Now that you understand the idea of the value map, I'd like to show you a real world example how to actually use it as an analytical tool to analyze price relationships for within a company or across companies. And I picked SD flash memory cards. You all know them from your digital cameras or the smaller versions from your phones and tablets. We look at two particular players here. SanDisk, they are actually one of the market leaders, in fact, they established the standard, the SD flash card standard together with Toshiba and Panasonic in the late 90s. And PNY who only recently entered the consumer market with their SD flash memory cards. The reason why I picked the SD cards is, once you compare a particular set of cards with the same speed rating, the customer value is really easily measured and expressed in the size of the cards. So I replaced here on the y-axis the customer value with gigabytes. And they go in 32, 64, 128, and so on, sizes. And the y-axis is the price. So in April 2015, SanDisk was pricing on Amazon.com like this. The 32 gigabyte card was going for $45, 64 for $75. And from then onwards, basically, the price doubled as the size of the card doubled. And therefore, you can draw this line here, which really represents kind of SanDisk's fair value line. Now, in May 2015, PNY started listing their cards. And they priced their cards a lot below SanDisk's. They roughly charged 40% for the 256 card of the 300, at 120. They went a little bit higher on the 128 cards with $70. And $400 for the 512 GB card. So their line is really more of a slope, which is already interesting that they kind of charge a higher rate here for the biggest ones, who's probably targeting semi-professional users. Now, there's another interesting thing. PNY chose to price their cards so much in the customer value surplus area that they in fact corrupted the price letter. The 256 GB card is priced below SanDisk's 128 card, so for the consumer, it's really is a no brainer to say, hm, I'm paying less and get twice the size, sure, I'd do that. So no surprise, SanDisk didn't wait long to adjust their prices. And for memory cards, or for semiconductors in general, prices are very fluid, because there's a lot of innovation going on and chips get more powerful, so we have quickly outdated products. So there is a general theme of fast price erosion. But nevertheless, in this example here, SanDisk decided to lower their prices in the range of 20 to 30%. And basically reinstalled the price logic here for the 128 cards at $100. Therefore, it's priced lower than the 256 cards from PNY, which makes a lot of sense. Now, PNY, again, lowered their prices, again trying to kind of match the next size up logic where the 256 card is now the same price as the 128 card. Again, creating a lot of customer value for those who don't care too much about the brand. This goes on for a couple of more cycles. And about mid-2016, the prices seem to have stabilized for a couple of months in a row at these levels here. Overall, you will notice there's a new scaling here on the x-axis. Prices continue to come down. But PNY kind of sells now in the 60 to 70% range of SanDisk, where there is a letter actually between the two different sizes, between the brands, and also a logic for each of the price letters within the brands. So what's kind of the takeaway here? I used this example to show you how to use it to track prices, price moves from different competitors for a product lineup. And in this story here, PNY started selling their high speed cards at less than half of SanDisk's price, therefore creating a significant value surplus for the customer, and PNY really tries to price the next-size-up below SanDisk. SanDisk responds with quick price reductions, and this dynamic almost resembles a price war. But over time, the prices stabilize where everyone is in a spot where their price logic makes sense from a letter perspective. But the overall market price level came down a lot in the meantime.
