Pricing Analytics Engagement Helps an Industrial Parts Manufacturer to Minimize Raw Material Cost and Optimize Product Pricing

What You’ll Find in this Case Study:

• Industry Overview
• Manufacturing Pricing Analytics Business Challenge
• Our Approach
• Manufacturing Pricing Analytics Solution Benefits
• Manufacturing Pricing Analytics Solution Predictive Insights

Industry Overview

Over the years, the effective pricing of products and goods has become a major concern for organizations, especially for key players in the manufacturing industries. Therefore, to sustain themselves in the competitive environment and meet the right target customers, manufacturing industries across the globe have started leveraging price analysis solutions. Price analysis solutions help manufacturing industries assess customer behavior, preferences, and accordingly set pricing standards. Moreover, the price analysis solutions help manufacturing industries estimate the impact of pricing on sales volume and comprehend the price differentials across markets.

Quantzigs price analysis solutions assist clients in the manufacturing industries to predict the position of the products against their competitors. Also, the client can effectively estimate price-change triggers based on customer behavior to maximize profitability and revenue. Furthermore, the price analysis solution offered by Quantzig also helps clients to assess the pricing patterns based on geography.

Uses of pricing analytics

1. Retail Industry:

– Dynamic Pricing: Retailers use pricing analytics to dynamically adjust prices based on factors such as demand, competition, and inventory levels.

– Promotion Effectiveness: Analyzing the impact of promotions and discounts on sales and profitability helps retailers optimize their promotional strategies.

– Customer Segmentation: Segmenting customers based on purchasing behavior and price sensitivity allows retailers to tailor pricing strategies to different customer segments.

– Price Elasticity: Analyzing price elasticity helps retailers understand how changes in prices affect demand for their products.

2. E-commerce:

– Personalized Pricing: E-commerce companies use pricing analytics to personalize prices for individual customers based on their browsing history, purchase behavior, and demographic information.

– Competitive Pricing: Analyzing competitors’ pricing strategies helps e-commerce companies adjust their prices to remain competitive in the market.

– Abandoned Cart Analysis: Analyzing the pricing factors that lead to cart abandonment helps e-commerce companies optimize pricing to reduce abandonment rates and improve conversion rates.

– Price Optimization: Using pricing analytics algorithms and machine learning models to optimize prices for maximum revenue and profitability.

3. Hospitality and Travel Industry:

– Revenue Management: Hotels and airlines use pricing analytics for revenue management, dynamically adjusting prices based on factors such as demand, booking trends, and seasonality.

– Demand Forecasting: Analyzing historical booking data helps hospitality and travel companies forecast demand accurately and set optimal prices.

– Segmentation Pricing: Segmenting customers based on factors such as booking patterns, travel preferences, and loyalty status allows companies to offer targeted pricing and promotions.

4. Financial Services:

– Insurance Pricing: Insurance companies use pricing analytics to assess risk factors and determine premiums for insurance policies.

– Loan Pricing: Financial institutions use pricing analytics to determine interest rates for loans based on factors such as creditworthiness, market conditions, and risk assessment models.

– Investment Pricing: Investment firms use pricing analytics to evaluate the pricing of financial instruments such as stocks, bonds, and derivatives based on market trends, risk factors, and valuation models.

5. Manufacturing and B2B Industries:

– Cost-Based Pricing: Manufacturers and B2B companies use pricing analytics to determine prices based on production costs, overhead expenses, and desired profit margins.

– Price Negotiation: Analyzing customer negotiations and pricing trends helps companies optimize pricing strategies for B2B sales and contracts.

– Volume-Based Pricing: Offering volume discounts and pricing incentives based on order quantities helps manufacturers and B2B companies encourage larger purchases and customer loyalty.

In summary, pricing analytics plays a crucial role in various businesses across industries, helping companies optimize prices, maximize profits, and stay competitive in the market. Key keywords include dynamic pricing, personalized pricing, revenue management, demand forecasting, cost-based pricing, and price optimization.

To find out how pricing analytics helps manufacturing companies to develop profitable strategies,

Manufacturing Pricing Analytics Business Challenge

The leading industrial parts manufacturer faced several challenges in their sourcing and pricing strategies, as well as in managing their complex engineering product portfolio. To address these challenges and achieve their objectives, they could benefit from leveraging advanced analytics and adopting a comprehensive pricing optimization approach. Here’s a breakdown of how they can utilize various techniques and strategies:

1. Global Sourcing Optimization:

– Utilize advanced analytics to identify the most cost-effective sources for raw materials across different geographies.

– Implement a systematic approach to assess and compare supplier performance, including factors like quality, reliability, and cost.

2. Process Performance Improvement:

– Implement analytics-driven insights to optimize manufacturing processes and enhance operational efficiency.

– Utilize data analytics to identify bottlenecks and areas for improvement in the production process.

3. Complex Product Portfolio Management:

– Use analytics to analyze customer demand and identify which engineering products are most profitable.

– Employ techniques like conjoint analysis to understand customer preferences and prioritize product features accordingly.

– Implement segmentation strategies to tailor pricing and product offerings to different customer segments.

4. Competitive Bidding and Pricing Strategies:

– Analyze historical pricing data and market trends to develop pricing models that account for price elasticities and competitive dynamics.

– Implement segmented pricing strategies based on customer segments, product features, and market demand.

– Utilize analytics to determine optimal price points and price brackets for different products.

5. New Product Development:

– Use analytics to assess market demand and identify gaps or opportunities for new products.

– Employ conjoint analysis and other techniques to determine the optimal features and pricing for new products.

6. Collaboration with Analytics Partners:

– Collaborate with analytics partners or consultants with expertise in manufacturing analytics and pricing optimization.

– Leverage external expertise to enhance analytical maturity and develop customized solutions tailored to the company’s specific needs.

7. Fair Price Considerations:

– Incorporate the “Fair Price Think Twice” concept, considering both cost efficiencies and fair pricing principles in sourcing and pricing decisions.

– Use analytics to evaluate the impact of pricing decisions on customer perceptions of fairness and value.

By leveraging analytics-driven insights and adopting advanced pricing optimization techniques, the industrial parts manufacturer can optimize their sourcing, pricing, and product strategies to maximize margins, improve competitiveness, and drive profitability.

Our Approach

To cater to the clients detailed category requirements, Quantzigs team of price analysis experts built a dashboard and identified the required variables from the supply chain, finance, and marketing data marts. They also analyzed primary and secondary processes to understand the number of features of each product, processing time, and raw material costs. Additionally, the price analysis experts compared and analyzed the cost behavior of various products in terms of process, equipment, overheads, and production volumes using statistical graphs.

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Manufacturing Pricing Analytics Solution Benefits

Based on their business requirements, the client collaborated with the Quantzig team to develop a solution to improve marketing strategies, price points, enhance product features, and offer customer feedback. The price analysis solution helped the client identify viable alternate materials based on costs to optimize the pricing and make necessary trade-offs wherever possible. Additionally, the client was able to identify the key cost drivers in the early stages of the products lifecycle. This helped in minimizing the total costs by 11% and increase profit margins by 6% for the producer.

Manufacturing Pricing Analytics Solution Predictive Insights

• Gain better insight into the cost drivers of products
• Determine optimal price gaps with respect to competitor products
• Identify the impact of discounted prices on the sales
• Leverage the relative price points in the portfolio