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Showing posts from December, 2016

WTP: A Very Important Business Abbreviation

Did you know the most profitable car of sports car maker Porsche is actually its family friendly SUV Cayenne? Wait what! How? Enter building to Customer's Willingness to Pay (WTP).



In a FirstRound.com postMadhavan Ramanujam, Simon-Kucher & Partners, shares the story of Porsche's counter-intuitive move in the mid 1990s.
In the mid 1990s Porsche's annual sales were a third of what they’d been the decade earlier when it almost died. The company badly needed a turnaround.  So Porsche "designed the car around what customers needed, valued and were willing to pay for – in short, around its price. All the items customers weren’t willing to pay for, like Porsche’s famous six-speed racing transmission, were thrown out, even if their engineers loved them." In contrast Fiat Chrysler, which was also looking for a hit, "focused its development process on engineering and design, settling on a price for the car at the very end.  Market performance was a disaster. It p…