This PPT slide, part of the 38-slide Pricing Strategy PowerPoint presentation, presents an overview of marginal cost pricing, which is a strategy focused on selling products at their incremental production cost. This approach essentially means offering a product at zero profit, specifically when fixed costs have already been absorbed by earlier sales. The concept is particularly relevant in scenarios where there is excess capacity, allowing businesses to sell remaining unsold products at marginal costs.
The examples provided illustrate practical applications of this pricing strategy. Online hotel reservation services, such as PriceLine, encourage hotels to implement marginal cost pricing for unsold rooms. This allows hotels to offer last-minute deals, effectively filling rooms that would otherwise remain empty. Similarly, airlines utilize this tactic to sell unfilled seats, ensuring that they maximize revenue opportunities even at lower price points.
The slide also hints at related pricing tactics, such as loss leader pricing and price discrimination, which can complement or contrast with marginal cost pricing. Understanding these connections can be crucial for businesses looking to optimize their pricing strategies.
For potential customers, this slide serves as a clear introduction to a pricing method that can be particularly beneficial in industries with high fixed costs and variable demand. It highlights the importance of strategic pricing in managing excess capacity and maximizing revenue. The insights provided can guide decision-making processes in pricing strategy development, making it a valuable addition to any executive's toolkit.
This slide is part of the Pricing Strategy PowerPoint presentation.
This Pricing Strategy framework is created by former McKinsey, BCG, Deloitte, EY, and Capgemini consultants. It teaches the Strategy Consulting approach to formulating a Pricing Strategy. Financial model also included.
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