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How would you develop a pricing strategy to combat against lost market share?

Posted in Marketing & Communications on November 10, 2011
There are (3) comments permalink

 

Kim started her new job as Marketing Manager at a mid-sized plastics company.  The company has always been very profitable but the increase in competition from Asia has taken away market share over the last three years.  Company executives believe that market prices are eroding and have tasked Kim to find out where prices need to be in order to proactively target the lost market share.  Kim is skeptical about the reasons for the lost business and wants to understand it before she recommends a pricing strategy.  She asked around the company and no market research has ever been conducted.  They have had most of their customers for years and a good history of bringing on new accounts.  The sales group explained to Kim that the accounts lost were based on price but nobody in the company was able to answer Kim’s question regarding benefits of the company’s products and services compared to the competition and compared to the needs in the marketplace.  Kim has three months to conduct her research before her presentation to the executive team on pricing.

  • What kind of research should Kim conduct? 
  • How should she go about doing the research? 
  • What approach should she take when presenting to the executive team?

 

Comments (3)

alockhar posted on: April 23, 2012

With any deal unless you are selling a pure commodity you want to understand why you lost a deal. Customers will sometimes give you price as a reason, it is an easy way out. So if it is genuinely price, fair enough but make sure there are not other factors in the decision and was it an apples for apples comparison. If your offering has more feature/benefits than the competition but the customer does not understand those differences it can look like a price issue. To sum that piece up she needs to fully understand the market, the customer needs, the company offering compared to the competition and what the competition is offering. The report to the Executive team needs to summarize the market and customer requirements where the holes are and a strategy to move the company forward. If the company has not moved its product line forward with market changes it may be getting left behind. Finally, there must be recommendations. Exec's don't need just a bunch of problems presented.

Tristan posted on: April 19, 2012

I agree that meeting with customers is a good approach. I also think that if you want to develop a competitive pricing strategy, you need to create some buckets and build the strategy around them. There are customer buckets and product buckets. Customers should be placed into "Maintain, Grow, Target & Modify". Products should be placed into "commodity/price leaders, innovation/profit leaders, product line fillers". Start by putting all your customers and products into these buckets, then develop a strategy for each. Do you have products to fit into each of these categories? if you don't, you need to work on innovation and building your product line. If you don't have customers to fit into these categories you are not going to be able to stay competitive or grow; you are just going to fight for existing market share. If you focus your pricing strategy on the competition, you will be a follower, but if you use these buckets you will be the one setting the pace.

MarketJive posted on: April 13, 2012

I think there are a few levels of research that can be conducted here. First go meet with customers! The best research you can conduct is to have a dialog with customers about things you can do together to gain new business. Maybe they talk about special price deals they would need go into new markets, or product development that is necessary, packaging changes, lead-times, etc. In the end these discussions with give her a good idea of price and the competitive situation. Second, she should do a formal survey of the sales force, regarding each lost customer (who did they lose it to, at what price) maybe even set up a meeting with lost customers to have a dialog as to what the company would need to do to get the business back. If she can get all of this feedback, I think she can not only present a pricing plan, but a service strategy going forward. It is great if it can be linked to new business from her discussions with key accounts.

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