WEBVTT 1 00:00:12.420 --> 00:00:14.645 Well, prices are incentives, right? 2 00:00:14.645 --> 00:00:18.660 They're mechanisms that put a price on 3 00:00:18.660 --> 00:00:21.690 certain products, certain value propositions. 4 00:00:21.690 --> 00:00:25.530 They tend to incentivize certain consumer 5 00:00:25.530 --> 00:00:26.820 and customer behaviors. 6 00:00:27.660 --> 00:00:31.860 So when we have a fair sharing 7 00:00:31.860 --> 00:00:36.630 of value in the pricing, that increases access to consumers. 8 00:00:37.620 --> 00:00:41.280 When we have really, really high prices, what we know 9 00:00:41.280 --> 00:00:45.120 as skim pricing, that reduces access to certain things. 10 00:00:45.120 --> 00:00:49.290 Certain ways of charging for a product 11 00:00:49.290 --> 00:00:52.535 or service can make it more accessible 12 00:00:52.535 --> 00:00:55.020 or less accessible, even if the total amount 13 00:00:56.190 --> 00:01:00.600 is the same--that the structure actually changes the way 14 00:01:00.600 --> 00:01:04.170 society perceives value and actually receives value. 15 00:01:04.170 --> 00:01:06.545 How businesses can go beyond cost 16 00:01:06.545 --> 00:01:10.080 and value matters a lot 17 00:01:10.080 --> 00:01:13.440 to whether their pricing 18 00:01:13.440 --> 00:01:15.930 achieves their long-term vision. 19 00:01:17.370 --> 00:01:21.210 Cost in particular is something that is important 20 00:01:21.210 --> 00:01:25.920 to consider, but as the only input, it tends to lead 21 00:01:25.920 --> 00:01:27.780 to a lot of short-term decision making. 22 00:01:27.780 --> 00:01:30.540 When businesses think beyond 23 00:01:30.540 --> 00:01:34.440 the short-term cost questions, they have an opportunity 24 00:01:34.440 --> 00:01:37.500 to support the business strategy in a better way. 25 00:01:37.500 --> 00:01:40.740 Adoption-focused strategies drives network effects. 26 00:01:40.740 --> 00:01:43.080 Network effects drive more demand, 27 00:01:43.080 --> 00:01:44.910 and more demand makes a business a lot more 28 00:01:44.910 --> 00:01:46.800 successful long-term. 29 00:01:46.800 --> 00:01:50.190 But that requires thinking beyond that short-term cost 30 00:01:50.190 --> 00:01:53.130 and value equation. That requires strategic mindset, 31 00:01:53.130 --> 00:01:56.490 one that actually thinks about where you're trying 32 00:01:56.490 --> 00:01:58.650 to take the business with the pricing mechanism. 33 00:01:58.650 --> 00:02:02.460 You're effectively sharing a lot more value in order 34 00:02:02.460 --> 00:02:05.370 to drive the flywheel that is important for your business. 35 00:02:05.370 --> 00:02:07.680 Well, let's talk about two. One, one of them is access. 36 00:02:07.680 --> 00:02:10.140 You know, access is a challenge from a societal standpoint. 37 00:02:10.140 --> 00:02:14.855 Access to innovative new health care solutions, 38 00:02:14.855 --> 00:02:19.380 access to technology, that in of itself creates value 39 00:02:19.380 --> 00:02:21.210 and unlocks new opportunity, 40 00:02:21.210 --> 00:02:24.150 access to education--are all challenges. 41 00:02:25.350 --> 00:02:30.240 And if you're only playing the cost game when it comes 42 00:02:30.240 --> 00:02:34.710 to those goods, you can end up in a situation 43 00:02:34.710 --> 00:02:37.565 where the few people who can afford those, you know, 44 00:02:37.565 --> 00:02:40.805 health care, who can afford education, 45 00:02:40.805 --> 00:02:44.790 who can afford technology, get it, 46 00:02:44.790 --> 00:02:47.190 but a wide swath of the population does not. 47 00:02:47.190 --> 00:02:50.040 So the shift from cost-based thinking to value-based, 48 00:02:50.040 --> 00:02:53.940 to the value game, can be incredibly powerful when it comes 49 00:02:53.940 --> 00:02:55.260 to things like access in particular. 