WORKSHEET #15: Identifying High Potential Price Points

Step 1:

Gather a list of products in the marketplace and rank them from top to bottom in order of their price per unit.

Step 2:

From this list, group all products that have similar Price Points together. Similar Price Points should fall within 7% either side of the average price for the group of Price Points.

Step 3:

Estimate the market share for each product, or product group, in the case where several products have a similar price. The ideal measure of market share here is units of product. If this proves difficult to obtain, use dollar measures.

Step 4:

Identify the product group with the highest market share and define that product group as the Standard Leader product group.

Step 5:

Define the key distinguishing benefits (Function, Reliability and Convenience) of this product group.

Step 6:

Identify the Performance Leader products, those with Price Points greater than 7% over the Standard Leader product group, and identify their incremental benefits in Function, Reliability and Convenience.

Step 7:

Identify the Price Leader products, those with prices 7% or more below that of the Standard Leader product group, and define their reduced Function, Reliability or Convenience benefits compared to the Standard Leader product.

Step 8:

Identify any Next Leader products in the market and describe their Function or Convenience benefit differences from the Standard Leader product.

Step 9:

Compare the growth rate of each Price Point group to that of the market as a whole.

Step 10:

Compare the gross margin and operating margins for each Price Point compared to the market as a whole.

Step 11:

Identify any specialist competitor (Performance Leader, Price Leader, or Next Leader) who has 50% or more of its product sales in one of the high or low end product categories.

Step 12:

Compare the company's product mix (Standard Leader, Performance Leader, Price Leader and Next Leader), in percentage of total sales, to the industry as a whole and to the most profitable and fastest growing competitors, respectively, in the market.

Step 13:

Estimate the purchases now, and in the future, of Core customers at each product Price Point.

Step 14:

Estimate our company's share of the Core customer purchases at each Price Point. Compare our share at each Price Point to our overall share of Core customer purchases. Our share at each Price Point should match our overall company share of the Core customer purchases. If not, investigate differences.

Step 15:

Determine the need for new or revamped Price Points according to our estimate of Core customer needs.

Basic Strategy Guide Users Return to Step 15