At Revenue Analytics, we partner with our clients to understand their business problems and develop solutions that increase revenue and profit margin. We help clients create and enhance Pricing and Revenue Management programs. By honing their Revenue Management capabilities, our clients improve decisions related to pricing, discounting, promotions, demand forecasting methods and inventory allocation.
Over the past 25 years, Revenue Analytics’ principals have developed a highly effective and efficient three step methodology for building Revenue Management capabilities.
- Revenue Diagnostic
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Many companies believe that they are leaving money on the table in their pricing and discounting decisions, but don’t have good visibility into where the problems lie. Moreover, they aren’t certain how much benefit enhanced analytics could provide. In this quick-hitting project, we rapidly assess client’s current Pricing and Revenue Management strengths, weaknesses, opportunities and critical needs. Key components of the 3-week project include:
- Identification of problems and opportunities
- Immediate and near-term recommendations on actions to address problems and opportunities
- Quantification of benefits for each recommendation
- Revenue ScorecardTM that plots organizational strengths and weaknesses in pricing, discounting, promotions, demand forecasting and inventory allocation
- Revenue Management Performance Assessment
For companies adept at practicing Revenue Management, a critical question is where can these practices be enhanced, and what new capabilities would have the most significant impact? We perform a rapid evaluation of the performance of Pricing and Revenue Management systems and business processes, and identify problems and opportunities for improvement. Using data analysis and business process evaluation, we focus on areas such as:
- Demand forecasting and unconstraining
- Optimization of inventory controls
- User interaction with systems
- Price elasticity modeling
- Decision processes relating to pricing, discounting and overbooking
- Effective practice of Revenue Management across various sales channels
- Benefit measurement and performance monitoring
- Discounts & Promotional Effectiveness Analysis
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Most companies would agree with the old adage that 50% of promotional spending is wasted… but we don’t know which 50%. In this quick project, we utilize statistical modeling to measure the effectiveness of promotions at a granular level. We work with the client to develop recommendations for improved targeting of promotions. Key project objectives include:
- Identifying strong and weak response to promotions by product / market / channel / customer segment
- Accounting for potential cannibalization and channel migration
- Identifying and addressing business process and execution short-falls
- Creating a roadmap for targeting discounts and promotions to the most responsive market segments
- Evaluation of Business Intelligence Opportunities
The Internet has made competitive data more available and extensive. Many companies capture competitive data, but analysis is often manual or ad hoc. We assess available competitive data and identify opportunities to systematically use this data to increase revenue. Potential uses to explore include:
- Integrating competitive data into market response models to improve pricing decisions
- Using competitive data to improve forecasting and demand planning
- Predicting competitor responses to pricing and discounting actions
- Price Waterfall Assessment
Many firms with decentralized pricing processes, complex discounts / terms and/or a significant cost-to-serve experience significant revenue leakage. Capturing this lost revenue drops straight to the bottom line. We collaborate with clients to conduct a tactical pricing and cost-to-serve analysis that provides deep insights into actual customer margins. Key components of the project include:
- Identification of, and recommendations to control, key revenue leakage elements (cost-to-serve), including:
- Rebates, unearned discounts, extended payment terms, late payments, shipping, special packaging, etc.
- Detailed pocket price analysis leading to profitability segmentation by customer, size or sales segment
- Price band analysis to quantify the variability of transaction prices and identify the underlying drivers
- Customer Segmentation
Revenue Management concepts challenge traditional segmentation schemes based on regions and products. Although these approaches are useful for financial reporting, they often do not help describe customer behavior. We apply sophisticated statistical analysis, to create a customer segmentation methodology based on customer buying behavior. Clients leverage this methodology to create targeted products or discounts, develop price strategies and allocate inventory to their most responsive customers.
Solution design process includes:
- Utilizing historical demand data to analyze customer behavior patterns and group customers accordingly
- Performing correlation analysis to identify commonly held traits among customer groups
- Developing business process and methodology for putting new customers into the appropriate segment
- Creating strategy for targeting product offerings, price points and discounts to unique customer segments
- Demand Forecast Design
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Forecasting is the bedrock on which successful Pricing and Revenue Management programs are built. We partner with clients who wish to evolve from demand planning based on sales estimates to a robust forecasting capability that predicts demand at a granular level, by product and by market. Factors that could be considered include:
- Seasonality
- Trends
- Product Lifecycle
- B2B and retail demand models
- Market Response Modeling
For the vast majority of companies, predicting how customers will respond to price points, discounts or promotions is educated guesswork. By conducting statistical analysis at a granular level, we develop market response models predict how customers will respond to offers. We leverage historic sales data, product data, competitive data, customer data and other available data sources. By combining analysis of these data with insights from interviews and observations, we develop market response models. Finally, we work with the client to identify ways to incorporate these models into decision processes.
