Winning the Profit Game: Smarter Pricing, Smarter Branding

Winning the Profit Game reveals the key to success: pricing, integrated with brand management, cost management, and product development. Whatever the goal - such as market penetration, customer retention, or increasing margins - "the strategy should be reflected in the price." Branding is a central topic in the book. "A pricing strategy cannot exist without a detailed brand strategy." Just how important is the effect of brand on pricing? "If targeted at decisions and products for which the customer has the least familiarity and the least ability or inclination to research, brand can affect price dramatically - a 100-percent price premium is not uncommon." Another recurring theme is segmentation. "A single price or brand approach is unlikely to work across multiple segments... Price sensitivity will differ by segment." "What do our customers particularly value in our products or services? How is this reflected in our price structure? What specifically charges for or reflects that value?" These are a few of the questions posed in chapter 13, Fundamental Questions for Senior Management. For organizations where discounting is out of control, the authors recommend a discount scorecard to bring some structure and purpose to discounts. In the sample given, a salesperson can give 10% due to a competitive bid, 10% if the client site is beyond a certain radius of the service center, 8% if the client's credit rating is CCC or below, plus up to 5% discretionary, not to exceed a maximum 30% discount. I thought it was peculiar that a customer would earn a discount for having a lousy credit rating. Maybe the authors were just checking to see if I was paying attention. Additional topics include pricing methods, bundling, legal constraints on pricing, organizational structure, and compensation. This is a comprehensive book written by four pricing consultants, including a former CFO. The writing style is excellent, making it easy to read despite being packed with information. My only nitpick is in a reference to price elasticity of demand. "During one period in the 1990s, the price elasticity of premium hosiery was 0.9, while the price elasticity of generics was 2.0. This clearly suggested that the premium brand could profitably take a price increase while the generics could not afford to do so." I think the authors should have mentioned that a price elasticity coefficient greater than one means demand is elastic; less than one means demand is inelastic. I had to dust off my old economics textbook to look that up.

Re-engineering, downsizing TQM, CRM - you've seen them all. But businesses are still trying to find ways to lead their markets and beat their competition. The authors of this book suggest that pricing deserves the kind of attention that, a decade ago, your organization lavished upon procurement. They believe pricing strategy will be the important competitive differentiator in times to come. That is certainly plausible, and this book offers extensive guidance on how, when, why and according to what guiding principles businesses should change prices. Its copy editors should have been more diligent, because spelling and grammatical errors abound, but the book is nonetheless surprisingly readable. The book makes some valuable points, and we believe it merits marketing officers' scrutiny.

Readers might find the the March 15, 2004 reviews of this book in the Miami Herald and the Ft. Worth Star-Telegram to be useful:"[The Authors] have produced something analogous to an eagle in the realm of business books... Like an eagle, Winning the Profit Game is distinguished by its farsightedness. Its clear, precise prose soars above that of most business books.""The opus opens with a musical metaphor, reminding readers that every era has its own music and its own signature instruments: the driving drums and multiple guitar riffs of rock n'roll, the thundering brass of the Swing Era's big bands and the virtuoso string sections of classical music. 'If we make the analogy with business, what skills is emerging even now as the lead instrument of the 2000s? What will be the key to success in an environment that's tougher, more competitive than ever before?' the authors write. Their answer is pricing-- not by itself but integrated with brand, cost management and product development."The authors cover the waterfront on pricing comprehensively and lucidly [including]Quick Hits for management."Readers might also wish to know that this book has been mentioned on yahoo.com's Finance website (2/20/04), and on Consultant News's consultant-news.com (2/24/04). Their comments were (respectively):"... executives reading this book will learn tools to help them... develop an effective, integrated price and brand strategy, use price as a language which speaks to customers [and] optimize price to increase revenue.""... by putting brand at the center of their framework, the authors challenge the conception of branding as a mysterious function separate from price. Rather, the two are inextricably connected and a superior price strategy cannot exist without a solid brand strategy."Incidentally, I would not say we put brand at the center of our book. We do give it a lot more attention than any other book on pricing, however.Hope this is helpful.Rob Docters(Co-author)

In fact I was surprised at how good it really was. Most business books are nothing more a string of anecodotes and platitudes, whereas here the reader gets a combination of pragmatic detail and genuine insight into what pricing can accomplish if unleashed. A great book to bring to the meeting room since the emphasis is on upper managament getting involved. From a technical perspective, it would appear the authors have spent time in the trenches, not just on their fannies in academia somewhere, as the stategy and tactics they recommend are fresher than anything to be found in Nagle or Dolan. As an example of this check out the chapter on "price as a language" for starters, then go from there.