Pricing is one of the most difficult , important , least resaerched P s of buisness ...usually decisiosn taken by the business owner or top managament ....some thoughts and real life examples from across verticals ..

1. Making Informed Pricing Decisions… Peshwa Acharya Presentation given @ Marcus Event Pricing Conference @ Singapore

2. Old Indian Saying

7. Shifts in Pricing Approach

9. Costing…. Usage Cost Down time Parts and Supplies Training User Labour Product Longevity Replacement Disposal

10. Essar Steel Case Study Concept of Contribution Analysis

11. Essar Steel Does High Net Sales Realization mean high Contribution? Contribution per hour “ An approach to analyze contribution with time / period dimension”.

14. Essar Steel What is Contribution? Most Common Concept of the Contribution is “ Absolute Contribution per ton” i.e [Sales Price] – [Cost of Production] = [Contribution] It is simple to understand and reflects business profits in commercial terms. But it ignores plant capacities and productivity. What is Plant Productivity? Plant capacities to produce output on tons/hr basis. Contribution/ton and Productivity/ton-hr provides Contribution in “Rs earned per hour”

16. Essar Steel Case Study : Contribution Rs per ton: (Hypothetical Case) Contribution Rs / Hour: Particulars Customer X Customer Y Order in tons 1000 1000 NSR 23000 24000 Cost 17000 17000 Contribution Rs / ton 8000 9000 Particulars Customer X Customer Y Order in tons 1000 1000 NSR 23000 24000 Cost 17000 17000 Contribution Rs / ton 8000 9000 Productivity tons / hr 350 300 Contribution Rs / hr 2.8 Mn 2.7 Mn

23. “ Peter Van Westendorp” Model Question : At what price would you find this brand to be : cheap, too cheap, expensive and too expensive?

27. Babool toothpaste .. 50 gms SKU Price Range : Rs. 9.00 to Rs.12.50

28. Price Conjoint Question : If you were to buy 100 bags of cement from these brands at the prices shown, how many of each brand would you buy?  REPEAT FOR EACH CARD PRICE Rs / Bag of 50Kgs CONJOINT CARDS A B C D E F Birla Rs 175 /- Rs 175 /- Rs 180 /- Rs 180 /- Rs 185 /- Rs 190 /- Ambuja Rs 175 /- Rs 180 /- Rs 180 /- Rs 185 /- Rs 190 /- Rs 190 /- ACC Rs 175 /- Rs 180 /- Rs 185 /- Rs 185 /- Rs 185 /- Rs 190 /- L&T – Ultra Tech Rs 175 /- Rs 180 /- Rs 180 /- Rs 185 /- Rs 190 /- Rs 190 /- JK Rs 175 /- Rs 175 /- Rs 180 /- Rs 180 /- Rs 180 /- Rs 185 /- JP Rs 175 /- Rs 175 /- Rs 175 /- Rs 175 /- Rs 180 /- Rs 185 /- Prism Rs 175 /- Rs 175 /- Rs 175 /- Rs 175 /- Rs 180 /- Rs 185 /- Maihar Rs 175 /- Rs 175 /- Rs 175 /- Rs 180 /- Rs 180 /- Rs 185 /- Satna Rs 175 /- Rs 175 /- Rs 175 /- Rs 180 /- Rs 180 /- Rs 185 /- Lafarge Rs 175 /- Rs 175 /- Rs 180 /- Rs 180 /- Rs 185 /- Rs 185 /-

31. Conjoint Analysis of Babool 50 gms

32. Scenario Building - 50 gms A/ Price Increase from Rs. 8 to Rs. 10 : Utility drop : -0.8 B/ Price Increase from Rs. 8 to Rs. 9 : Utility drop : -0.4 C/ Price Increase from Rs. 8 to Rs. 8.50 : Utility drop : -0.2 Can be offset by offering 25% extra (0.8) Can be offset by offering toothbrush free (0.7) D/ Price decrease from Rs. 8 to Rs. 6 : Utility gain : 0.1

33. Market Simulations (50 gms) Current Prices Babool : price drop Brands Price (Rs.) Promotions Share of preferences (%) Colgate 15.50 - 45 Babool 8 - 26 Anchor 13 - 14 Cibaca 8 - 15 Brands Price (Rs.) Promotions Share of preferences (%) Colgate 15.50 - 43 Babool 6 - 31 Anchor 13 - 13 Cibaca 8 - 14

34. Market Simulations (50 gms) Babool : Price increase Babool gains from Colgate, as Babool starts getting considered by Colgate users as a relevant alternative At the same time, Babool loses share to Cibaca because of the price offered by the brand (Rs.8) Brands Price (Rs.) Promotions Share of preferences (%) Colgate 15.50 - 41 Babool 10.50 - 19 Anchor 13 - 13 Cibaca 8 - 27

35. Market Simulations (50 gms) Babool : Toothbrush free Babool : 25% extra No major difference in terms of offering either promotions to gain share. Cheaper alternative should be adopted. Brands Price (Rs.) Promotions Share of preferences (%) Colgate 15.50 - 43 Babool 8 Toothbrush free 33 Anchor 13 - 11 Cibaca 8 - 13 Brands Price (Rs.) Promotions Share of preferences (%) Colgate 15.50 - 43 Babool 8 25% extra 31 Anchor 13 - 13 Cibaca 8 - 14

36. Market Simulations (50 gms) Interpolations Share of preference Current Price (Rs. 8) Babool at Rs. 8.50 Babool at Rs. 9.00 Babool at Rs. 10.50 Colgate 45 44 43 41 Babool 26 24 23 19 Anchor 14 14 13 13 Cibaca 15 17 22 27

37. BPTO EXPOSE BASE PRICING LEVEL. ASK : Which brand would you buy at these prices? INCREASE PRICE OF CHOSEN BRAND TO NEXT LEVEL. REPEAT QUESTION. CONTINUE TILL RESPONDENT REACHES HIGHEST PRICING LEVEL FOR ANY BRAND OR SAYS HE WON’T BUY ANYTHING AT SUCH PRICES Consideration Set PRICE Rs / Bag of 50Kgs Birla Rs 175 /- Rs 180 /- Rs 185 /- Rs 190 /- Ambuja Rs 175 /- Rs 180 /- Rs 185 /- Rs 190 /- ACC Rs 175 /- Rs 180 /- Rs 185 /- Rs 190 /- L&T – Ultra Tech Rs 175 /- Rs 180 /- Rs 185 /- Rs 190 /- JK Rs 170 /- Rs 175 /- Rs 180 /- Rs 185 /- Prism Rs 165 /- Rs 170 /- Rs 175 /- Rs 180 /- Maihar Rs 170 /- Rs 175 /- Rs 180 /- Rs 185 /- Satna Rs 165 /- Rs 170 /- Rs 175 /- Rs 180 /-