HBR's Go to Market Tools - Pricing for Profit

Follow

This article concerns: http://hbr.org/product/hbr-s-go-to-market-tools-pricing-for-profit/an/GTM2TL-HTM-ENG

HBR's Go to Market Tools: Pricing for Profit

HBR's Go to Market Tools: Pricing for Profit is an English Web based HTML interactive program that will help you confidently arrive at the most profitable price by guiding you through a series of questions.

Your Situation: Figuring out the best price for your product or service can be nerve-wracking. Your new product launch or marketing campaign's success, perhaps even your career advancement, may hinge on the price you choose. So how do you select a price that's attractive to customers and profitable for your company?

Your Solution: This tool will help you confidently arrive at the most profitable price by guiding you through a series of questions:

  • How much does it cost to produce each product you sell?
  • How are your competitors' products priced, and how valuable is your product or service relative to those competitors?
  • How many customers will buy your product at various price points?
  • What price maximizes your profitability?

HBR's Pricing for Profit will help you turn your raw data into a clear analysis that will inform your pricing decisions. The tool provides a systematic approach to determining the most profitable price for your product or service.

Includes:

  • introductory video
    • 1 minute, 36 seconds long
    • only available in-product, online
  • tutorial
    • walks you through the data gathering, calculations, and analyses to help you make more-informed pricing decisions
    • only available in-product, online
  • Price Your Product or Service tool
    • provides a systematic way to figure out the best price for your product or service to maximize profits
    • only available in-product, online
  • Excel version of the tool
    • downloadable
    • available permanently (from saved local copy)
  • PowerPoint
    • pre-designed
    • fully customizable
    • results from CLV tool export into PPT
    • presentation to share your results with your colleagues
    • available permanently (from saved local copy)

Navigate

When you launch Pricing for Profit, you will be on the 'Welcome' screen. You can use the menu links at the top of the screen as well as the buttons in other areas of the screen to navigate.

Click the play icon to watch the introductory video. Click the 'Worksheet' button in the 'Excel Worksheet' section to download the Excel version of the CLV tool.

Click on 'Tutorial' in the menu at the top of the screen or the 'Tutorial' button in the 'Walk Through the Tutorial' section to go through the training tutorial.

Clicking on the 'Tutorial' links on the 'Welcome' page will bring you to a tutorial explaining how to use the tool. Click on the 'Value', 'Demand' and 'Profit' tabs to navigate through the tutorial pages.

Click on 'My Projects' in the top menu or the 'Tool' button under 'Price Your Product or Service' to begin using the tool with your company's data.

The first time you click on the 'My Projects' or 'Tool' links on the Welcome page, the page will display a 'Get Started' button in the upper right as well as instructions in the center of the page how to proceed. Click the 'Welcome', 'Tutorial' or 'Glossary' links in the menu bar to navigate away from this page.

Clicking 'Get Started' will give you a screen on which to enter you company's data and click the 'Crunch' button to allow the tool to calculate the data.

Be aware that you need to input data and click the 'Crunch' button on all three tabs, Value, Demand and Profit, to complete the tool and be able to export your results to PowerPoint. After crunching your data on all three tabs, at the bottom of the 'Profit' tab is a 'Save a PPT' button allowing you to export your results into PowerPoint.

Click on the 'Glossary' link in the top menu at any time to access the full glossary of terms relevant to the tool.


VARIABLE COSTS

Vary as the unit quantity a company produces and sells changes. These are the costs of each incremental unit.

For example: If you have a lemonade stand, the variable costs include everything needed to produce and sell one cup of lemonade: lemons, water, sugar, and a cup. However, these variable costs can change depending on the quantities produced. If you were to expand into multiple locations and buy lemons in larger quantities, the variable costs would go down.

FIXED COSTS

Non-unit-based costs. A cost that does not change in direct proportion to the quantity of units produced and sold. These are often up-front costs.

For example: If you have a lemonade stand, the fixed costs include the cost to build the stand, rent the location, and advertise. However, if you were to expand into multiple locations, you would need to invest in more lemonade stands. The fixed costs would go up, but not in direct proportion to the number of cups of lemonade produced.

PRICE SENSITIVITY

The degree to which the price of a product influences consumers’ demand for it. Consumers are “price-sensitive” if their demand for a product changes a lot when the price changes only a little. Consumers are “price-insensitive” if their demand for the product hardly changes even if the price changes a lot.

VALUE

The difference between the benefits customers receive from a product and the price they must pay to obtain it. Value is based on how well the product completes “the job” customers hire it to do. Value consists of functional benefits and symbolic benefits.

CUSTOMER DEMAND

The number of units that customers would buy at a given price point.

PROFIT

The amount of money the company earns after paying all of its expenses. Profit is equal to revenue minus costs (fixed costs + [variable costs x units sold]).

REVENUE

The amount of money the company takes in from selling its products. Revenue equals the price per unit paid by the customer times the total number of units sold.

Do I have to complete the Tutorial?

No, you do not need to complete the Tutorial. It is simply available as an optional resource.

Was this article helpful?
0 out of 0 found this helpful
Have more questions? Submit a request

0 Comments

Please sign in to leave a comment.
Powered by Zendesk