Next, I want to show you the price ladder. The price ladder is a way to identify the steps between price points and see whether the steps are too wide or too narrow, and the way you do it? You simply plot out all your product offerings. You have on you x-axis here are all the products and you have on the y-axis the price points. I marked the kind of three hot price points we identified from the price piano. And then, you have a lot of hot dogs here, start at 2.59, 2.99, for traditional, then the jump to 4.59 and 4.99 and here between 2.99 and 4.49, you have the four hot dogs from organic. But that's not enough. We also need to really understand what are the exact features of each product. So we're talking hot dogs, it's not overly complicated. There is a basic hot dog and you have four add-ons. You can add the cheese, bacon, onions and these onions are raw or chili. And now you basically see that the very basic entry level hot dog at 2.59 from traditional has no add-ons. They add cheese and the price goes up to 2.99, you add bacon and onions, that goes up to 4.59 and lastly you have all on it, basically overloaded, it's 4.99 with all of it. Now, the organic has same features, but it's really differentiated through the quality of the ingredients. As the name says, it's organic. So the basic hot dog starts at 2.99 and you see there is a premium here over the basic offering. Then, you are adding cheese for 50 cents. They try to be healthy so that's why they don't really offering any bacon in the organic side, and then you can add another onions and finally the chili for 4.49. So this is really helpful to analyze the current architecture. It gets even more interesting once you lay in the competitors and in an industry or market often times the offerings are somewhat comparable and if they're not you have to try to make them comparable as much as possible when you look at the price points. So Frankies is actually the direct competitor to the organic lineup. That's why they started 2.99 with the basic hot dog, then they have the jumbo to the 3.99 and they have cheese and onions with it, and then, they go to the 4.99 with chili. Dawg Day has also there are four, and, the features match as the way you see it here. Now, 2 interesting things, first of all, it gets confirmed that we're the only 1 with 2.59. And the way we do it is, we have a very basic entry level offering and that is great. Because the first health price fund was 2.99 and staying below that certainly attracts a lot of demand. The second thing is, we are closing the gap that Frankies had, they go from 2.99 straight to 3.99. But we have something in between here at 3.49 in our organic range, so that is very good. But we also see that we have a gap in our traditional line-up. Dawg Day has this hot dog here, with cheese and bacon at the price point of 3.24. And we have this big debt from 2.99 to 4.59. So this might highlight now what kind of offering we need to kind of close that gap in our price ladder. There are a couple of more things you can read out of it. For example, Dawg Day is pricing the exact comparable hot dog at 3.99, whereas we go at 4.59. So that's a 60 cent difference, but we are doing okay here on the entry level hot dog. Now, because of that we might get some first indication or data that we want to re-price some of them, so for example the 4.49, our premium organic hot dog right now, is actually 50 cents below Frankie, so that might be an opportunity. Our traditional top line hot dogs are kind of priced above Dawg Day. So here you might think that we have to lower it to capture more volume, and therefore, be ultimately more profitable, or maybe not. To be decided. Lastly, emphasizing the need to defend our unique price positions with the 2.59 and the 3.49 hot dogs. You must assume that Frankies and Dawg Day do the same analysis. And they will pretty quickly discovered that we have this 2.59 offering, they might bring out something else. And we should start thinking now of what we will do once that happens. I really like using the price ladder, it's a powerful tool to analyze the price structure of a client. Let's recap. There are really three things I want you to take away. The price that it helps you to understand what's the relationship between price and features? And when you look for opportunities you should ask yourself, does the client's view really match with the market's view on what the value is of each of the features? So in our hot dog example, we charge 50 cents for the cheese as an add-on, is this the willingness to pay in the market? Should it be 60? Should it be 40? The second point is it helps you to visualize the price gaps between competitors. And here the opportunities usually are by looking at. Are our steps in the price leader too wide or too steep? And do we need to adjust our offering to smooth it out? And as a very last point, I didn't talk about it in the hot dog example but when I would be doing this for a client, I would most definitely also look into the cost. Not only plotting the price but also the cost. And by comparing the two shapes you can usually see whether there is too much of a reliance cost plus pricing or whether there is already some customer value-based pricing in place.
