This has led to pricing practices that do not support the overall strategy of the business. The new pricing strategy created is a value-based pricing strategy that supports the overall strategy of the company and takes into account the predicted market development in the industry. The Gate model has been adapted suitable for this thesis work in Figure 3. The locations of gate three and four have been switched as I believe that conceptual framework needs to be done before I can objectively assess the current state of Hero's pricing.
Another point in the literature review was to understand the current pricing situation in Hero. The price seemed to be entirely in the hands of the sellers and I wanted to understand why. The aim of the thesis was to create a new pricing strategy together with an implementation plan.
When prices are compared with competitors, the only thing that should matter is the value of the product. In the next two chapters I will go through the lowest two levels of the pyramid. Minimizing discounts is one of the most important ways to make a profit as part of a pricing strategy.
Hero's offering plays only a minor role in the overall project, whether measured by cost or buyer interest. Another factor that differentiates between the price of the first and second division is the price of raw materials. Additionally, in 2018 I asked everyone in sales, "How long would it take you to find a competitive price for a product for a specific customer group or customer?" The answers varied between 15 minutes and.
Check your history
The correlation of prices with the cost of maintaining a customer relationship can also be analyzed, but since managing a customer relationship with Group 2 is the most expensive, while managing a customer relationship with a Group 3 company is the least expensive, the costs of Group 1 are lower. between the two groups, we can quickly conclude that there is also no correlation between prices and cost of sales. All in all, a quick conclusion can be drawn: there is no correlation between the costs of customer relationship management and prices. Finally, the value delivered to each customer group can be compared to the prices charged.
If we compare the values Hero is able to offer its customers, Group 2 B2C gets the highest value, followed by Group 2 B2B, then Group 3 and finally Group 1. This concludes that the prices offered to each customer group are not matches the Hero's value proposition either. To conclude this section, the results further support that prices are driven by customers rather than sales.
For this, I will use the checklist provided by Hill and fill in the answers for Hero to further understand the current situation on a larger scale than just price differences. The answers should show how much the company pays attention to the price currently. and the sales manager considers whether prices should be adjusted. In other words, sales only bring in products that they believe are overpriced, but never products that are underpriced.
Prices are always increased by a percentage or if they are rejected by sales, the prices of some products may remain unchanged. If the cost of raw materials increases for several consecutive months, prices will increase. If Hero has determined that there is room for price increases, the prices will be increased later.
Are the prices well researched?
Assess the impact of changes and cases where changes could have been made but prices were not adjusted. The values are still discussed together with the customers and then passed on to internal meetings where the values are defined more precisely. They constantly follow the actions of competitors, but the research is often limited to feedback from the sales team.
Assess the price of each product
Assess the profitability of your customers
Check your pricing team
Schedule meetings for your pricing team
Allocate enough time for pricing
Hero needs a revised pricing strategy that will support the overall strategy of the company and help maximize profits. No research supports industry growth in the products Hero sells, while it is also not expected to decline. Finally, what needs to be considered in pricing is 'volume of customers'; the customers who buy such quantities as are important to scale down production costs.
Especially for the company's first division products, the competition is fierce, as the quality of the products is more regulated. The purpose of these boundaries is to help develop the future business model (Figure 20). Since the original pricing strategy did not include DIY products, he suggested that this be included in the overall draft of the new strategy.
While validating the new pricing strategy, we discovered that the strategy was missing some important parts that affect pricing. In this section, I will present a modified version of the pricing strategy that will contain what was considered missing. The price of the main raw material fluctuates a lot and the company must be able to react quickly to cost changes.
Everyone must understand their role in the process and understand how their actions affect the company's profitability. The competitors should accordingly be analyzed by product or by product group, whichever is relevant, and furthermore by customer group - in the same way as the value offered is created. HR should be involved in creating bonus sales incentives that support the company's objectives.
But in addition to the pricing team, pricing should be on the agenda in all sales meetings, and the information gathered from sales should be used in the meetings of the pricing team. The implementation plan should be updated quarterly in pricing team meetings to ensure the company stays on track. The objectives of the thesis therefore seem to be achieved as a new pricing strategy has been created.
A value-based pricing strategy refers to assessing the value of the product or service being sold to the customer and pricing accordingly. However, Hero's strategy relies on certain distribution models, so the pricing strategy must support the choice of the right distribution channels.
