Pricing for Profitability: Activity-Based Pricing for Competitive Advantage [Hardcover]

John L. Daly (Author)

Book Description

ISBN-10: 0471415359 | ISBN-13: 978-0471415350 | Publication Date: October 12, 2001 | Edition: 1

Three things can happen when establishing a product price. A price set too high is a lost sale that could have been profitable at a lower price. A price set too low is rewarded with unprofitable work. Only when a price is set appropriately does a company make both a sale and a profit. Just as activity-based costing and activity-based management revolutionized the cost accounting world, activity-based pricing will bring a disciplined approach to developing pricing. Activity-based pricing examines the relationships between price, cost and sales volume and how this relationship effects profitability. Pricing for Profitability joins the disciplines of marketing, economics, business strategy, engineering and cost accounting to achieve maximum profitability.

Editorial Reviews

From the Inside Flap

Accurate pricing for improved profit

When pricing a product, you have to get it right. Overpricing will lead to lost sales that would have been profitable at a lower price, while underpricing leads to sales that bring revenue without profit. Activity-based pricing is a new paradigm for improving profitability by reducing the occurrence of pricing mistakes and placing less emphasis on increasing revenue and more on improving profits. Pricing for Profitability will help any company set prices that are both attractive to buyers and profitable for the company.

Activity-based pricing will help you:
* Establish prices based on solid knowledge of customer demand and product cost
* Stop unintentionally pricing products at a loss
* Determine how much of a price is profit
* Use superior financial knowledge to generate superior financial return

Pricing for Profitability is intended for use by people from a variety of disciplines: marketing, sales, cost accounting, engineering, economics, and business strategy. While most pricing books approach pricing from a marketing standpoint, this book treats the entire pricing process from multiple points of view, to provide a broad understanding of how to use pricing to gain a competitive advantage.

Too many companies unknowingly price their products at a loss, sometimes a substantial loss, because they do not understand the important interrelationships of price and sales volume and sales volume and cost. This book offers a comprehensive treatment of these interrelationships that will make a difference in your bottom line. The tools and real-world examples included here will allow companies to consistently earn a profit on their products, no matter what that product is.

Organized so that it can be read at several different levels of detail, Pricing for Profitability will help anyone involved in the pricing process make more accurate-and more profitable-decisions.

From the Back Cover

Accurate pricing for improved profit

When pricing a product, you have to get it right. Overpricing will lead to lost sales that would have been profitable at a lower price, while underpricing leads to sales that bring revenue without profit. Activity-based pricing is a new paradigm for improving profitability by reducing the occurrence of pricing mistakes while placing less emphasis on increasing revenue and more on improving profits. Pricing for Profitability will help any company set prices that are both attractive to buyers and profitable for the company.

Activity-based pricing will help you:

• Establish prices based on solid knowledge of customer demand and product cost
• Stop unintentionally pricing products at a loss
• Determine how much of a price is profit
• Use superior financial knowledge to generate superior financial return

See all Editorial Reviews

Product Details

• Hardcover: 240 pages
• Publisher: Wiley; 1 edition (October 12, 2001)
• Language: English
• ISBN-10: 0471415359
• ISBN-13: 978-0471415350
• Product Dimensions: 9.2 x 6.1 x 0.7 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 5.0 out of 5 stars  See all reviews (6 customer reviews)
• Amazon Best Sellers Rank: #1,014,262 in Books (See Top 100 in Books)
  • #94 in Books > Business & Investing > Management & Leadership > Pricing

More About the Author

John L. Daly, MBA, CPA, CMA, CPIM - President of Executive Education, Inc. and author of Pricing for Profitability. Executive Education provides management consulting in pricing model development and produces continuing professional education seminars for accountants.

Our seminars are targeted at corporate financial managers and are offered through 40 accounting associations throughout the US and Canada. You can see a schedule on our website www.ExecutiveEducationInc.com

Customer Reviews

Most Helpful Customer Reviews

11 of 14 people found the following review helpful:

5.0 out of 5 stars A New Paradigm in Pricing Strategy, April 11, 2002

By A Customer

This review is from: Pricing for Profitability: Activity-Based Pricing for Competitive Advantage (Hardcover)

Pricing for Profitability is a refreshing new look at pricing strategy the combines the disciplines of Business Strategy,Cost Accounting, Economics, Marketing and Business Strategy to create an approach where each of these disciplines will surely find a solid common ground.

The book concentrates on maximizing profitability, rather than maximizing revenue, convincingly refuting the approaches of other pricing books (written by marketing professors) that say "the more sales the better". He reminds us that revenue does not equal profit, but that profit = revenue minus expenses.

Mr. Daly asserts "there are three things that can happen that can happen in product pricing and two of them are bad", the most devestating result being that many companies underprice difficult or low-volume bids sometimes loosing significant amounts of money. He believes that many organizations have an inadeqate understanding of their costs which leaves them at a competitive disadvaantage.

This book is a must read for any manager who has pricing responsibility.

4 of 5 people found the following review helpful:

5.0 out of 5 stars A Must Read for Manufacturers, January 29, 2003

By 

Gary Grigowski (Michigan, USA) - See all my reviews

This review is from: Pricing for Profitability: Activity-Based Pricing for Competitive Advantage (Hardcover)

Pricing for Profitability has allowed our company to intelligently quote new projects and answer a critical question during price negotiations - "Should I walk?". We have also found the activity based pricing concepts useful for evaluating the countless cost down requests we get from our customer and understanding what we can and cannot do. I would recommend this book to anyone in a highly competitive, tight margin business.

4 of 5 people found the following review helpful:

5.0 out of 5 stars Valuable insights into profitable pricing, January 16, 2003

By 

James D. Boston (Plano, TX USA) - See all my reviews

This review is from: Pricing for Profitability: Activity-Based Pricing for Competitive Advantage (Hardcover)

John Daly has written an excellent book with important insights into the desirability and mechanics of using Activity Based Pricing to achieve a profit-driven pricing model.

Why is this important?

If you really understand and properly allocate your costs and use that understanding to develop an Activity Based Pricing model for your products and/or services then you are pretty well assured of profitability, particularly as you increase unit volume. Of course, this assumes you can sell at a price higher than your fully loaded, properly allocated costs.

As Mr. Daly clearly describes, traditional cost allocation methods (not to mention back of a napkin allocations) result in problematical cost distortions and lead to potentially serious pricing errors.

Anyone with profit and loss responsibility, or who would like to get there, would be well served to buy this book, read it and take it to heart. It is well written, coherent and was a pleasure to read. Daly has struck an excellent balance in that the book is not so filled with technical accounting/finance detail it is inaccessible to a non-accountant and yet it has sufficient substance to be of interest to accounting and finance specialists.

As investment bankers we receive financing requests from many companies seeking capital that are not profitable or not as profitable as they could be. Activity Based Pricing is one of the disciplines we are introducing to our clients and prospective clients to help them achieve profitability or become more profitable in order to better position them to compete for capital.