Designing and Managing the Supply ChainWHUT,2017Lecture 12(Chapter 13)THIRDEDITIONDesigning&ManagingtheSupplyChainSmart PricingConcepts, Strategies & Case StudiesWangZhangqiongDavidSimchi-LeviPhilipKaminskyEdithSimchi-LeviMcGraw-Hil/lrwin
McGraw-Hill/Irwin Lecture 12 (Chapter 13) Smart Pricing Wang Zhangqiong Designing and Managing the Supply Chain, WHUT, 2017
13.1 Introduction·Demand&Pricing>Implicit assumption sofarhas beenthatdemandcannotbeinfluenced> In reality, this is not true>Demand level changes canbemadethrough:>Advertising,displays,and promotional tools>Pricing13-2
13-2 13.1 Introduction Demand & Pricing Implicit assumption so far has been that demand cannot be influenced In reality, this is not true Demand level changes can be made through: Advertising, displays, and promotional tools Pricing
Dell's Pricing StrategyProductpricedifferentbased ontypeofcustomerProductprice variesover timePrices ofoptions offeredalso vary overtimeIBM is investigating software that willallow it to adjust prices according todemand13-3
13-3 Dell’s Pricing Strategy Product price different based on type of customer Product price varies over time Prices of options offered also vary over time IBM is investigating software that will allow it to adjust prices according to demand
Questions Related to PricingWhat arethese companies doing?Why does Dell charge a different pricefordifferent consumers?At different times?If Dell can do it, can it work for other companies?What is wrong with a traditional fixed-price policy?13-4
13-4 Questions Related to Pricing What are these companies doing? Why does Dell charge a different price for different consumers? At different times? If Dell can do it, can it work for other companies? What is wrong with a traditional fixed-price policy?
Revenue ManagementPrinciplesAll companiestryingto boostprofitbyusingwhat areknowas smartpricing orrevenuemanagement techniguesTechniques first pioneered by the airline,hoteland rentalcarindustriesAirlineindustryRevenue managementhas increasedrevenuesignificantlyAmericanAirlines'estimates ofannualincrementalrevenue of $1 billionthrough revenue management13-5
13-5 Revenue Management Principles All companies trying to boost profit by using what are know as smart pricing or revenue management techniques Techniques first pioneered by the airline, hotel, and rental car industries. Airline industry Revenue management has increased revenue significantly American Airlines’ estimates of annual incremental revenue of $1 billion through revenue management