Strategic Marketing and Pricing Workshop
Can you articulate your cooperative’s overall strategic direction and the role that your marketing efforts play in achieving your goals?
Do your current rates increase your risk of losing your most profitable customers in a competitive environment?
Does your current rate design assure that margins will be maintained even if customers choose another supplier?
Do you have rate options to offer a price-sensitive customer without giving away profits?
Which rate designs are consistent with a more competitive future and complement your overall strategic direction?
Course Description
Cooperative leaders are starting to recognize that a critical step in preparing for a more competitive future is to develop a pricing system that is driven by the strategic plan. Historically, rates have been designed to recover costs with little thought to the role that pricing plays in achieving strategic goals or optimizing the cooperative’s marketing efforts. This two-day workshop will help cooperatives examine the strategic issues they will be facing in a more competitive environment. The workshop has been designed to explore ideas on how different pricing strategies can optimize cooperative marketing efforts and understand various rate revision and rate development techniques that can be used within this strategic context.
Learning objectives
Traditional “one size fits all” pricing was always considered “fair” in the past since all customers shared an average embedded cost of service. Not in the future competitive environment! If the price you are charging a customer is too much above that customer’s actual cost of service, you could be opening yourself up to a competitor and risk losing your most profitable customers. The workshop will also identify how cooperatives can develop more pricing alternatives for an individual customer so that your co-op’s sales staff can develop a closer, more consultative relationship with their customers — essential to a relationship-based marketing program designed to retain or attract customers by developing multiple transactions. Finally, the workshop will assist cooperatives consider the impacts that various different strategic directions (i.e. WIRECO, WIRECO Plus, RETAILCO, etc.) will have on their pricing strategies before rushing into the process of revising their existing rates or developing new rate offerings.
Strategic Considerations
1) The evolving competitive market
2) Alternatives for playing the competitive game
a) Price focused strategy
b) Lock-in strategy
c) Revenue enhancement strategy
3) Maintaining utility margins
a) Customer and revenue retention
b) Incremental revenue from new sales
i) New products with existing customers
ii) Existing and new products with new customers
4) Implementing defensive marketing strategies
a) Exit barriers
b) Relationship marketing
c) Price focused defensive strategies
d) Service focused defensive strategies
5) Implementing offensive marketing strategies
a) Price focused aggregation strategies
b) Service focused strategies
6) Which approach is the best fit for your utility?
a) Your comparative advantages
b) What do you do well?
c) Don’t play a game you can’t win
7) Strategic Direction
a) WIRECO
b) WIRECO Plus
i) Plus Power
ii) Plus other products & services
iii) Creating value for members
c) RETAILCO
8) Assessing the risk of losing customers in a competitive environment
a) Individual customer profitability
b) Price exposure
c) Customer attitudes
9) Marketing tools in a competitive environment
a) Product
b) Price
c) Promotion
d) Place
10) Analyzing customer needs
11) Needs-based selling techniques
12) Strategic pricing
13) Products and services
14) Product promotion
15) Product and information distribution channels
16) How to avoid the word “no” and get to “yes” with customers
a) Creating proactive solutions to customer needs
b) Responding to customer requests
i) How to parry a request for a rate decrease
ii) Other products and services
c) The role of pricing in saying “yes” to customers
17) Setting strategic goals
a) Reducing delivered cost per kWh to customers
b) Protecting existing margins
c) Increasing margins
d) others
Cost Recovery, Rate Design and Strategic Pricing Issues
1) Cost Allocation
a) Cost of service studies
i) Functionalization
ii) Classification
iii) Allocation
iv) Class rates of return
v) Class averages and how they can be used
(1) Developing Marketing strategy
(2) Targeting economic development efforts
(3) Assessing and communicating benefits of marketing
b) Individual customer profitability
i) Financial management
ii) Rate re-design
iii) Market segmentation
iv) Targeted pricing
v) Targeting marketing efforts
2) Cost recovery principals
a) Fixed costs
i) Customer, service and facilities charges
ii) Demand charges
(1) Purchased power and generation
(2) Transmission
(3) Distribution
b) Variable costs
i) Energy charges
ii) Fuel adjustment clauses
c) Embedded cost pricing
d) Marginal cost pricing
e) Real time pricing
3) Rate design
a) Two part rates
b) Three part rates
c) Time of use rates
d) Interruptible rates
e) Seasonal rates
f) Geographically differentiated rates
g) Rate unbundling
i) Reflecting unbundled prices on the bill while continuing to bill on a bundled basis
ii) Billing on an unbundled basis
(1) Cost causation
(2) Margins
(3) Degree of disaggregation
h) Bundling rates with other products and services
4) Menus of Rate Options and Assisting Customers with Choosing the Best Rate
