Case Workshop Series

Session 2 - Pricing
Aviral Bhatnagar (Monitor Deloitte)
Ketav Mehta (McKinsey & Company)
Session Overview
1. Profitability case solved in an interview setting by the speakers (We could not do
this last time due to lack of time)
2. Introduction to Pricing cases
3. Framework to solve pricing cases
4. Pricing case solved in an interview setting by the speakers
5. Audience case solving session
6. Live project to consult a startup and solve its problem
Profitability Mock Case
Our client is a pharma company. It is a market leader, but has been
experiencing declining growth since the past few quarters. They
have hired you to investigate this problem and give suitable
recommendations.
Pricing - Introduction
Topics covered within this framework:
Cost based pricing
Value based pricing
Competition based pricing
Pricing Case
Your client is a local ice-cream manufacturer and wishes to bid for the rights of
selling ice-cream at Mohali Cricket Stadium. He wishes to know if he should
participate in the bid and if yes, what should be his bid price?
Pricing Introduction and Framework
Background Questions:
Understanding the company, the market and the product
Company:
What is my companys main objective and its quantification: To make profits, to enter the market safely, to gain market
share or maintain a brand value/premium product? Payback period, RoI, etc.
Brand value of the company in the specific market
Market
What is the type of market : Monopolistic, Oligopolistic or highly competitive
Primary purchase driver (brand, quality, price, etc.)
Growth rate and stage of market (growth, maturity, decline)
Product:
What is the type of product : High Price High Value, Low Price High Value, Low Price Low Value?
Patent/USP/Differentiator
Switching costs
Using these three we can understand what is our optimal pricing strategy
Pricing Introduction and Framework
Pricing
Competition Demand Finances
Competition
Competitors
Background
Size
Growth
Profitability
Brand Value
Products
Pricing
Portfolio
Mix
USP/Differentiator
Switching Costs
Substitutes
Products
Pricing
Suitability
Demand
Need
Fulfilment
Type of
need
Timeline
Willingness
to Pay
Purchasing
Power
Brand
Value
Value
Creation
Product
Service
Finances
Market
Sizing
Sales
estimates
Revenue
estimates
Costs
Fixed
Costs
Variable
Costs
Profits
Historical
Future
Company
Balance
Sheet
Outlook
Value Chain
Raw Materials Manufacturing Transport Inventory Distribution
Break costs
easily via
Value Chain
Pricing
Competition
Competitors
Background
Size
Growth
Profitability
Brand Value
Products
Pricing
Portfolio
Mix
Substitutes
Products
Pricing
Suitability
Demand
Need
Fulfilment
Type of need
Timeline
Willingness
to Pay
Purchasing
Power
Brand Value
Value
Creation
Product
Service
Finances
Costs
Fixed Costs
Variable
Costs
Profits
Historical
Future
Company
Balance
Sheet
Outlook
Process Overview
Background
Information
Product
Company -
objectives
Competitive
Landscape
Market
Customers
Market Sizing
Profit
Estimation
Revenues
Costs
Final Price
Pricing strategies
Competitive Based Pricing : Objective to gain market share; highly
competitive market, Low Price markets
Value Based Pricing: Objective to maintain brand image/ roll out a premium
product, not a very competitive market, High Price High Value markets
Cost Based Pricing: Objective to safely cover costs and enter market, almost
nascent markets, new product new market roll outs
Pricing Audience Case
Our client is General Electric and has invented a new light
bulb. This revolutionary bulb runs for 500 years. Estimate the
market size and what should be the price of the bulb?