Pricing for Management Consultants & Business Analysts

Pricing is pretty difficult as it has a lot of impact on the strategy, consumer satisfaction, and most of all on the profits of the firm. We will start by looking at the essential concepts in pricing.

Another source of improving the profits without changing the scale of the business is to play with the pricing. Here I will discuss some general rules and approaches

In this lecture, we will talk about what kind of benefits the right price conveys

Here I will discuss from the psychology point of view what  is the fair price and how to build around it

When we are talking about prices we have to remember that there are different concepts involved

• Regular Price Level

• How we charge the customer?

• How the price is presented to the customer

• Pricing Policy

• Discounting Policy / Promotion Policy

• Price Awareness

• Price Perception

• Price Setting Techniques

Let’s start with a short definition. Price Elasticity of demand:

• Shows how the demand will change if you move the price

• It gives the percentage change in quantity demanded in response to a 1% change in price

Now let’s have a look at different ways to set prices. We will briefly go through the theory, but we will mainly concentrate on short case studies that will help you understand different techniques.

There are 3 main approaches to price setting. We will discuss how they differ when you use them and what are the pros and cons of every approach.

• Cost-plus pricing

• Value-Based Pricing

• Competition Based Pricing

There are some ways in which you can implement Value-Based Pricing

• Similar products with different price points (i.e. fashion, food)

• Basic products with potential paid upgrades (i.e. cars, airlines)

• 1 price but discounts for specific groups of customers

• Use value metrics to estimate the price (i.e. SaaS)

• Dynamic Pricing (i.e. Airlines)

• Multiple prices for the same products (i.e. e-commerce)

Implementing the value-based pricing is a 5-step process

• Define Customer Segments

• Estimate their willingness to pay

• Pick the mechanism to implement value-based pricing

• Test the mechanism on a sample

• Implement after finding the optimal solution

Checking the willingness to pay can be described using a 5-step process

• You carry out a survey among customers from your segments

• Create a map using their responses

• Determine the potential price range

• Test specific price points

• Implement after finding the optimal solution

In Value-Based Pricing, you set the prices using the value that the product gives your customer. We will talk briefly about the customer surplus that you should leave.

In many cases, similar products are available at different prices next to each other in the same store. Those different prices we call price points.

Let’s see what the impact will be on the Gross Margin of introducing a new price point in a coffee shop chain. A few information about the chain

• 100 locations in Eastern Europe

• Currently, they sell 2 sizes

• They want to introduce 3rd size

• Estimate the impact on Gross Margin

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

Certain needs require the customer to buy a few products together to fulfill their needs. Those products we call complementary.

In some cases, you want to bundle two or more products and sell them as one set. Usually, the bundle costs less than individual products. Let's see when it makes sense.

Now we will have a look at a cosmetics producer, and we will try to see what the impact of creating a new bundle is. Let's see what we know about them:

• They sell face creams & shampoos

• They consider creating a bundle of those 2 products

• They will 10% discount on products in the bundle

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In some industries especially B2B the pressure on prices is so big that firms decide to unbundle their services and prices.

Imagine that you are working for a Drugstore Wholesaler that wants to unbundle its services (provide direct distribution instead of wholesaling service). Help him estimate the impact

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

Let’s have a look at 3 approaches to managing the price & discounts.

Let’s see how the price of a product will change in the Product Life Cycle.

Imagine that you are working for a video game producer. You have to decide on the pricing strategy in each and every stage of the Product Life Cycle.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

Price discrimination is an old concept that can be fully used thanks to technology. In Price Discrimination, we start with the notion that the product has a different value for different customers. If this is the case, then it makes sense to have different prices for different customers or groups of customers. Price Discrimination can be achieved in many different ways

Imagine that you are working for a PE fund that has just bought a fashion Retailer. You have to estimate the impact of introducing special discounts for cardholders.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In Dynamic Pricing, you set flexible prices based on current or forecasted demand. In other words, there is a big fluctuation in the prices.

Let’s imagine that an airline is considering moving from a single price to dynamic pricing. Check under what conditions it makes sense.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

Let's discuss segmentation methods that may be useful to you

In many cases, it is more important to manage the price perception rather than real prices. We will discuss in this section what price perception is and how to use it to your advantage.

