Finishing up the competitive price moves, now it's about choosing and executing the best move. Talking about step five, choosing the best possible move to achieve your goal. In this example, we are trying to maximize the revenue for a seven piece dining room set. And there are three steps to it. There is, first of all, you try to find the best move in unconstrained, meaning before any competitor responses. Then you do the war gaming, where you explicitly consider what your competitor might do. And finally, you have all of the pieces together to pick the best price. So in our dining room example, you know that the competitors are priced at around $500. And, now if you go up, it does send a certain signal to the market, and going up is usually not seen as a price threat. Going down, however, is, and the steeper you go the more serious it is seen as a threat. You need to calculate the likely outcome for your business for those scenarios. So, it's indexed, meaning it's indexed to the highest level. So the most profit is made if the price were at $500 and the highest sales, what we are solving for, would be at the this $50 price reduction. But now it gets interesting because you have to think about what price signal are you sending to the market, therefore, what will your competitors likely do and, as such, what are the implications for you ultimately? And if we threat the competitors strongly, we have to expect in this example a 10% price cut. Now, we can calculate what this 10% price cut does to our profit and our sales. If we find a price that is somewhere in between the 500 and the 450 that is less threatening, we also can expect a milder price response by the competitors. And here, we're expecting a 5% price cut, if we are just in the middle between 500 and 450. And lastly, and that's more like the optimistic case, that there's no price response at all from the competitor. So now we're trying to maximize sales, and in those three examples here, the sales price where we have a mild price response from the competitor, leads to the best outcome. This steep price with a strong price response by comparison is actually never the best option, not for profit not for sales. And having a non threatening price signal with no response, leads to better profits but it's not solving for our goal of lowering sales. Let's finish this up and talk about the execution of the price move and monitoring the outcomes. And I've said already most of the things, so just as a reminder here, after you do the move, you want to update your market map and check, did anything change in terms of shift share? Are the castle is still all the same? Did anything change around the type of the fields? And lastly, verify the competitors actually did what you are trying to do. So here we anticipated a mild prices response, but was this actually true? If it was, then you're on a good track. If it was not, maybe you have learned something to tweak your future modeling. So let's wrap this up. There are a couple of table stakes. You have to know your own business and want to be clear what you want to achieve. But you also have to know your competitors as well as you can. For the war gaming, you have to think through the possible price moves, and what your competitor response might be and how they might be triggered. And select the option with the best end outcome. And lastly, don't forget to follow through. Monitor your competitors carefully and adjust your strategy as needed.
