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Management article
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Reference no. BH055
Authors: Donald V Potter
Published by: Indiana University
Published in: "Business Horizons", 2000

Abstract

Even in a mature and complex market, which is resistant to across-the- board price increases, there are still many ways to deftly raise effective prices and increase market share. Pricing policy, if wielded wisely, can still be a powerful tool. The path to these pricing opportunities lies in three actions management can take: changing the structure of the price (bundle benefits, unbundle benefits, offer alternative service levels and price points, link future purchases to current transactions, change the price effectiveness period, substitute components of the price, shift some of the price to suppliers); building more subtlety into the pricing process (set prices selectively rather than across the board, move prices in smaller increments, raise invisible prices, match price moves to the market, use discounts strategically to build relationships with desirable clients); and exploiting patterns common in other difficult markets (price against the leader, follow the leader, seek out segments that will tolerate higher prices). With the hidden power of pricing, a company facing a highly price-competitive market can use knowledge and subtlety to improve its returns and share.

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Abstract

Even in a mature and complex market, which is resistant to across-the- board price increases, there are still many ways to deftly raise effective prices and increase market share. Pricing policy, if wielded wisely, can still be a powerful tool. The path to these pricing opportunities lies in three actions management can take: changing the structure of the price (bundle benefits, unbundle benefits, offer alternative service levels and price points, link future purchases to current transactions, change the price effectiveness period, substitute components of the price, shift some of the price to suppliers); building more subtlety into the pricing process (set prices selectively rather than across the board, move prices in smaller increments, raise invisible prices, match price moves to the market, use discounts strategically to build relationships with desirable clients); and exploiting patterns common in other difficult markets (price against the leader, follow the leader, seek out segments that will tolerate higher prices). With the hidden power of pricing, a company facing a highly price-competitive market can use knowledge and subtlety to improve its returns and share.

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