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Price decisions often have financial consequences in the tens of millions of dollars in annual revenues and income. Price too high and you lose market share and share of wallet. Price to low and you lose margin and ignite a price war. To decide the right price for a new offering, ADP used discrete choice modeling to inform three basic decisions: (1) What is the optimal price for a new core offering that meets our share, revenue, and margin objectives? (2) Which value-added options are of highest interest to customers, and what is the optimal pricing strategy? (3) How should we structure the price to optimize revenue generation across multiple segments of customers?
During this presentation we will review the research process and implementation hurdles. A key output of the research is an economic model of the marketplace. We will use an example model to illustrate how it works and the consequences of alternative pricing decisions. Finally, we will discuss how these research findings are integrated into the broader pricing strategy decision process.
President, Value and Pricing Partners, LLC
Director of Product Marketing, CDK Global
Publish Date: October 21, 2014
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Peg Rodarmel, SVP, Subscription Services, Infor
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