Market response modeling can be used to:
- Provide insights into customer segmentation and learnings on customer behavior patterns
- Improve existing pricing models
- Predict responsiveness to various price points and discount levels
- Generate pricing and discount recommendations
- Enhance pricing strategy
- Provide a basis for measuring pricing performance
- Price Tolerance
Manufacturers and distributors are often faced with the daunting task of pricing thousands, even hundreds of thousands of products. Many are interested in Revenue Management and Price Optimization, but are concerned that an “optimization” model won’t fit their business.
Our price tolerance measurement techniques help clients discover the products for which a price premium will be effective, and those for which discounting can stimulate demand. We work jointly with clients to design a capability to measure price tolerance at the individual product level. We design price tolerance ratings and reports that communicate price responsiveness to decision makers in a concise, transparent fashion. Most importantly, we develop a business process to use tolerance ratings to identify pricing errors, make pricing changes and predict the impact of pricing / discounting decisions.
Solution design process includes:
- Data analytics and modeling to measure price responsiveness, while accounting for the impact of non-price demand drivers such as seasonality and product lifecycle
- Business interviews and working sessions to define policy and procedures for utilizing price tolerance capability
- Plan of action for implementation and ongoing performance measurement
- Retail Price Optimization
With thousands of products, and the diverse preferences of individual consumers, companies selling through retail channels struggle to determine pricing that maximizes contribution. Understanding price responsiveness by micro–market segment and cross-product interactions are keys to improving pricing and profitability. We partner with clients to design custom price optimization models and improved pricing business processes. We focus on developing a sophisticated approach to modeling that results in clear, actionable recommendations.
Solution design process includes:
- Transactional data analysis to build market response models for multiple products / markets
- Comprehensive interview process to identify challenges and constraints, generate visibility and build consensus, and lay a foundation for success
- Business process re-design to facilitate sustained acceptance
- Rigorous quantification of benefits at the product / market level of detail
- Creating a detailed implementation and training plan
- Negotiated Deal Price Optimization
B2B pricing is a unique challenge. Each decision has a significant impact. Losing a bid, or winning at the wrong price, can mean the difference between a profitable quarter and one that misses the mark. We partner with clients to develop market response models for various customer segments and an implementation plan for providing decision support tools to the sales force. We help clients leverage their CRM data to model customer behavior and predict win probability and volume based on a particular bid. But ultimate success depends on the ability to develop both a sophisticated approach to modeling and clear, actionable recommendations for the sales force.
Solution design process includes:
- Transactional data analysis to build market response models for multiple products / markets / customer segments
- Comprehensive interview process to identify challenges and constraints, generate visibility and buy-in, and lay a foundation for success
- Collaboration with sales force to design a business process that will lead to improved pricing decisions
- Rigorous quantification of benefits at the product / market level of detail
- Markdown Optimization
Markdowns are a common approach to address end-of-lifecycle products and clear the supply chain for new products, particularly in retail. We work with our clients to develop targeted markdown strategies that achieve high turn rates and high profits. These strategies are driven by statistical analysis to understand responsiveness to markdowns at a granular level.
Solution design process includes:
- Transactional data analysis to build market response models for multiple products / micro markets / and incentive types
- Lifecycle models updated based on sales velocity at a product/ micro market level, with proxies for new products
- Integration with demand forecasting and supply chain planning
- Lifecycle Management
Forecasting models that incorporate seasonality and trend are often not sufficient to predict demand. For industries such as consumer goods, fashion, retail, service parts and technology, incorporating product life cycle models is critical. We partner with clients to identify product lifecycle stages and develop strategies to maximize revenues throughout the entire product lifecycle.
Solution design process includes:
- Using historical data create product lifecycle curves
- Developing a methodology for forecasting new product lifecycles
- Designing pricing, discounting and inventory strategies for various lifecycle stages
- Pricing Performance Measurement
The key to sustaining Pricing and Revenue Management success is an ongoing performance measurement capability and a drive for continuous improvement. We develop performance measurement capabilities that reliably track performance while providing deep insights for continuous improvement.
