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Strategic Pricing

Strategic Pricing. John Newton - National Co-ordinator for Costing and Pricing JCPSG. JCPSG. Key reports affecting pricing. Hanham Report (1988) JCPSG Strategy (2003) - Investing in Innovation (2002) OST Consultation - fEC (2003) HEFCE Financial Memorandum (2004)

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Strategic Pricing

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  1. Strategic Pricing John Newton - National Co-ordinator for Costing and Pricing JCPSG

  2. JCPSG Key reports affecting pricing • Hanham Report (1988) • JCPSG Strategy (2003) - • Investing in Innovation (2002) • OST Consultation - fEC (2003) • HEFCE Financial Memorandum (2004) • Treasury letter (2004) • Science and Innovation Investment Framework • (2004) Joint Costing and Pricing Steering Group

  3. JCPSG Environmental issues • Perception - public, students, clients • Role of HE sector? • Government legislation • Regional/national/devolved objectives • Need for sustainability - fEC • Tuition fees • RAE • Public Good - Funders Forum, NHS, • Charities • Trends • Competition - HE, UK Private, Overseas Joint Costing and Pricing Steering Group

  4. JCPSG The HE Portfolio Mix • Teaching • Research • Consultancy • Trading • Other income • Non income-generating activities • Is there a strategy? Joint Costing and Pricing Steering Group

  5. What governs value in the HE sector? JCPSG • Perception • Branding • Marketing - promotion • How should we value our HEI? • Comparison with stock market valuations- • value at net assets or strategic value? • Strengths/weaknesses • Why do we value a plumber more than an • academic? Joint Costing and Pricing Steering Group

  6. How does manufacturing industry price products/services? JCPSG • Use of Cost-based and market-based • pricing • TRADITIONAL COSTING • Direct costs based on standards • Production overheads recovered on direct • labour • Sales and administration costs recovered • on Sales income • Activity -Based Costing • Marginal Costs - contribution to margin • Market/Competition • Aims • Profit Joint Costing and Pricing Steering Group

  7. Head of Commercial Pricing (a Sunday Times job advert - 26.9.2004) JCPSG • Change • Need to increase profitability • Improve service • Meet ever increasing competitive and • regulatory challenges • Complex product portfolio • Multi-stakeholder environment • Pricing strategy, policies, frameworks • Develop structural pricing proposals • Undertake competitor benchmarking • Model pricing responses to competitor activity • Implement pricing strategy • Provide commercial guidance to costing teams Joint Costing and Pricing Steering Group

  8. Policy review for pricing JCPSG • HEIs should review: • Strategic direction • Market/customer/ product mix focus • Financial Strategy • Risk analysis • Information flow/reporting • Decision-making • Best practice - negotiation, customer • profitability • Post-implementation review of • costing and pricing strategies • Additional resources • HR issues - need for liaison, incentives • RAM • Where are we are now? Joint Costing and Pricing Steering Group

  9. Institutional strategy for sustainability JCPSG • HEIs should: • 1. Establish and recognise fEC of • activities- better systems, processes. • 2. Determine marginal cost. How? • 3. Manage activities strategically. How? • 4. Look after the customer - quality. • 5. Secure better prices. How? • 6. Improve project management and • cost recovery. What’s happening now? • 7. Invest in research infrastructure Joint Costing and Pricing Steering Group

  10. Some more questions JCPSG • Do we know which products and customers are profitable? • What is the success rate of bids? • Who makes the final decision whether to proceed with work? • What are competitors doing? • Do we know how our indirect costs are driven? • Do we have a passion for excellence? Joint Costing and Pricing Steering Group

  11. Some key dates JCPSG • Now - HEIs to improve cost • recovery • January 2005 - fEC to be in place • July 2005 - JCPSG ends • September 2005 - Grants to Research • Council on new basis Joint Costing and Pricing Steering Group

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