A modern-day consumer has multiple options to choose from the competitive market. Innovations brought about by a brand is being easily imitated, and the level of product differentiation is declining. Companies these days are battling out on the price front with competitive pricing, seasonal discounts, promotional coupons, and flexible financing. However, competing on the price directly affects the revenue, so companies should look at different avenues to maximize revenues from pricing.
Organizations have a large repository of data available to them including historical price and sales figure, price and demand fluctuations, seasonal demands, consumption patterns, and price sensitivity data. The problem arises when companies do not have the necessary time, resources, or expertise to materialize the data into strategic decisions. Pricing analytics assists the company in making effective pricing decisions to increase the profit margin; thus, contributing to the ROI.
Optimal Attainable Pricing
With the help of historical data, price sensitivity data, and consumer behavior data the price point of each product could be dynamically set to attain the best price possible. Budget airlines have been using pricing analytics and big data analytics to increase the revenue from each passenger by dynamically changing ticket prices every minute. For instance, the analytics tool can identify that historically there has been a surge in the demand on a particular date, and increase the ticket prices accordingly. When the seat remains unsold, the tool will automatically analyze the demand and reduce ticket prices to ensure sales.
Companies can get valuable insights on their historical promotional efficiency and make adjustments to their new promotional campaigns. Pricing analytics tools are so complex that it can test out the effect of promotions on the demand on a smaller scale. Then, by running the predictive analytics tools, it can automatically provide promotional offers for a price-sensitive segment and roll out premium promotions for value-seeking customers.
New Product Pricing
The problem with new product pricing is that if the product price is too high, it won’t sell and if the price is too low, companies lose out on revenue opportunities. Companies rely on traditional methods of pricing by taking into consideration prices of similar products and pricing it lower than those products. Using pricing analytics, companies can set the best price point for the new product in order to maximize revenues and employ a better price skimming strategy.
For expert advice on implementation of pricing analytics: