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The Price Advantage (Wiley Finance) [Hardcover]

Walter L. Baker , Michael V. Marn , Craig C. Zawada
4.7 out of 5 stars  See all reviews (3 customer reviews)
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Book Description

25 Jun 2010 Wiley Finance (Book 535)
A comprehensive look at creating pricing strategies that work in both good economic times and bad Written by three preeminent pricing experts at McKinsey & Company, the Second Edition of The Price Advantage is a practical pricing guide for the executive or pricing practitioner who wants to identify, capture, and sustain substantial pricing gains in their business. Pricing is by far the most powerful profit lever that managers can influence. Yet few companies approach pricing in a way that fully capitalizes on its value. This Second Edition , a major revision and extension of the first book, shows you what it takes to achieve the price advantage in today′s competitive and complex business environments. Based on in–depth, first–hand experience with thousands of companies, this book provides managers with a pragmatic guide through the maze of pricing issues. It reinforces why pricing excellence is more critical than ever today and then explains state–of–the–art approaches to analyzing and improving your own pricing strategy and execution. Explores the fundamental role of pricing infrastructure in achieving the price advantage Includes new topics such as software and information products pricing, lifecycle pricing, custom–configured products pricing, pricing of high–count product lines, pricing in distributed sales environments, "razor/razor blades" pricing, and tiered products and services pricing Revisits the full range of classic McKinsey pricing tools, including the pocket price waterfall and value maps Engaging and informative, the Second Edition of The Price Advantage will put this essential discipline in perspective.

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The Price Advantage (Wiley Finance) + Power Pricing: How Managing Price Transforms the Bottom Line + The Strategy and Tactics of Pricing
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Product details

  • Hardcover: 384 pages
  • Publisher: John Wiley & Sons; 2nd Edition edition (25 Jun 2010)
  • Language: English
  • ISBN-10: 0470481773
  • ISBN-13: 978-0470481776
  • Product Dimensions: 23.2 x 16.2 x 3.4 cm
  • Average Customer Review: 4.7 out of 5 stars  See all reviews (3 customer reviews)
  • Amazon Bestsellers Rank: 62,504 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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From the Inside Flap

For all the advantages businesses pursue, there is one powerful advantage that is accessible to virtually every business—but realized by very few. That advantage is the price advantage. Pricing is far and away the most sensitive profit lever that managers can influence. Very small changes in average price translate into huge changes in operating profit, yet few companies are as disciplined and deliberate about pricing as they should be. In the most comprehensive and insightful treatment of pricing management available today, this Second Edition of The Price Advantage shows companies how to use pricing excellence to outperform competitors and increase profitability in both good and bad times. Drawing on more than three decades of client success, three preeminent McKinsey & Company experts demonstrate why pricing is critical to bottom–line profitability and explain state–of–the–art approaches to analyzing pricing and building distinctive pricing capability. Working with colleagues and companies across the globe, they have helped develop leading–edge practical knowledge in pricing for clients in all major industries. Written in pragmatic terms, this Second Edition of The Price Advantage continues to be the practical pricing guide for thoughtful general managers who have been tempted by the unrealized promise of improved pricing and, perhaps, even frustrated by attempts to translate pricing theory into bottom–line impact. It provides a structured approach for identifying where the most precious sources of untapped pricing opportunity reside in a business, along with practical, case–illustrated guidance on how to capture that opportunity. Updated throughout to reflect changes in the global pricing environment and advances in McKinsey′s pricing knowledge, this Second Edition covers a host of new topics including software and information products pricing, lifecycle pricing, custom–configured products pricing, pricing of high–count product lines, pricing in distributed sales environments, and tiered products and services pricing. Also, the building of a sustainable pricing capability and a high–performing pricing infrastructure is covered in much greater detail than ever before. With emphasis on translating pricing theory into real improvements and bottom–line performance, the Second Edition of The Price Advantage is designed to give today′s CEOs and business managers a competitive advantage in any economy.

From the Back Cover

Praise for THE PRICE ADVANTAGE, SECOND EDITION "This book is a treasure—a practical yet intellectually sound guide to pricing that is applicable to both large and small companies. Frankly, in all my years writing about economics and covering corporate decision making, I have not seen pricing strategy and tactics explained so clearly as in this book." — Michael Mandel , former chief economist, BusinessWeek , and Editor–in–Chief, Visible Economy LLC "This book is both insightful and practical. Many companies overlook the substantial profit opportunities from smart pricing. The authors show you not only where to look for, but also how to capture and sustain those opportunities." — James M. Kilts , former chairman and CEO, The Gillette Company "The Price Advantage is very straightforward and direct, with concise and easily applied coverage of each and every topic." — David J. Reibstein , Marketing Professor, The Wharton School The Second Edition of The Price Advantage , written by three preeminent experts at McKinsey & Company, is the most pragmatic and insightful book on pricing available. Based on in–depth, firsthand experience with hundreds of companies, as well as significant investments in new pricing research, this book is designed to be a comprehensive guide for managers through the maze of pricing issues. The authors examine state–of–the–art approaches for analyzing and improving pricing performance, demonstrate those approaches with real case studies, and draw a pricing excellence blueprint for companies to follow. In good economic times or bad, achieving the price advantage is critical to corporate performance and profitability.

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Customer Reviews

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Most Helpful Customer Reviews
1 of 1 people found the following review helpful
Having worked with many consultants from McKinsey & Co, this books brings to you some of their success stories and methodologies for effective pricing. Whilst the book is a really good read, it is more of a showcase for how good McKinsey & Co. are rather than showing you the tricks of the trade so you can help your own enterprise.

Is it worth it......? In my opinion yes, but don't expect to have all the answers to solve your own problems.
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5.0 out of 5 stars Great book 31 Oct 2012
By derren
Format:Hardcover|Verified Purchase
I have been pricing since 1998 with many world class companies who could have greatly benefited from the principles explained in this text. My eyes have been opened and I feel more excited about the discipline than ever.
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0 of 2 people found the following review helpful
5.0 out of 5 stars This is the BEST book on pricing 24 Mar 2009
I just bought 4 books from Amazon on pricing. I wish I had not bothered with the other 3 - they were all pretty poor. Just get this one and you will be happy.
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Most Helpful Customer Reviews on (beta) 4.2 out of 5 stars  20 reviews
11 of 11 people found the following review helpful
4.0 out of 5 stars Essential reading, but not the whole story 13 Feb 2011
By Steven Forth - Published on
Format:Hardcover|Verified Purchase
The Price Advantage is one of the essential books on pricing and it is the second one I would read after Tom Nagle, John Hogan and Joe Zale's The Strategy and Tactics of Pricing (5th Edition). (I have not yet read Tim Smith's Pricing Strategy: Setting Price Levels, Managing Price Discounts and Establishing Price Structures which looks like it will be an interesting read.) Reed Holden and Mark Burton Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table is also a good first introduction.

The authors are McKinsey consultants (one has recently moved to the pricing software vendor PROS Software) and they bring a great deal of consulting experience to the book which greatly enriches the case studies. Pricing excellence is divided into three elements, Market Strategy, Customer Value and Transactions and tools, advice and examples are provided for each element. This book provides the best introduction to the Pocket Price Waterfall (and its extension the Pocket Margin Waterfall), which is not surprising as the authors are the people who developed this framework. Appendix 1, which provides numerous examples of waterfalls is a great thing for them to have shared and is itself worth the price of the book. The book also has the best presentation I have seen of Value Maps and the Value Equivalence Line and how they are relevant to strategy. Even though I have problems with this approach (see below) it is important foundational reading for anyone interested in pricing and pricing strategy. The extended case study on Monarch Battery provides a good summary of the ideas in the book and how they can be applied. This is a great way to pull things together at the end of a book and it also provides a touchstone for people involved in pricing that we can refer to in conversations.
I do have three problems with this book.

The Value Mapping approach has been criticized by Gerald Smith and Tom Nagle (see "Pricing the Differential" by Gerald Smith and Tom Nagle, published in Marketing Management in the May/June 2005 issue and available on the Resources page of the LeveragePoint website). In short, value maps tend to over estimate the contribution to price of shared (commoditized) benefits and to understate the potential contribution of differentiated benefits. Value models like Nagle's Economic Value Estimation are a far more powerful way to understand the economic impact of a product for a customer and how to use this in setting and communicating price. Baker, Marn and Zawada do not mention value modeling or respond to the well known criticisms of value maps. This is part of a wider problem with the book, it is narrowly depended on the McKinsey approach and experience and does not engage the wider conversations taking place in the pricing community.

The book also fails to relate pricing concepts and frameworks to other work. For example, on Page 229 they discuss new product launches and characterize these as Revolutionary, Evolutionary and Me To. This discussion would be greatly enriched by putting it in the context of Clayton Christensen's work, see The Innovator's Dilemma: The Revolutionary Book that Will Change the Way You Do Business (Collins Business Essentials) and subsequent books. This is actually a general problem in the pricing community, which tends to be inward focused and caught up in its own role and frameworks. But pricing will only show its full potential to transform business when it is connected to other parts of the business: product development, marketing, sales and finance. This will only happen when pricing frameworks are related to the frameworks used by people in other functional areas. There is a special need for someone to put pricing in a context meaningful to sales, so that sales can stop seeing pricing as "the sales prevention department."

