Capabilities 

Pricing Strategy

Pricing strategy is the foundation for Pricing and Revenue Management decisions

Overview

Pricing strategies should:

• Be aligned with the corporate value proposition, customer needs, and product offering
• Be clearly defined and easily executable
• Be consistent across the segment or channel

Pricing strategies should not:

• Be based on vague corporate goals such as "maximize revenue" or "grow share"
• Be defined relative to your competitive positioning, i.e. priced "just above" or "just below" Competitor X
• Be overly complex, with too many rules and exceptions to manage effectively

Key Questions

 

• What are our current pricing strategies and how were they formulated?
• How do they support corporate objectives?
• Do they drive financial performance and brand positioning?
• Does the field sales organization understand the rationale underlying our pricing strategies? Are they bought-in to the strategies?
• Who is responsible for maintaining and measuring the impact of current pricing strategies?

Pricing Tactics

Pricing tactics are the processes and practices used to ensure consistent execution of pricing actions

Overview

Key principles for pricing tactics:

• Ensure prices and discounts are always in alignment with overarching strategies
• Account for future demand, customer responsiveness to price and competition
• Communicate and distribute prices in a consistent and understandable manner
• Ensure flexibility in processes to account for market changes

Key Questions

• How frequently do price exceptions occur?
• What are we doing to ensure that our pricing tactics are more proactive than reactive?
• Who is responsible for enforcing alignment between pricing strategies and tactics?
• How do we account for competitive pricing actions on a consistent basis?
• Do our prices vary by market segment, allowing us to simultaneously grow margin and market share?

Analytics & Optimization

Analytics and optimization brings science and sophistication to Pricing and Revenue Management decision making

Overview

Key principles of analytics and optimization:

• Understand business requirements and objectives
• Know that the theoretical optimal is not always business optimal
• Iterate alternative approaches to evaluate best fit for business model
• Understand that the model is only as strong as its weakest input
• Create tools and algorithms that can easily be scaled and modified going forward

Key Questions

• Do we have analytical tools that can help us make informed tradeoff decisions between margin and volume?
• Can we predict the precise uplift expected from a promotion or price change?
• Can we measure market responsiveness to price? By segment? By channel?
• Do we know the optimal way to allocate our inventory? By segment? By channel?
• Is our business ready to adopt optimal recommendations?

Organization & Governance

Pricing organization and governance is the enabler for execution, education and evaluation of Pricing and Revenue Management capabilities

Overview

Key principles of a Pricing and Revenue Management organization:

• The right organizational framework ensures consistent communication across functional groups and provides feedback loops on pricing actions and impact
• Pricing and Revenue Management responsibilities must be clearly owned by a specific group within the organization; ambiguous ownership leads to lost pricing opportunities and lost revenue / margin
• Sales force compensation alignment to pricing objectives is paramount
• Involving senior leadership in the development of pricing strategies is considered a best practice

Key Questions

• Who in the organization has ownership over pricing and Revenue Management?
• How much true business integration is there between other functional groups (Finance, Marketing, Sales) and Pricing and Revenue Management?
• Is sales force compensation aligned with the pricing strategy?
• How extensive is the communication and buy-in for pricing strategies and new pricing initiatives?
• Does foundational training on pricing and Revenue Management best practices currently exist in the organization?

Technology & Data

Technology and data facilitate rapid decision-making and automation of Pricing and Revenue Management actions across the enterprise

Overview

Key principles of technology & data:

• Leverage all existing data sources – POS / transactions / invoices, competitive, CRM, etc. – to make more informed pricing and Revenue Management decisions
• Data preparation for analysis often requires the combining of disparate data sources and rigorous data cleansing
• Implementing new Revenue Management capabilities can easily be done by leveraging existing systems and tools – i.e., BI tools, CRM, ERP systems, etc.
• Automation of core pricing capabilities allows more time for strategic decision making and ensures consistency in decision making

Key Questions

• Do we have the capability to dynamically change prices as market factors shift?
• Is all of our transaction, product, customer and competitive data mapped together or does it reside in disparate databases?
• What competitive data is available to us? How is it leveraged for making better pricing decisions?
• Are manual process steps required to perform pricing analysis, comparisons and/or execution?
• Are our pricing changes systematically tracked in our data? Is the performance of these changes systematically tracked?