50 00:02:57.390 --> 00:02:59.980 The second question is choice. 51 00:02:59.980 --> 00:03:04.090 And that has to do with using pricing as a way to price in 52 00:03:05.860 --> 00:03:08.590 choices that we want consumers and companies to make. 53 00:03:09.765 --> 00:03:13.870 And a classic example of that is when you start charging for 54 00:03:14.770 --> 00:03:18.160 the environmental impact of something, that 55 00:03:18.160 --> 00:03:22.030 that impact on the price then creates a choice that's a lot more informed. 56 00:03:22.030 --> 00:03:24.790 It's important that in that choice game 57 00:03:24.790 --> 00:03:26.475 that you have all the information in front 58 00:03:26.475 --> 00:03:30.340 of consumers on why that product is greener, better. 59 00:03:30.340 --> 00:03:32.800 There are a couple of ways. One is, does 60 00:03:32.800 --> 00:03:33.970 that allow consumers 61 00:03:33.970 --> 00:03:37.180 and customers to make more climate-friendly decisions 62 00:03:37.180 --> 00:03:40.120 by subsidizing those choices to a degree? 63 00:03:40.120 --> 00:03:42.580 So the price ladder tilts towards the greener, more 64 00:03:42.580 --> 00:03:43.930 sustainable alternative. 65 00:03:43.930 --> 00:03:47.055 The other way that those decisions get made is 66 00:03:47.055 --> 00:03:48.430 through regulatory interventions. 67 00:03:48.430 --> 00:03:52.360 In countries like Norway, there is such a hefty 68 00:03:52.360 --> 00:03:57.070 tax on internal combustion engines that 80% 69 00:03:57.070 --> 00:04:00.940 of the new vehicles are electric vehicles now, right? 70 00:04:00.940 --> 00:04:03.370 So when, so the takeaway is 71 00:04:03.370 --> 00:04:05.980 that while consumers can have some concerns about electric 72 00:04:05.980 --> 00:04:09.045 vehicles, when the price is right relative 73 00:04:09.045 --> 00:04:12.820 to the next best alternative, they'll make that decision. 74 00:04:12.820 --> 00:04:15.220 In the United States as the gap 75 00:04:15.220 --> 00:04:18.490 between electric vehicles or hybrids 76 00:04:18.490 --> 00:04:22.990 and traditional internal combustion engines is closing, 77 00:04:22.990 --> 00:04:25.420 more and more consumers are making that decision. 78 00:04:25.420 --> 00:04:27.970 How to share value between buyers 79 00:04:27.970 --> 00:04:31.150 and sellers is such a big question 80 00:04:31.150 --> 00:04:33.610 because it's at the core of strategic pricing. 81 00:04:35.230 --> 00:04:39.490 So the premise of value-sharing is that you create value 82 00:04:39.490 --> 00:04:43.095 for consumers, but if you capture in your price all 83 00:04:43.095 --> 00:04:45.160 of the value that you're creating, 84 00:04:45.160 --> 00:04:47.500 that customer is essentially indifferent 85 00:04:47.500 --> 00:04:49.960 and they don't necessarily have a strong reason 86 00:04:51.130 --> 00:04:52.870 to stick with your offer 87 00:04:52.870 --> 00:04:55.090 if you're taking all the value away. There's a need 88 00:04:55.090 --> 00:04:57.855 to share some of the value back in order to bring people 89 00:04:57.855 --> 00:04:59.230 to the table 90 00:04:59.230 --> 00:05:02.590 and have them walk away feeling good about the transaction. 91 00:05:02.590 --> 00:05:05.470 Now, how good they feel about it matters. 92 00:05:05.470 --> 00:05:08.920 If they feel kind of, sort of okay, 93 00:05:08.920 --> 00:05:10.570 then they might come back, 94 00:05:10.570 --> 00:05:13.510 but maybe a lot of other consumers and customers won't. 95 00:05:13.510 --> 00:05:15.850 And so that means you'll have a smaller market 96 00:05:15.850 --> 00:05:18.010 because you're trying to take too much of the value. 97 00:05:18.010 --> 00:05:20.295 So you need to strike a good balance, 98 00:05:20.295 --> 00:05:23.320 and that's why the value-sharing concept is so critical 99 00:05:23.320 --> 00:05:24.610 to the success of a business.