3. Cespedes, Raise Your Prices!, 2010 (Price Strategy)

3. Cespedes, Raise Your Prices!, 2010 (Price Strategy) -...

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Raise Your Prices! Face it: Most companies can't compete on price. And the good news is they don't have to. By FRANK V. CESPEDES , ELLIOT B. ROSS and BENSON P. SHAPIRO MAY 24, 2010 http://online.wsj.com/article/SB10001424052748704240004575085513717202880.html By now, we're all aware of the slash-your-prices scenario many companies take as a given these days: Your customers demand more and have online access to product comparisons from multiple sellers; you face global competition from rivals that have labor-cost advantages; and the financial crisis has accelerated the commoditization of more and more markets. The solution? Cut your prices to gain volume and scale. That definitely works for a few companies. But the reality is a very few—think Wal-Mart or Costco or Southwest Airlines. In fact, the very success of these business models makes it difficult for their competitors to duplicate—think Kmart or Sears, or any number of bankrupt budget airlines. This article is for everybody else: those who choose not to compete on the basis of cost and low price. This article is for companies that can and should compete on the basis of performance, for which their customers willingly pay higher prices. By competing on performance instead of price, you shift the battle to where your company's strengths lie—in the ability to deliver unique benefits. So-called performance pricers are adept at three core activities: identifying where they can do a superior job of meeting customers' needs and preferences; shaping their products and their business to dominate these segments; and managing cost and price in those areas to maximize profits. If you can find these performance segments, manage them cost-effectively, and communicate to the customer the extra value being delivered, then as long as your offering is superior to the competition or other alternatives, you will be able to boost both prices and profits. For an idea of how to become a master of performance pricing, let's consider a global
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This note was uploaded on 11/02/2011 for the course MARK 11420 taught by Professor Cox during the Fall '11 term at University of Houston.

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3. Cespedes, Raise Your Prices!, 2010 (Price Strategy) -...

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