Pricing

Pricing Strategy Should Be at the Olympics

By James Marland
June 8, 2011

Like many Brits I awoke disappointed today to see that my request for dozens of Olympic Tickets had been mainly unsuccessful.  It looks like first round Archery and Fencing for my family, none of the prestige events such as Athletics, Gymnastics, Swimming or Cycling. As I ponder on having to learn the difference between a foil and an epée it appears that the allocation of tickets is really a failure of pricing.

UK_Olympics_2012_Thumbnail-resized-600It was impossible to indicate to the ballot organizers which sports you were really interested in, and which were just make-weights. The only rational way to do this would be through a price signal. Without a proper indication of value to the spectator it is likely that amateur archers are watching the canoeing and members of the British Tae-Kwon-do association are contemplating an afternoon of badminton. Of course, a secondary market of touts (aka scalpers in the U.S), will correct this mis-match, but by extracting money from a Value Chain which should be going to the London Olympic committee. This pains me as a taxpayer who is being asked to foot the bill.

In B2B, what mechanisms do we have to allow customers to indicate the value they attach to our products or services, and how do we harvest that information? I’ll be blogging on this over the next few weeks but here are a couple of thoughts.

In the B2B world our customers can signal their intentions through negotiation. In fact that is why we have sales people to sell our products and services, to understand the value the customer gets from our solution, and reaching a price that reflects that value. Of course it is in the customer’s interest to mask this, which is why they involve procurement departments as intermediaries. They become the touts in the trade, creaming off the value that the customer has acknowledged. Good sales people always prefer to negotiate with the end customer.

From our sales teams we have reams of data, how can we dig through it to pick up the pricing signal? As noted above, the signal-to-noise ratio may be low, but with potentially hundreds of thousands of price points to analyse over the years, surely we can infer something of the customer’s value proposition.

For now, time to mug up* on the lunge and the riposte.

British Term of the Day  – *Mug up = to study intensely

 

– James Marland

  • Price Management , Price Optimization , Pricing Effectiveness , Pricing Efficiency , Pricing Strategy , segmentation , Strategic Pricing

    James Marland

    James Marland is the Director of Business Consulting at Vendavo based in London. In this role he helps diagnose Pricing Opportunities and develops business cases for pricing projects with ROI models. James has been in the pricing software space for many years, both on the customer and supply chain side: so he has a view from “each side of the table”. Prior to his pricing career he was VP of Solutions at Ariba and has also spent 5 years at SAP America. He has a Bachelor of Science degree in Mathematics from the University of Southampton.