This is a comprehensive look at creating pricing strategies that work in both good economic times and bad. Written by three preeminent pricing experts at McKinsey & Company, the Second Edition of "The Price Advantage" is a practical pricing guide for the executive or pricing practitioner who wants to identify, capture, and sustain substantial pricing gains in their business. Pricing is by far the most powerful profit lever that managers can influence. Yet few companies approach pricing in a way that fully capitalizes on its value. This Second Edition, a major revision and extension of the first book, shows you what it takes to achieve the price advantage in today's competitive and complex business environments. Based on in-depth, first-hand experience with thousands of companies, this book provides managers with a pragmatic guide through the maze of pricing issues. It reinforces why pricing excellence is more critical than ever today and then explains state-of-the-art approaches to analyzing and improving your own pricing strategy and execution. It explores the fundamental role of pricing infrastructure in achieving the price advantage. It includes new topics such as software and information products pricing, lifecycle pricing, custom-configured products pricing, pricing of high-count product lines, pricing in distributed sales environments, 'razor/razor blades' pricing, and tiered products and services pricing. It revisits the full range of classic McKinsey pricing tools, including the pocket price waterfall and value maps. Engaging and informative, the Second Edition of "The Price Advantage" will put this essential discipline in perspective.
Preface
Acknowledgments
Part One Pricing Fundamentals 1
Chapter 1 Introduction 3
The Power of 1 Percent 3
The Price/Volume Tradeoff 6
Market Forces Add Pressure 7
The Nobility of Pricing Excellence 10
Why the Price Advantage Is So Rare 10
Chapter 2 Components of Pricing Excellence 13
An Integrated Approach 15
An Interdependent Hierarchy 18
Applying to Your Company Pinpointing the Opportunity 19
Part Two Exploring the Levels 23
Chapter 3 Transactions 25
The Pocket Price Waterfall 26
The Pocket Price Band 29
The Soundco Radio Company Case 32
Pocket Margin Waterfall and Band 39
Alen Glass Company Case 40
Chapter 4 Customer Value 45
Mapping Value 46
Creating a Value Map 46
Making Moves on the Value Map 57
Putting Customers on the Value Map 67
Value Profiling 69
Chapter 5 Market Strategy 75
Profiting from Better Price Predictions 77
Planning for an Expected Price Change 78
Maintaining Optimal Production and Capacity 79
