Price Optimization Engagement Outcome

The Challenge

In today’s competitive and fast-changing business landscape, an optimal pricing strategy needs to be equally dynamic. In such a scenario, using ‘pricing’ as a strategic lever to improve profitability proved to be challenging for a European energy management and building automation systems manufacturer.

The client needed a comprehensive solution to automatically generate a category-specific prices at scale to meet the evolving demands and skilfully tackle the growing complexities of the operating environment. The manufacturer was alos looking at leveraging price optimization and automating price quoting to better match market conditions and customer expectations. Besides, due to the standard manual processes that they followed for price setting, they were able to analyze only a few price points per product category due to which the quote turnaround time was high. Compounding the client’s challenges were frequent swings in raw material costs including copper, iron, and nickel. As such, keeping up with the commodity cost volatility and recovering losses through pricing turned out to be an arduous task.

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Quantzig’s Approach

Realizing the issue, the manufacturer set out to address this problem by leveraging advanced price optimization techniques. It was clear that they needed a solution that was responsive to all the complex factors involved in calculating their prices and could identify the areas of opportunity to increase margin. Also, they needed a scalable solution that could help them generate market-aligned, customer and deal-specific prices without compromising on accuracy.

To help the client tackle their challenges, we adopted a comprehensive five-step, price optimization based approach that levearged machine learning techniques and predictive algorithms to generate thousands of price segments and produce market-aligned, differentiated prices for each unique product catgeory.

Quantzig’s suite of pricing analytics solutions is comprehensive. Gain limited-time complimentary access to our analytics platform to learn more about the importance of price optimization in the manufacturing sector.

Step 1: Data Pre-Processing

The initial phase of this price optimization engagement focused on improving data quality and data accessibility. Our experts conducted a comprehensive data audit to analyze data sets and system infrastructure to bridge gaps and identify the required transformations.

Step 2: Price Gap Analysis

The second phase of this price optimization study focused on monitoring and analyzing price gaps in real-time. This helped them gauge the effectiveness of the existing pricing strategies and devise new strategies based on the demand for different product categories.

Step 3: Pricing Model Analysis

The price optimization solution enabled the client to review and interact with price models that predict the P&L impacts of various pricing strategies, allowing them to choose the strategy that best aligns with their business goals for revenue and profit maximization.

Step 4: Pricing Model Development

An exhaustive list of factors potentially affecting the quoted prices was created, allowing our team to develop a framework to explore and validate the source data and synthesize an improved predictive pricing model.

Step 5: Simulation and Implementation

A tree-based machine learning model was developed, and results were compared to the algorithms and data used to build and implement a robust pricing model.

In this success story, the price optimization solutions offered tremendously improved the client’s ability to use price as a strategic lever to meet business goals and empowered them to capitalize on the complexity within their business. Laern more about the benefits of price optimization by getting in touch with an expert.

Value Delivered

Quantzig’s price optimization solutions helped the client devise a robust framework to optimize the brand’s pricing strategy by analyzing customer reactions to different price points and price changes. The systematic approach helped unravel new opportunities for improving profits and avoiding price leakages. This resulted in a significant improvement in revenue and profit margins and a measurable reduction in quote turnaround time and authorized price quoting.