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ESSO Discount Promotion: Fill up for EXACTLY 70 € – who comes up with such a thing?
It is an old wisdom in pricing: many discount strategies are anything but well thought out – for example when Deutsche Bahn tries to dissuade me from buying a Flex-Ticket with a price advantage of 1.25 euros. A current example of a hardly comprehensible discount idea is the ESSO discount promotion: anyone who fills up for EXACTLY 70 euros receives a discount of 5 euros on the next refuelling.
What is actually being rewarded in this ESSO discount promotion? The customers’ play instinct? The sensitivity in handling the fuel pump? Should I refrain from filling up completely in order to be able to redeem the 5 euros? Will I become an ESSO regular customer as a result? How annoyed would I be if the tank is already full at 67 euros? And with our Toyota, we have never filled up for 70 euros, the little one doesn’t have such a huge tank. Am I being discriminated against because I don’t drive an SUV?
It seems to be true what pricing expert Hermann Simon said many years ago: very many discount systems are not really well thought out. This ESSO action apparently belongs to them.
Rising production costs force SMEs to optimize their pricing
The ongoing exorbitant rise in purchasing prices for energy and raw materials hits German SMEs hard. Companies should quickly get their pricing in order in the face of rapidly rising or fluctuating production costs – but how? This question is addressed by the Creditreform magazine in a current article. The business magazine for SMEs (Handelsblatt publishing group) publishes assessments by experts, including Hans-Christian Riekhof as a specialist for strategic pricing issues. One of his key statements: “Companies often approach pricing naively.”
Massive price increases threatening the existence of many companies
The situation is serious, the magazine quotes Stefan Ortolf from DZ Bank. Russia’s war against Ukraine is affecting a large number of medium-sized companies. With regard to the current situation, about 72 percent of the companies surveyed for a current Creditreform study consider the massive price increases to be the biggest challenge for SMEs this year. The situation does not tolerate any delay – companies must act quickly.
Pricing expert Riekhof: Some companies treat the topic of pricing completely naively – this is now taking its toll
Many managers have never seen such price increases. Today’s entrepreneurs often lack experience. As Hans-Christian Riekhof, Professor of International Marketing at PFH Private University of Göttingen and sought-after pricing expert, finds in his empirical studies, some companies approach the topic of pricing very professionally, but some also completely naively. “The latter is now taking its toll. Because those who have not defined a process to put their prices to the test once or several times a year and possibly adjust them, now lack speed, says Riekhof. ”
In addition, the wrong people often decide on price increases in many companies. There should be consensus across the department boundaries of product development, marketing, product management, sales, service, controlling about where to go in terms of price strategy, explains the pricing specialist”, who imparts strategic pricing knowledge and practical action options to managers in regularly held pricing seminars.
Link:
Full article in Creditreform magazine:
https://creditreform-magazin.de/finanzen/preise-erhoehen-pricing/
https://creditreform-magazin.de/finanzen/preise-erhoehen-pricing/
Screenshot: Creditreform magazine
Value-based Pricing instead of Cost-based Pricing: Flixtrain and the track prices of Deutsche Bahn
The CEO of Flixtrain, André Schwämmlein, has to pay a fee for the use of the tracks of DB subsidiary DB Netz if he wants to use the DB rail network with his trains. This is understandable, but the governing parties are debating whether to charge Flixtrain full costs or marginal costs.
Flixtrain – Cost based Pricing is complex in cost determination
“From business studies, we know that there are sensible alternatives to Cost based Pricing (Pricing-Newsletter No. 9: Why cost-oriented pricing is dangerous), especially since the causative determination of costs for each individual rail kilometer is likely to be complex”, says pricing expert Dr. Hans-Christian Riekhof, Professor of International Marketing at the Private University of Göttingen (PFH). A promising approach could be to determine the prices for certain tracks or better routes according to the value that arises when used by the customer.” This approach is called Value based Pricing (Pricing-Newsletter No. 9).
For Flixtrain, value-oriented pricing is a viable alternative
A high-speed ICE route between two metropolises generates a higher value than the connection between two rather insignificant small towns, completely independent of the costs of the track. Thinking about contemporary variants of pricing would perhaps be a good recommendation, says Riekhof.
Photo: pixabay.com
