Articles & Papers

Making Price Make Sense

David Feldman

Building Business Cases to Enhance the Bottom Line

Considering all the elements of the marketing mix, price has the most direct effect on profitability. Price is also the most easily controlled element of the marketing mix. Yet, properly setting prices and measuring their impact on the entire organization is seldom done strategically, or in a manner that optimizes long-term market share and profitability.

Marketing departments traditionally provide insights into market acceptance of new offerings and prices but have limited impact on building business cases for changing prices. In order for marketing departments to make the transition from simply providing business insights to developing full-blown business cases, they need to redesign their research studies to link to category profitability and consider the strategic implications of price changes on brand equity, product positioning, product cannibalization, and competitive response.

This white paper discusses a modeling approach that helps marketing departments leverage their research efforts into financial planning tools. Through this approach, companies can more effectively test the financial impact of alternative marketing strategies and enhance the overall contribution of their portfolio within a category.

Keywords: Pricing, profitability, research, pricing strategy, value pricing, price sensitivity, cannibalization, positioning, package offering, target segments, new product pricing

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