VIT Business School

02 13/12/2023
Assignment No: Date of Submission:

BMT6150
Course Code:

PRICING AND REVENUE MANAGEMENT

Name of the Course:

C1
Slot No:

AKANSHA SINGH
Name of the Course Teacher:

RAJNANDINI PUJARI
Name of the Student:

22MBA0217
Register No:
Brain and Company's Competitive Pricing Strategy
Part A: Competing with Dissenture's inferior service

In this scenario, Brain and Company's key advantage is the larger guaranteed benefit they offer
for the same cost as Dissenture. Here's how they can leverage this advantage to win the
business:

1. Cost-plus approach: Since both companies have the same cost and offer different
benefit levels, Brain and Company can simply mark up their cost based on the
additional value they provide. In this case:

Cost of delivering service = $500,000

Additional benefit over Dissenture = $500,000 ($2 million - $1.5 million)
Therefore, Brain and Company should charge:

Minimum price = Cost + Guaranteed value difference = $500,000 + $500,000 = $1

million.
This ensures they cover their costs and offer a price competitive enough to incentivize
the customer to choose their superior service over Dissenture's.

2. Customer value-based pricing: Brain and Company can also analyze the customer's
perceived value of the additional benefit. If the customer highly values the extra
$500,000 benefit, they might be willing to pay more than the minimum price
calculated above. In this case, Brain and Company could:

Conduct market research to understand the customer's willingness to pay for the
additional benefit.
Negotiate a price that captures a portion of the additional value they deliver, while
remaining competitive and attractive compared to Dissenture.

3. Threshold pricing: Brain and Company could define a price threshold beyond which
Dissenture would become a more attractive option, considering both cost and benefit.
This threshold could be:

Dissenture's price + Customer's perceived value of Brain's additional benefit: $500,000

(Dissenture's price) + $x (customer's perceived additional value)

Brain's cost + Customer's perceived value of Dissenture's price advantage: $500,000

(Brain's cost) - $y (customer's perceived value of Dissenture's lower price)
 By analyzing these thresholds and the customer's preferences, Brain and Company can
reach a strategic pricing decision that guarantees they win the business while
maximizing their profit.

Part B: Dissenture's cost advantage

If Dissenture's cost reduces to $400,000, Brain and Company faces a more challenging
scenario. Here's how they can adapt their pricing strategy:

1. Revalue the additional benefit: Brain and Company needs to re-evaluate the
customer's perceived value of the extra $500,000 benefit in light of Dissenture's
lower cost. The customer might be more inclined to accept a smaller price difference
between the two options if Dissenture is cheaper to begin with.

2. Consider cost reduction: Brain and Company should explore ways to reduce their
own costs without compromising the quality of their service. This could involve
optimizing internal processes, negotiating with suppliers, or streamlining project
delivery. Reducing their cost would allow them to offer a more competitive price
without sacrificing profitability.

3. Highlight additional differentiators: If cost and guaranteed benefit become less

impactful, Brain and Company could emphasize other aspects that differentiate
them from Dissenture. This could include factors like:

• Proven track record and expertise in the customer's specific industry or domain.
• Superior customer service and support.
• Faster implementation and quicker time to value.
• Access to additional resources or networks.
By emphasizing their strengths and offering a compelling value proposition, Brain and
Company can still entice the customer even if Dissenture's lower cost makes the decision
marginally closer.

Conclusion:
Brain and Company needs to adapt their pricing strategy based on the competitor's cost
advantage and the customer's priorities. Analyzing cost structures, perceived value of
benefits, and additional differentiators can help them reach a competitive price that secures
the business while meeting their profitability goals. By understanding the dynamics of the
market and the customer's decision-making process, Brain and Company can remain a leader
in the pricing and revenue optimization space.