Strategic Movements May 2017

May 2017 Pricing, Selling

BMW Demonstrates Strong Management Skills

BMW AG’s earnings before interest and taxes (EBIT) rose to EURO 3.0 billion from EURO 2.4 billion for the first quarter 2017 over same quarter last year.  The profit growth was attributed to the release of the 5-series sedan, strong sales in China, and the sale of Here, a mapping venture, to Intel Corp. Product and price management underlies the achievement in two out of three of the attributions.  Well done BMW management.

Grainger’s Challenging Price Action

Let me get this right:  Grainger’s “pricing action” was to lower prices. The result was higher volumes and lower gross profits.  The aim was a clear market share take.  And CEO Donald Macpherson is happy with the result?

This a horrible business idea resulting in horrible business results – and the stock value plummet told the CEO as much.

It might be defensible on the basis of a new competitive threat or positioning for an acquisition, but that wasn’t the defense.   Donald stated that, although Grainger creates a lot of value for their customers, they lowered prices to reduce dissatisfaction customers have with their pricing.  Well, sure enough, he has satisfied them by giving away the value Granger creates.

About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

Tim J. Smith, PhD
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