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Pricing can be a very challenging issue for product and service providers seeking to maximize the value of their market potential. Dynamic variables exist that have to be considered including current trends, customer demands, and the competitive dynamic. Our clients wrestle with these challenges every day, and with the help of The Shpigler Group we have helped clients figure out the ‘sweet spot’ when determining the value maximizing market acceptance point for their products and services.

An electric utility client of The Shpigler Group had recently decided to pursue a strategy involving selling access to their pre-existing fiber. Our client recognized the opportunity to leverage synergies involving assets, operations, and finances to create opportunities for value enhancement.

Despite the market potential, the history of the market had shown a number of high profile failures throughout the telecom industry, resulting in significant consternation within the sector. Many of these players pursued an over-aggressive ‘land-grab’ strategy in an attempt to capture maximum value. Some players found operational issues impossible to overcome and were unable to realize their objectives. Meanwhile, others were unable to capitalize on their plans due to the inability to properly address the highly competitive market and secure sustainable revenue.

The first step was to find out what competing providers were charging their customers and what the market might bear. With many entrants in the sector, our client needed to differentiate themselves in terms of service and price points. Additional research was performed to see what pricing concessions might have to be made to secure a longer term agreement with potential "anchor tenants".

First, a compete analysis phase to evaluate the market potential was conducted. A bottom-up analysis of the expected market demand for fiber-based services was conducted and used to determine the size of the market that fiber providers would compete for. A computer-based pricing model was developed that quantified the market impacts of different pricing positions through a process of game theory simulations.

Problem Solved
After reviewing the results of the research and analysis work, we arrived at a two-tier pricing strategy. Prices for different classes of service were developed with a split-level pricing approach to account for the differences of competitive vs. non-competitive regions. Overall terms and conditions were developed to match or beat competitive offers.

With The Shpigler Group’s assistance, our client successfully entered the fiber market. A number of long-term contracts were gained, resulting in a healthy addition to the company’s bottom line. In addition, two newly acquired customers entered into a construction contract for the development of wireless systems that provided further revenue opportunities.

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