Customer -Centric Pricing:

1. Customer -Centric Pricing: • The Surprising Secret for Profitability • an article by Robert G. Cross and Ashutosh Dixit

2. The Idea • “Customer-centric pricing requires the simultaneous and continuous assessment of product attributes, customer perceptions, and the circumstances of time and place by listening to customers’ actions. It is a means of assuring that the companies assess the value they create for customers and extract that value from the marketplace.”

3. Back to the Future • Pre-industrial revolution, all sales transactions were customer-centric. • Currently, most pricing is still product-centric. • Underpricing and consumer surplus

4. The Customer-Centric Pricing Process

6. Segmentation • Conventional market Segmentation techniques include demographic variables such as age, sex, race, income, marital status, education level, etc. etc. Though effective, they are not effective in determining a willingness to pay. • Customer-centric pricing asks the question: “What is this willing to pay at this point in time?”

7. Customer Perceptions of Value Components

8. Value Measurement • “...consumers, themselves, may not be able to predict exactly what they would do, until faced with the decision.” • Coke: $4.00 • Ford

10. Neiman Marcus BMW M6

11. From Value Creation to Value Appropriation • The better a product is aligned with specific customer’s preferences, the more it is valued. • Consumer Surplus: the gap between what a customer is willing to pay, and what they actually pay

12. Sustaining Value Sustaining Value • Microsoft Xbox release 2001. • What happened and what could have been done?

13. Economic Benefits • Customer-centric pricing is a step toward a preto optimal in the economy. • Producers can assess the market value that various customers segments place on more subjective attributes. Through this they can cater to varying market segments.