The Pricing Advantage does not address emerging opportunities from two-sided markets. Two-sided markets, or platforms, are becoming more and more common and surface all sorts of important pricing and competitive strategy issues. If you have a conventional business model, and you are caught on the wrong side of a two-sided market, you are basically done for unless you can find a new business model. To get insight into two-sided markets, their challenges and huge opportunities, see Catalyst Code: The Strategies Behind the World's Most Dynamic Companies by David S. Evans and Richard Schmalensee and Free: The Future of a Radical Price by Chris Anderson.
10 of 11 people found the following review helpful
5.0 out of 5 stars Pragmatic Approaches a Businessperson Can Use 3 Mar 2004
By A Customer - Published on
The Price Advantage makes the case that pricing is the most under-appreciated lever for improving performance in most companies today. The authors put forth an argument that is compelling for business leaders in every company to elevate their view of pricing opportunities in general, and pricing as a key lever for performance management in particular. Most importantly, however, the book provides practical, pragmatic insights into what approaches a businessperson can take to identify and capture pricing opportunities. It brings both the opportunities and potential pitfalls to life through the frequent use of case examples where companies succeeded in "ringing the cash register" through effective pricing or left a great deal of money on the table through poor pricing actions.
Of particular usefulness are chapters on specific topics that a business leader tackling pricing is going to face sooner or later. The chapter on "industry strategy" where the authors lay out some of the tactics for being a price leader or good price follower seems to be fresh writing on these topics ( I have not seen anything written about this before, and I thought it was quite actionable). Also, the chapter on pricing architecture set forth nicely the different ways of structuring price to drive the right customer and reseller behavior, again providing a way to look at the issue that should drive toward results effectively.
The chapter on issues/opportunities that arise from mergers/acquisitions provides distinctive perspectives on how to take advantage of opportunities and/or avoid huge downside risks associated with these events. The price wars chapter provides a guide for many managers to utilize in avoiding counterproductive (often inadvertent) actions across the markets in which they compete. Sidestepping just one of the potholes that the authors describe is likely to save a business great pain. Executing a strategy that weaves its way through the price war minefield discussed is likely to make the business a top performer, and the managers leading such an effort heroes.
The discussion of pricing technology appeared only to scratch the surface, perhaps a necessity due to the rapid innovation underway. While I was left wanting more in this area, the book did provide a way to segment solutions and approaches in this area that should be useful for those exploring the range of options available in today's - or tomorrow's - marketplace.
Finally, as you would expect from the authors' backgrounds, the insights on how to architect an organizational change program provide a framework that should be useful regardless of whether the challenge is a large enterprise or if you're tackling a focused initiative to capture value in a single product line.
8 of 9 people found the following review helpful
5.0 out of 5 stars The Price Advantage 16 Dec 2004
By Pricing Director - Published on
This is the best book on pricing out in the market today. It is easy to understand and pragmatic......not one of the theory intensive books written by academics that have little or no practical value. Mike Marn's ideas are both easy to understand and to implement. I manage pricing for a SBU of a very large industrial company. Using the ideas from the book (along with a lot of very hard work), we were able to realize a very significant improvement at our bottom line without adding to the competitive intensity of the marketplace. Nothing in the book is magic; however, it all hangs together. A company that executes well on his ideas, will no doubt improve their financial performance.
51 of 68 people found the following review helpful
2.0 out of 5 stars Much of this is old hat, unfortunately 15 Feb 2004
By Don King - Published on
A friend of mine who knows I have an interest in pricing sent me a free copy of this book. Michael Marn has led the pricing practice at McKinsey & Company for a long time now, and I'd been wondering why he hadn't published a pricing book before now.
Unfortunately it turns out to be something of a one-trick pony, and a pony pretty long in the tooth at that. About half of it talks about the well-known price-benefit map. No question it's a fundamental idea, but hardly leading edge. Plus you need a McKinsey team to execute it. Given the pedigree of the authors I was hoping for more. A lot of the book just repeats McKinsey's early work on price wars, postmerger pricing, and overall strategy--good stuff but again nothing new.
If you're interested in pricing, in my opinion there are better options than this. ...
10 of 12 people found the following review helpful
5.0 out of 5 stars You Must read It 19 Jun 2005
By Cristian Sepulveda - Published on
This book is an compilation of many paper published by Mckinsey.

If you have read "The Power of Pricing" or "The Hidden Value of Postmerger Pricing" or "Pricing in a Downturn", all published by the Mckinsey quarterly, you must read this book if you want to go in deep.

I recently start working in pricing, and in my company we start seeking for a software provider to help us is pricng process. well, I meet with the best software providers, and all of them talk about "The Power of Pricing", and I note that these systems are Copy&Paste of the paper. now I note that is a Copy&Paste of the book.

if you are not sure to buy the book, first look for the papers. if you want to have pricing conversation, join to our free pricing forum [...]

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