Pricer’s Points: Pricing Optimization – The business practice most managers love to hate | Gregory Grzegorzyk

This is the direction of pricing optimization. It’s not that sales executives, marketing promotion managers, sales operations, and merchandising people are idiots. It’s just that the process has become so complex and the competition so smart, that it’s imperative companies apply advanced analytic science to solving the multidimensional challenge of setting the right price, for every customer segment, across every geography, for any sales cycle, relative to the sunset and/or launch or new products and services. To do that requires a variety of techniques which I will briefly describe in terms anyone can understand, even your EVP of sales :)

This list isn’t exhaustive, but it’s representative of some of the techniques I have found very powerful for systematizing and automating pricing optimization to maximum advantage.

The ideal approach in steps

We start by interviewing our client’s key sponsor to get their views on their product and service line. Prior to this meeting, we’ve already researched your company, competitors, and market dynamics, from your employee reviews on glassdoor to your customers’ product reviews, as well as Hoovers and dozens of other sources. So when we meet with you, we already have a reasonably clear picture. In this interview we get your perspective on your perceived strengths, weaknesses, and challenges. We learn about your success stories and will build on those.

In subsequent client meetings, we expand participation to include other key business managers who are either impacted by or have an influence on product and service pricing. From these interviews, we develop a radar chart as a type of gap analysis on how different groups perceive your company’s performance on various KPIs related to pricing optimization. This often reveals areas where departments are very aligned in their thinking or quite disconnected. One goal of our pricing optimization practice is create greater alignment between groups, and rules of engagement and deployment, so that even if a few gaps remain, at least everyone understands what those are and what that means, to avoid potential conflicts moving forward.

We make connections with your pricing team, as well as the members on your team responsible for various data and system domains that are connected to pricing in any way, most often ERP systems like SAP or Oracle, CRM/SFA tools such as Salesforce.com, and even your marketing suite experts for Eloqua, Marketo, or Adobe Campaign. We do a deep dive into the structure of your data, and the cycle of input to conversion to output. As part of our analytics, we focus on understanding the metadata (data about your data) and your unique architecture and process flow. This will include product hierarchies and attributes. In some systems, a single order can contain hundreds of products and service line items at the SKU level, and it’s not uncommon to have associated tables that reveal quotations on prices changing dynamically or manually as negotiations take place daily between your sales team and your customers on a quote. These dynamics are key to our scientific approach to creating predictive models for pricing optimization.

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Pricing Optimization – The business practice most managers love to hate | Gregory Grzegorzyk.