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Making More Money from Data | bcg.perspectives

The B2B information-services industry has struggled to rediscover modest, let alone rapid, growth since the onset of the global financial crisis, as banks and other major customers closely watch costs. Many providers have resorted to heavy discounting to maintain volume and cost cutting to preserve margins.

There is a better approach. Pricing is a powerful tool that too few companies deploy to their advantage. It is one of the best ways for a company to grow organically and is especially relevant for products and services under development. Pricing is effective because information services tend to be “sticky.” Once end users start to rely on a specific service, they are reluctant to switch. Try telling Wall Street professionals that they have to give up their Bloomberg terminals or Thomson Reuters Eikon desktops or lawyers that they have to switch from Westlaw to LexisNexis or vice versa, and watch the reaction. If information service providers—and, more generally, companies that sell software as a service—understand the distinct value that different segments of end users derive from their services—in other words, what makes those services sticky—they can price more effectively.

Because the cost of serving a customer is next to nothing, however, providers often discount indiscriminately to win or retain customers. At the extreme, one customer may pay five times more for an identical service than a customer purchasing the same volume. Pricing requires discipline during negotiations and is ultimately about a commercial transformation that rewards value creation. By pricing more effectively, B2B information-service providers can generate revenue gains of between 2 and 8 percent within 18 months. This extra revenue flows straight to the bottom line or can be funneled into new services. Either way, the provider has changed the dynamics of the market and set itself on a new growth trajectory.

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Making More Money from Data.

1 Comment on "Making More Money from Data | bcg.perspectives"

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  1. Rob Niederhoffer says:

    Fantastic article. Thanks for posting!

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