148
operational, 151
as part of pricing strategy, 43, 145–146
reduction of, 148–149
of strategy front end, 191
Risk scorecards, 108
Rolls Royce, 73
Sales forces, 147, 199, 211, 212, 251
Sales process, 232, 238–241, 243
Sam’s Club, 135
Scaling, 53–54
Scenario planning, 111–112
Schmidt, Eric, 223
Scientific bundle pricing, 92 (See also Bundling) S&D (supply and demand) analysis, 213
Seagate, 237
Search engine market, 134
Segmentation, 119–129
benefits of, 127–128
and branding, 180–181
context as complementary to, 122–128
context vs., 119–122
and contextual logic chain, 124–127
and demand curve, 106
and differential value, 26
and price pressure, 42
Segment-specific pricing, 65
Server Farms, 95
Service speed, 48
Share, balance between profits and, 21
Share growth, 27
Shell Oil, 111
Shillinglaw, Gordon, 31n.6
SIC (Standard Industry Classification) codes, 127
Simulating markets, 202
Situation (in pricing), 249
Skype, 140
“Sleepers” (in software), 55
Software as a service (SaaS), 158, 159, 166
Software companies, 127
Sony, 105
Sophisticated sale, 49
Southwest Airlines, 152
Special orders, 29
Spreadsheets, 209–210
Stand-alone purchase patterns, 89–90
Standard & Poor’s, 8
Standard Industry Classification (SIC) codes, 127
Starbucks, 217
Statistical modeling, 148, 210
Statistical tests, 148
Stock brokers, 140
Strategy (see Pricing strategy)
Studies, sponsoring, 136
Subcontractors, 142
Subsidiary prices, 14
Sun Microsystems, 126
SunGard Availability Services, 210
Sunglasses, 178
Super-sets, 35
Suppliers, 72
Supply and demand (S&D) analysis, 213
Supply chain operations, 242, 243
Supply curve, 213
Surveys, 193–195
Synthetic products, 168–169
Systems architecture, 231–246
aligning pricing with business operations in, 242–243
collecting and applying context in, 232, 246
context-specific pricing approval in, 241–242
enabling price setting in, 235–238
end-to-end, 243–246
integrating sales and pricing in, 238–241, 243
pricing solutions requirements in, 232–233
pricing waterfall in, 234–235, 242–243, 245
Systems-led approach, 191–192
Tax opportunities, 110
Telecom equipment industry, 26
Telecommunications, 123
Telephony industry, 72–73, 75, 88–89, 100, 139–140
Teller, Edward, 253n.4
Telport Communications Group, 22–23
Test market procedures, 170
Texaco, 144
Theresa, Mother, 157
Thiede, Patrick, 227
Third parties, 110, 120, 141–143
Tiering, 96–98
Time-phase pricing, 245
Timing:
with Battleground market sector, 138
importance of, 3, 23, 40, 131–133, 139
and inflation, 115n.8
of introductory pricing, 157
Trading organizations, 34
Transaction speed, 48
Tymetrics, 228
Underdog strategies, 139
Unemployment, 111
Uniform pricing, 65
Unit of measure, 51–52
Unit of purchase, 78–81
United Airlines, 151
United States Trust, 123
Unstructured data, 240
Upstarts, 94
Upstream product development, 198
Up-tiering, 97
U.S. Postal Service, 143–144
U.S. Supreme Court, 180
Use and Enjoy phase (product adoption), 159–161
Utility phase (computing/data communications), 123, 125
Value:
communication of, 110
company’s guarantee of, 149
concept of, 17
of content, 53
context vs., 9–10
differential, 24–26
and digitalization, 47
of free products, 166
intrinsic, 8
lifetime, 164–166
and price increases, 104
and price structure, 80
product value tool, 206, 208–211
relative, 24
Vintner Reserve, 145
VoIP telephone providers, 8, 88–89, 140, 180–181, 196
Voltaire, 103
Volvo, 66
Vonage, 8
Warehouse clubs, 135
The Wealth of Nations (Smith), 213
Web sites, 50
White Star Line, 219
Wikipedia, 57n.2
WIMAX wireless broadband access, 196
Women’s fashion, 31n.2
World War II, 155–156n.13
Wright & Miller Federal Practice and Procedure, 216