Although big data and analytics have become routine phrases for modern businesses, most companies fail miserably when it comes to identifying practical uses for the plethora of data that they possess. Effectively leveraging the data that companies already own can help them quickly identify potential areas to adjust pricing strategies and capture opportunities. Without uncovering and acting upon the opportunities, several companies are leaving millions of dollars of profit on the table. This is where the role of pricing analytics comes into the picture. Pricing analytics enables companies, across all industries, to dramatically improve profitability & market share by defining optimal prices and pricing strategies. Pricing analytics leverages data to understand what drives the customers’ buying decisions and integrates this knowledge to meet the company’s pricing needs. Here is how deploying pricing analytics for your business will work to your advantage in the long run:
Identifying Pricing Opportunities
Utilizing pricing analytics tools often allows companies to uncover “quick wins,” or extra revenue and margin that can be generated over a short period by fixing the most obvious cases of price misalignment or leakages. Furthermore, by using pricing analytics, companies can correctly identify the pricing strategies that need to be adopted and the ones that need to be eliminated. Beyond the extra bucks generated in the short term, the quick wins are very often the first building block of a longer-term effort to realign prices and increase margins.
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Planning Pricing Strategies and Promotions
Planning and implementing pricing strategies that meet the overall business goals is highly crucial for a firm. Companies have to monitor the market closely and anticipate the impact of a price change or a promotional campaign. Pricing analytics solutions help them to correctly estimate the most feasible pricing strategies that would result in better returns. The right pricing analytics solutions also provide valuable information to businesses to plan their promotions within the budgets allocated.
Improves Operational Efficiency
Companies often face problems in understanding how to negotiate a price with logistic partners and pricing of resellers based on performance. Pricing analytics tools use data to identify the best prices and quotes that will help maximize ROI and profit margins. Pricing analytics solutions such as contract pricing, sale through pricing, and capacity curve based pricing help in overcoming such issues.
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Getting Stakeholders to Buy into the Pricing Strategies
Generally speaking, this need applies to all companies, regardless of their industry, size or the degree of sophistication of their pricing strategy. As every pricing manager knows too well, getting all the internal stakeholders (whether from sales, marketing, finance or even production) to agree upon the pricing strategy and execute it accordingly can prove to be a significant challenge. The very fact of backing the approach itself with “cold hard facts” and robust analysis of the data can facilitate this process and get approval from the various stakeholders easily.
Some companies implement full-fledged profit optimization tools by building upon the predictive pricing models they use to manage their prices and promotions. However, it should be noted that the shift from being able to predict what will happen to actually optimizing pricing is far from being straightforward. Businesses that successfully manage the change typically have sound pricing strategies in place for several years and at the same time excel at execution.