McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School
Book a coaching

Approach of Pricing Cases

Anonymous A

Hey,

how to approach a Prcing case?

My usual approach is:

First, I would analyse the clients comoany (meaning market share, product, costs, financial data) and what is the goal (gain market share? max profit? response to a (new) competitor?).

Second, I investigate the market: competitors and their products (substitutes?) and prices.. benchmarking. In addition to that, analyse the costumers (what are they willing to pay).

Third, I choose a pricing strategy taking into account the following:

  • Cost-based: P=R-C (ineffective)
  • Value-based: compare the values of your product vs. competitors. Is there value added and are costumers willing to pay more? => higher price.
  • Competitor-based: set a price based on the second step of the approach (benchmarking).

Is there a better approach/framework? General things to consider in pricing cases?

Thank you very much!

Vlad replied on 06/07/2018
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi,

The general framework for pricing is: Cost base - Value based - Competitor based - pricing strategy

1. Cost based - you actually check what are the costs and apply standard industry / target markup

2. Value based pricing can be done in 2 ways:

  • You compare the value proposition and features of your product vs. the VP of the closest product of your competitors. If you have a significant difference in value prop - you have to define how much value you propose to the customer in $ terms.
  • Another way is to calculate the closest alternatives and think how much additional value we provide by replacing them. Think of the discount airlines compared to trains or buses

3. Competitor based pricing - basically it's benchmarking against competitors if you have a product with a very similar value prop. Make sure you take into account the segment (i.e. in premium higher price may be the proxy for quality).

4. Pricing strategy - here you define how you will price the product taking into account 1,2,3 and your company strategy. Maybe you decide to have a zero margin if you can crossell other services. Or maybe you would like to subsidize to win the competition. Also, think of price differentiation and having different pricing tiers (e.g. basic, premium or even fremium) and how it helps to drive price perception and fulfill strategic goals

Good luck!

Related BootCamp article(s)

Getting Up to Speed

In order to repeatedly demonstrate prerequisite skills under the pressure of a real case interview, you need to learn the basics and practice cases.

3 Comment(s)

Pricing

Pricing case studies can either stand alone or be a part of another case study. You can crack pricing Case Interview in three steps: Investigate the company; Investigate the product; Choose a pricing strategy

3 Comment(s)

Related case(s)

Bank envelope

Solved 31.6k times
4.4 5 1061
| Rating: (4.4 / 5.0) |

Your client, Customlope, is the leader in the US secure envelope manufacturing industry. Banks buy these envelopes for operations such as money deposits and high value transactions. Next year, a new digital technology will reduce the overall number of units sold in the industry by 25%. In the ... Open whole case

Fysikum

Solved 23.3k times
4.4 5 1234
| Rating: (4.4 / 5.0)

Your client, Fysikum, is an operator of squash centres in Sweden. The squash centres include sauna, spa, pool, gym and of course the squash courts. Due to the extreme success in Sweden the company is considering expanding to other countries of Europe, in particular Germany. Therefore they asked u ... Open whole case

Shaving & Co

Solved 21.3k times
4.3 5 838
| Rating: (4.3 / 5.0) |

Our client is an international CPG (consumer packaged goods) firm called Bryan, with multiple business units (toothpaste, batteries, skin & body care, among others). They are the global market leader in every market they play in except for the hair removal market. They came to ... Open whole case

In-flight Broadband

Solved 11.9k times
4.3 5 433
| Rating: (4.3 / 5.0) |

Our client is a startup that can deliver broadband internet aboard commercial flights.The company owns a patent on a necessary technology. They want to know whether their current business model is valid. Open whole case

Wall Inc.

Solved 7.0k times
4.3 5 218
| Rating: (4.3 / 5.0) |

Your client, Wall Inc., is a dry wall manufacturer. A new competitor has just entered the market. Since the competitor charges low price company, Wall Inc. is thinking about reducing its price by 20%. The client wants us to evaluate this plan. Open whole case