Dear Broker, here are your updates for this week...

M a r k e t i n g  t i p
Applying your pricing strategy to your lease proposals including TermBuilder tactics
Part two of a two-part series on pricing your lease financing proposals

In part one of this series [view it now] we discussed several leading pricing strategies a brokerage can employ based on its marketing plan. All pricing strategies ultimately seek profit maximization, however the methods of getting there are different. While some pricing strategies depend on volume, others depend on premium pricing, while others rely on the psychological impact of the way pricing is presented.

This second and final part of the pricing series looks at how to implement your prescribed pricing strategy. Pricing involves two major components: monthly payment and amount due up front. Several variables contribute to these components, which are term, residual, rate and of course the amount financed. As a broker, you have direct or indirect influence on the variables. First we'll summarize the pricing strategy, then we'll look at ways to use SunBridge Capital's TermBuilder deal structuring tool to actuate the concept into real-world use including how .

Economy pricing: High volume of fundings aided by ultra-competitive pricing. Price your leases as low as you can while still being profitable.
- Learn the monthly payment and up-front amount of the customer's other financing options
- Avoid any unnecessary expenses tied to the deal like special promotions or enhanced service levels
- In TermBuilder: set commission level just above break-even point, use the maximum term length and residual, use capital cost reductions for up-front money due instead of last payments in advance

Premium pricing: Concede competing on price to allow you to include premium value-added items or services.
- For example, you can include special promotions like the always-popular free fuel card, offer enhanced service levels, pay some transactional expenses, even meet with the applicant while they are signing documents.
- In TermBuilder: maximize commission, use last payments in advance for up-front money due instead of capital cost reductions.

Transactional or cost-based pricing: Price each transaction by adding your desired gross margin to the cost associated with working the deal.
- Assess on a case-by-case basis what the transaction will cost you, both in incremental expenses (such as manpower) and fixed expenses (such as overhead). Once you have that number, add your desired gross margin. The resulting number is the commission you should include in your deal.
- In TermBuilder: adjust your commission to the exact point you determined. Other variables may affect the dollar amount of commissions, so you may need to readjust the number of points you are including as other variables change

Market penetration pricing: Start with low pricing across the board to win as many vendor and end-user relationships as possible. Once those relationships are stabilized, you can begin to increase prices to achieve greater profitability.
- Similar to the premium pricing strategy above, you want to find ways to add value to your product offerings beyond just price; but, you want to set prices low in the beginning more like the economy pricing. The value-added items and services as well as the low prices will help you acquire (penetrate) more of the market. Once you have "flow" business, then begin to increase prices.
- In TermBuilder: at the outset, use the TermBuilder settings as shown above for economy pricing, then move toward the setting for premium pricing once you are earning repeat business.

Cherry-picking: This pricing strategy allows you to only work on the deals that are most profitable to you. It is a reversal of market penetration pricing's mix of economy and premium pricing.
- Earn high commissions on fewer deals while also minimizing expenses. You'll fund fewer deals, but you will be much more profitable overall. Of course, you have to be receiving a strong enough flow of deals that you can afford to let some of them walk in exchange the high-commission deals you do fund.
- In TermBuilder: follow the same settings as shown above for premium pricing

Bundling: Assuming you are going to immediately or in the near-term complete multiple financing transactions for one customer, bundling may be the right pricing strategy to employ. If you assume that earning and managing one customer who completes three transactions is less expensive than three customers each completing one transaction, you can price the bundle of deals accordingly.
- Have the customer commit to the transactions you can complete. Price them as a single package. Charge all or the majority of your commission on first transaction.
- In TermBuilder: If the SunBridge Capital deal is the first deal in the bundle, use the settings above for premium pricing. If it is not the first deal, select the economy settings described above and potentially even less commission.

Value-based pricing: This pricing strategy seeks to set your price point just below the customer's perceived value of your product ("what it is worth").
- Discover the value of your product to the customer through discussion and financial analysis. Set your price point just below that value so your deal is portrayed as a wise financial investment.
- In TermBuilder: Take up-front money as last payments in advance instead of capital cost reductions, maximize term length and residual, then set your commission so that the final pricing is just below the customer value.

Psychological pricing: Pricing to sell to the customer's emotions and perceptions can close more deals. This strategy seeks to put your lease proposal in a position to best meet the customer's perceptions of good pricing.
- Find out the customer's hot buttons: monthly payment, up-front amount, rate, term length, residual/lease type, etc.
- In TermBuilder: Depending on the customer's preferences, you can move from a residual lease to a capital lease, lower payments to just under the customer's monthly payment threshold - like $1,950 a month instead of $2,005 a month, and influence rate to also come in under a threshold. Maximizing the term length, residual and capital cost reduction will decrease the effective rate. You can also use the flexibility in term length and residual to create proposals that are incongruent to competing proposals, or leave you space for further negotiation. For instance, you can set the term length at 56 months and the residual at 15%.

Implementing a price strategy as part of your overall marketing plan is easy with SunBridge Capital's TermBuilder. employ the tactics described above, as well as those in part one of this series to best meet your marketing objectives.

S a m p l e  d e a l  o f  t h e  w e e k
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