Key factors in successfully designing a Pricing Performance Measurement program include:
- Defining key performance metrics / KPIs for management
- Developing pricing performance models that measure the proportion of total revenue opportunity achieved, to estimate how much money is being left the table
- Designing exception reports to quickly identify pricing and discounting errors and opportunities
- Creating business processes that use performance measurement to drive change and investment
- Demand Forecasting Implementation
Forecasting is the foundation of all business planning, and Revenue Management is no exception. We partner with clients to develop robust forecasting models that predict demand at a granular level, by product and by market. A successful implementation must address:
- Decisions to be supported by forecasting model
- Pricing / Discounting / Inventory / Channel Allocation
- Decision-maker interaction with the forecast
- Forecast accuracy measurement and improvement processes
- Price Tolerance Implementation
A price tolerance solution can help you manage portfolios of thousands, even hundreds of thousands of products, uncovering opportunities to take price and opportunities to grow profitable volume by discounting. We partner with clients to develop and implement a price tolerance measurement methodology, and to update the pricing business process to incorporate price tolerance. We collaborate with the client on:
- Design of new business processes
- Measuring price tolerance
- Monitoring product portfolio for problems and opportunities
- Incorporating price tolerance into pricing decision process
- Development of software to perform analytics to measure price responsiveness and produce reports and recommendations for decision makers
- Communication with the organization to build consensus, identify issues and facilitate acceptance
- Retail Price Optimization Implementation
Creating a retail price optimization capability requires sophisticated models that predict customer response to display, promotional, discount and price offerings at a micro market level. Creating a sustainable capability requires transparent price recommendations and decision support information, and enhancements to the business process. We partner with clients to design, develop and implement robust price optimization capabilities. We collaborate with the client on:
- Business strategy and process design
- Data analytics and modeling to improve and enhance optimization and performance measurement algorithms
- Development of system / process requirements
- Communication with the organization to build consensus, identify issues and facilitate acceptance
- Negotiated Deal Price Optimization Implementation
In implementing a solution to recommend optimal prices to the sales force, it is critical to have both robust analytics and robust pricing and exceptions management processes. We partner with clients to develop and implement a capability to recommend target price ranges to the sales force based on the attributes of individual deals and customers. We collaborate with the client on:
- Design of business strategy and process
- Data analytics and modeling to maximize the performance of optimization and performance measurement algorithms
- Development of system / process requirements
- Communication with the organization and sales force to build consensus, identify issues and facilitate acceptance
- Revenue Management Group Development
Leveraging our experience in designing Revenue Management organizations for dozens of companies, we help clients create and enhance Revenue Management programs that deliver sustainable results. We know what works and what doesn’t work. We combine our knowledge with our clients’ insights into their own capabilities, organization and culture. We partner to develop a group charged with creating Revenue Management strategies and ensuring consistent, superior execution of those strategies. Key elements of this work include:
- Collaborating with executive team to determine roles, responsibilities, fit within the current organization and success criteria
- Consensus-building throughout the organization to determine priorities, identify “Quick Wins” and ensure new Revenue Management group acceptance
- Designing process flows to smoothly integrate new Revenue Management group operations with current operations
- Pricing Performance Measurement Implementation
Building upon our expertise in performance measurement solution development, we work with our clients’ existing data and reporting infrastructure to implement pricing performance measurement capabilities that provide deep insights and a foundation for decision making. Key elements of this work include:
- Developing and implementing sophisticated, yet robust pricing performance models that measure the proportion of total opportunity achieved, measuring how much money is being left the table
- Systematically generating reports on key performance metrics / KPIs for management
- Systematically generating alerts and exception reports to quickly identify pricing and discounting errors and opportunities
- Business processes development and training to create a culture of performance measurement and information-based decision making
- Outsourced Analytics
We provide clients with an outsourced pricing analytics and Revenue Management department, capable of supporting the sales, marketing and finance functions. We can provide this service for clients at a fraction of the cost of developing and maintaining the capability themselves.
An outsourced analytics department offers:
- Dedicated pricing analysts, with years of pricing and revenue management experience
- A template revenue management process that is then tailored to the client organization’s unique requirements, including daily, weekly, and monthly reporting
- Ongoing training, development and leadership that will not only sustain, but continuously improve the client’s Pricing and Revenue Management process
- A premier Pricing and Revenue Management process at a fraction of the cost most companies can achieve on their own.