Let’s start with a short definition

• Price level perceived by the customer

• Quite often the perceived price is lower or higher than the real price

• Price Perception is influenced by the current price level but also other things like discounts, historical prices, prices for the most popular products, price labels used, communication, etc.

There are plenty of things that can influence price perception. Below some examples of what influences the price of consumer products

• Price labels (size, color)

• Exposition of specific products in the store

• In-store & external communication

• Look & Feel of the store (both online and offline)

• Previous experiences

• Leaflets / Brochures

• Sales Reps & Cashiers

• The naming of special prices

• Promise of EDLP

• Price in other channels/categories

What is Price Awareness?

• If you want to influence Price Perception you should measure whether customers are aware of prices at all

• Price Awareness is measured in the percentage of the customers that know roughly the price of the product

• This will differ from product to product; from customer to customer

Price Image:

• Shows how customers perceive specific elements related to the price for example: regular price level, price promotions / discounts, consistency of price strategy, etc.

• You can use it to compare 2 different products of different firms

In this section, we will have a look at some issues related to the pricing of consumer goods. We will also have a look at some more advanced case studies.

There is a number of challenges when it comes to the pricing of FMCG. We will briefly discuss them in this lecture

There is a number of challenges when it comes to the pricing of SMCG. We will briefly discuss them in this lecture

There is a number of challenges when it comes to the pricing of Retailer. We will briefly discuss them in this lecture

Imagine that you have a chain of physical stores and online stores. What pricing would you use? How you would come up with the right pricing?

In this lecture, we will solve the case study that we have introduced in previous lectures.

The impact of the price change on your profit will depend on a few factors. I will discuss in this lecture what you should take into account and how to calculate it.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

More and more SMCG businesses are considering switching from just selling the product and losing track of the customer to selling service which usually, helps you increase your link with your customer base and earn more at the same time.

More and more SMCG businesses are considering switching from just selling the product and losing track of the customer to selling service which usually, helps you increase your link with your customer base and earn more at the same time.

Here we will introduce the case study of a smartphone producer who wants to switch from selling the product to selling the service. We will try to estimate and compare both options and see what makes more sense.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.

Pricing of B2B services drastically differs from the pricing of consumer goods. In B2B the buyer is more rational and has a much bigger knowledge of the market. In the last section, we will have a look at how pricing is addressed in B2B.

There are many ways in which you can set the price for a consulting project. I will show you different methods in which you can set your price, what are the implications of each and one of them and when they can be used.  I will also discuss the advantages and disadvantages of each and one of them.

Here I show you how to calculate the price and the profitability of a consulting project using fixed fees and times and material formulas. You will get also a template in Excel shown in the lecture as an attachment in additional resources

Here I show how to position your consulting business

In this lecture, I will talk in general about how you can not be forced to give discounts on the consulting project you are trying to sell to the customer.

Here I will show you using the case of a due diligence project what you should do instead of discounting. The methods I will show you on one hand will keep the customer happy and your margin safe.

I will show you an example of a project sold at very high margins yet at a lower cost for customers thanks to proper structuring of the project scope.

In this lecture, we will analyze in detail the RFP I got from the customer and see what are the implication of it for the whole project, the offer, and the real underlying problem.

In this lecture, we will analyze in detail the RFP I got from the customer and see what are the implication of it for the whole project, the offer, and the real underlying problem.

Here I will show you the first proposal I have created for the project. I will explain to you the logic behind it and why certain things are presented in such a way.

Here I will show you the first proposal I have created for the project. I will explain to you the logic behind it and why certain things are presented in such a way.

The meeting totally changed the approach to the project and I learned a lot. I will show you what I have learned during the meeting, how it influenced the whole project. I will show you also the result of the negotiations.

During the negotiations, I learned enough information to adjust the offer for the customer. The aim was to create a more appealing (for both sides) offer that would reflect what we have agreed on during the negotiations.

In consulting you have low seasons with little or no work. Therefore, makes sense to use dynamic pricing. You identify the low seasons and try to sell them at a lower price or a higher price.

Price formula in B2B services can drastically impact the margins and net profit. In this lecture, we will go through a case that will show you how to approach the analysis of the price formula with uncertainty on the scenario that will happen.

In this lecture, we will solve the case study that we have introduced in previous lectures.

In this lecture, we will solve the case study that we have introduced in previous lectures.