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Raising Prices

Raising Prices. Matthew Noack and Stephanie Ferris. By PresenterMedia.com. Raising Prices and Profit Margin. Increasing prices will increase profit margin Increase price without alienating existing customers Consumer Price Index increase 3% in 2011. How Not to Set Prices.

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Raising Prices

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  1. Raising Prices Matthew Noack and Stephanie Ferris By PresenterMedia.com

  2. Raising Prices and Profit Margin • Increasing prices will increase profit margin • Increase price without alienating existing customers • Consumer Price Index increase 3% in 2011

  3. How Not to Set Prices • “Going with your gut” • Priced too low • Cost-based pricing • Leaves room for more profit margin • Competitor-based pricing • Not bad if identical, but can cause price war • Salespeople-based pricing • Incentive for too low of price • Video

  4. Raising Prices Eliminate discounts or change terms and conditions Cost increases = price increases Test price increase Charge for add-on services Redesign or re-launch “Premium” version

  5. Discounts • Don’t let one time deals turn into company policy • Customer behavior • Cash? Pay back early?

  6. Avoiding Price Wars • “Price buyers” • Only do business when profitable • Excess inventory • Lower price, take away value • They rarely change and are not loyal customers • Example: • AT&T sells iPhone 3gs for $49

  7. Redbox • In 2011 increased prices from $1 to $1.20 • Right as Netflix increased prices and lost customer • Do you still use RedBox even after price increase? • If yes, would you pay $1.50/night? • If no, what would you be willing to pay per night?

  8. Netflix • Increased prices by splitting up services • Didn’t add value • Drastically raised prices from reference price (Huge % increase) • Perceived value was reference price • http://www.youtube.com/watch?v=s4d-di_n3QE

  9. References • ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt • http://www.huffingtonpost.com/2011/10/27/redbox-price-to-increase_n_1062628.html

  10. Thanks For listeningAny Questions?

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