Optimal pricing strategies balance supply and demand perfectly. However in the fast-moving online world it is difficult to sustain price competitiveness - especially in the hyper-competitive travel and electronics industries. This presentation brings together pricing theory with established best practice to draw some conclusions. We also outline how software vendor Lixto tackles pricing optimisation on behalf of its clients in these industries.

1. Welcome to:
‘Price Optimisation
Technologies’
A webinar sponsored by
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2. About Bloor Research
• Established 1989, is the leading independent European IT
analyst company and serves Europe and North America
• Specialist IT product / market research reports
• White papers, product reviews, customer case studies
• Strategic Advisory Services for vendors and end users
• Free IT articles @ www.IT-analysis.com / www.IT-
director.com
www.bloorresearch.com
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3. Agenda
1. The new importance of optimised pricing
2. Industry dynamics
3. Pricing considerations
4. Pricing optimisation
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4. Pricing: now the most important
marketing variable
Falling:
GNP
Stock markets
House prices
Credit availability
Currency exchange rates
Employment
= we all have less money to spend on luxuries like travel and electronics
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5. Price discipline erosion by
challengers and followers
Pioneers Leaders Nichers Challengers Followers
Customer Perceived Value
High Low
Price High Low Price
Average Price
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6. What to do? McKinsey on pricing
in the downturn
1. Watch for sudden shifts in price structure
2. Monitor customer-level profitability
3. Adjust to changing customer needs
4. Update price sensitivity research
5. Monitor your industry‟s microeconomics
6. Study your suppliers
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7. Many businesses are ill-
equipped in pricing automation
• Manual environmental monitoring and ad
hoc spot-checking
• Analysis in spreadsheets
• Paper-based static reporting
• Lack of drill-down to detail
• Pricing actions based on experience and
best estimates
• Slow to respond to competitive threats
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8. Attributes of the Travel &
Electronics Industries
• Driven by GNP and consumer „feelgood‟ factor
• Global price transparency and intense competition
• Commoditisation and disintermediation
• Seasonality and demand uncertainty
• Supply chain / logistics oriented
• Infinite number of product / service price offers that
change daily or weekly
• Different offers and prices for different geographic
markets
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9. Online Travel
• European market is valued at 50Bn+ EURO
• In the UK, of those planning holidays, 76%
researched destinations and 66% booked flights
and accommodation online
• Online holidays bookings are easier and quicker;
better priced; and offer 24/7 availability - only 22%
trust advice from travel agents or holiday firms
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10. Online Consumer Electronics
• European market is valued at 50Bn+ EURO
• 77% of electronics purchases are researched
online; customers test and buy at retail stores
• 50%+ of electronics consumers use web
comparisons - comparing prices online is easier,
and there is a wider range of products
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11. Consumer Online Behaviour Varies
Online Travel: Vs Online Electronics:
• An intangible service • A physical product
• An impulse purchase for • A researched capital
a planned event investment
• Needs source credibility • Needs physical evidence
• Online search for best • Online comparison
offers creates shortlist
• Online booking • Check retail outlet
availability
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12. Pricing is key to success Online
2 (1 = Low; 5 = High)
Barriers
(Low)
to entry
Supplier Consumer
1 5 5
bargaining bargaining
(Low) (High) (High)
power power
Competitive Price
Intensity = Competition
Availability of 5
substitutes (High)
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13. Economic pricing
Price ($)
Supply
Premium price Dependencies:
Optimal price • Market maturity
• Commoditisation
Economy price
• Oligopolies / Brands
• Elasticity / sensitivity
Demand
Volume (Units)
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14. The internal circular argument
Cost
Volume “Yes, but . . . “ Price
Demand
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15. ‘Good’ pricing is not easy . . .
• The maximum a customer is prepared to pay /
perceived value / price points
• Pricing for pioneers, leaders, challengers, nichers
• Low cost operators, price makers and price takers
• Pricing for segments / products / place / timing
• Product line pricing, utilisation and yield
• Penetration / loss leader pricing vs skimming
• Competitive parity
• Cost-plus (margin) or mark-up pricing
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16. Customer Perceptions On Price /
Quality
Relative Quality
Low High
High Poor Value Premium
Segment
Relative
Price ($)
Economy Good Value
Low
Segment
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17. How pricing automation helps
• Define automation around your market “space”
• Regular reporting of competitor online prices
• Visibility of „whole product‟ components
• Alerts of market events such as stock-outs and
over-supply
• Workflow to turn insight into pricing actions
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18. How Lixto works
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19. What do you get?
1. Pricing dashboards and visualisations
2. Tailored for your business rules and workflow
3. Pre-built reporting, ad-hoc analysis and alerts
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20. Summary and Conclusions
Pricing is moving from an internal to an
external environment management focus
Optimised pricing is key to online revenue
and profits in a downturn economy
Automated pricing solutions that reduce
complexity and improve real-time price
responsiveness should be considered
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21. Thank you!
Gerry Brown
Senior Analyst, BI & CRM / Digital Marketing
Bloor Research
gerry.brown@bloorresearch.com
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