Pricing Strategy

Pricing is a particularly challenging discipline. What, for example, is the trade-off between price and the other value attributes of a product or service? And how do you measure elasticity without noise from other factors that influence demand (such as competitor promotions or discounts)?

To complicate matters, pricing is generally not as well understood as other metrics such as sales and growth. There’s also a cultural tendency in many organizations to emphasize discounts as a selling technique.

On top of that are market-driven differences. Among businesses that target consumers (B2C), for example, the most innovative leaders capture sales by changing prices dynamically according to time, place, channel and customer behavior. But these kinds of price movements can be less effective for businesses that target other businesses (B2B), where customers are fewer, sales cycles are longer and transactions are often quite large. In other words, although price optimization is just as important in both environments, the strategy for implementing it might be altogether different.

How we help

We help you develop strategies for different types of pricing — including pricing to retailers, pricing into channels and industrial pricing — by establishing the links between pricing and the attributes valued by different strategic segments. As part of this, we can:

• Clarify the market and competitive dynamics that affect pricing decisions

• Determine the attributes of a product or service that deliver value

• Determine what goes into the cost of a product or service to ensure that price structures deliver required profit contribution levels

• Model the effect of a given price on profit and/or volume

• Identify improvements in the way prices are set and delivered to the marketplace

• Design a process to consistently enforce pricing policies

• Create processes and incentives to focus the sales force on contract and account profitability

• Match pricing with the value that the customer expects to receive

• Uncover causes of margin leakage by analyzing historical sales data at the transaction level

• Link pricing strategy with product portfolio management

• Develop integrated pricing strategies across channels

• Design analytical tools to sustain improved pricing capabilities for the long-term

Your benefits

• A clearly defined pricing architecture and, where applicable, approach to yield and/or revenue management

• Greater understanding of the value attributes that mitigate sticker shock and should be communicated to each consumer segment

• More repeat transactions and a larger basket size, thanks to sharper range and merchandising strategies

• Optimized margins or market share

• Improved predictability of profit and volume

• Greater insight into transaction, customer, segment and channel profitability