Value-based Marketing Strategy
Pricing and Costs for Relationship Marketing
This book offers novel methods for developing Value-based marketing strategies aimed at increasing revenue and profits. The Value concept relates all the benefits offered by a product with its price and the effort required to obtain it. Global competition requires managing Value rather than individual products or brands. This fosters customer loyalty, and provides a solid basis for relationship marketing. The book takes a practical, step-by-step approach to explain:
• How the forces of supply and demand interact with customer Value;
• The relationships between benefits, quantities, prices and costs;
• How to develop effective competitive strategies;
• How to manage inventory and product mix efficiently;
• How to apply the Value model to increase profitability, and solve major marketing problems.
The book sets forth several new approaches for marketing and pricing decision-making:
• The concept of Value integrates marketing, finance, economics and accounting, in order to link Value-based pricing with relationship marketing.
• The law of supply and demand is restated with quantity as a function of Value instead of price; this makes it a more realistic and practical tool for understanding today´s highly competitive business environment.
• The confrontation and complementation concepts provide useful tools for guiding marketers into new segments, and pricing products accordingly. They play a key role for devising win-win strategies, not only with customers, but also with competitors.
• The Value Matrix is a practical tool for understanding the product´s positioning, analyzing its competition, setting prices and developing strategy. It aims at achieving an optimal balance between customer loyalty and product mix profitability.
• The Value Life Cycle illustrates how Value acts as a force that constantly changes revenue, providing insight for developing strategies in each phase of the product´s life cycle.
• Analogies with physics illustrate how policy constraints create resistance to sales velocity, thereby determining the rate at which a firm advances towards its financial and marketing goals.
• The strategy for pricing business services applies Value to balance supply with demand; this leads to increased revenue.
• The marketing approach set forth unifies product portfolio and inventory management with Value-based pricing for maximizing income.
Clear explanations and accessible language make this book ideal for marketing professionals and non-specialists. Advanced readers may refer to the appendices, where the subjects are analyzed further and the mathematical foundations are laid out; numerous solved problems of pricing and costs are included.
Chapter 1. The Business Environment
1.1 Supply and demand
1.2 Markets and the Economy
1.3 Market Forces
1.4 Types of Buyers
Chapter 2. Marketing Concepts
2.1 Product Mix
2.4 Product Positioning
2.5 Market Share
2.6 Marketing mix
2.7 Transactional Marketing
2.8 Relationship Marketing
2.9 Product Life Cycle
Chapter 3. The Value Concept
3.1 Definition of Value
3.2 Resistance in sales
3.3 Supply and Demand with Value
3.4 Value: Questions and Answers
Chapter 4. Price
4.1 Definition of Price
4.2 The Dimensions of Price
4.3 Price Elasticity
4.4 Optimum Price
4.5 Pricing Policy
4.6 Pricing Strategies
4.7 Services´ Pricing
4.8 Sales Velocity
Chapter 5. Costs
5.1 Variable Cost
5.2 Variable Cost Velocity
5.3 Manufacturing Cost
5.4 Other Variable Costs
5.5 Fixed Costs
5.6 Other Costs
Chapter 6. Contribution Margin
6.1 Contribution Margin Definition
6.2 Optimum Value
6.3 Breakeven Analysis
6.4 Applying Contribution Margin
6.5 Variable Cost Percentage
6.6 Product Categories
6.7 Inventory profitability
Chapter 7. Applying Value
7.3 Value Life Cycle
7.4 Value Model
7.5 Profitability Statements
7.7 Sources and Resources
7.8 Value-based pricing
7.9 Practical Application Cases
Chapter 8. The Value Matrix
8.1 The Value Matrix
8.2 Building the Value Matrix .
8.3 Pricing and Strategy
8.4 Business Modeling
8.5 Value Matrix Applications
Chapter 9. Ethics in Marketing and Pricing
Appendix 1. Optimization of the Demand Function
Appendix 2. Summary of Formulae
Appendix 3. Value and Contribution Margin
Appendix 4. Sales Volume Variance Analysis
Appendix 5. Discounts
Appendix 6. Solved Problems in Pricing
Santiago Lopez works as a business consultant and marketing professor. Trained as an economist (Dartmouth College, USA) and MBA (Universidad de los Andes, Colombia) specialized in marketing, sales and finance. His professional experience includes management posts in Colombian and multinational corporations in diverse industries, such as Compañía Global de Alimentos S.A. (General Manager), Chemonics International (Marketing consultant for agribusiness projects), Ralston Purina Colombia (Director of Finance and Administration); Baker Hughes Inc - Milpark Drilling Fluids (General Manager for Colombia and Venezuela); Seguros Aurora S.A. (VP Finance), and Berol S.A. (Financial manager).