transaction pricing
DESCRIPTION
TRANSACTION PRICING. December 11, 2002. Transaction Pricing Developing unit prices for individual products or services. Pricing Considerations. Define unit of service or product Understand the market Customers Competitors Product/Service Life Cycle Volume Potential Barriers to Entry. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: TRANSACTION PRICING](https://reader036.vdocuments.us/reader036/viewer/2022082411/5681311d550346895d97877c/html5/thumbnails/1.jpg)
TRANSACTION PRICINGDecember 11, 2002
![Page 2: TRANSACTION PRICING](https://reader036.vdocuments.us/reader036/viewer/2022082411/5681311d550346895d97877c/html5/thumbnails/2.jpg)
Transaction Pricing
Developing unit prices for individual
products or services
![Page 3: TRANSACTION PRICING](https://reader036.vdocuments.us/reader036/viewer/2022082411/5681311d550346895d97877c/html5/thumbnails/3.jpg)
Pricing ConsiderationsPricing Considerations
• Define unit of service or product
• Understand the market
• Customers
• Competitors
• Product/Service Life Cycle
• Volume Potential
• Barriers to Entry
![Page 4: TRANSACTION PRICING](https://reader036.vdocuments.us/reader036/viewer/2022082411/5681311d550346895d97877c/html5/thumbnails/4.jpg)
Pricing ConsiderationsPricing Considerations
$-
$20
$40
$60
$80
$100
$120
0 1 2 3 4 5 6
Cost Revenue
![Page 5: TRANSACTION PRICING](https://reader036.vdocuments.us/reader036/viewer/2022082411/5681311d550346895d97877c/html5/thumbnails/5.jpg)
Pricing Considerations - Cost BasePricing Considerations - Cost Base
• Fixed versus variable costs
• How quickly fixed costs can be avoided
• Individual product/service variable costs (if producing or rendering more than one)
• Marginal and incremental costs
• Target volumes and break-even points
• Sensitivity analysis on volume levels (market share)
• Capital investment
• Working Capital requirements
![Page 6: TRANSACTION PRICING](https://reader036.vdocuments.us/reader036/viewer/2022082411/5681311d550346895d97877c/html5/thumbnails/6.jpg)
Pricing ConsiderationsPricing Considerations
$-
$10
$20
$30
$40
$50
$60
$70
0 1 2 3 4 5 6
Average Unit Cost Unit Price
![Page 7: TRANSACTION PRICING](https://reader036.vdocuments.us/reader036/viewer/2022082411/5681311d550346895d97877c/html5/thumbnails/7.jpg)
Investment RiskInvestment Risk
• Achieving target volumes
• Competitor reactions
• Risk mitigation strategies
– Cost variability
– Sharing risk and rewards with suppliers/partners
![Page 8: TRANSACTION PRICING](https://reader036.vdocuments.us/reader036/viewer/2022082411/5681311d550346895d97877c/html5/thumbnails/8.jpg)
Go Forward StrategyGo Forward Strategy
• Plan strategy before entry
• Position product/service as evironment changes
• Quickly adjust as competitiors’ react and customer values change
![Page 9: TRANSACTION PRICING](https://reader036.vdocuments.us/reader036/viewer/2022082411/5681311d550346895d97877c/html5/thumbnails/9.jpg)
Key Decision DriversKey Decision Drivers
• Customers
• Competition
• Market Price
• Volume
• Costs
• Investment
• Strategy
• Willingness to Pay
• Our Advantage
• Winning price
• Break-even, Profit
• Fixed,Variable
• Return on Investment
• Drive market share