Intelligent management of price structures and levels is the most important point for securing business success. Correct prices bring more profit, but with incorrect price management, companies risk permanent damage. Excellent pricing goes far beyond setting prices for individual products. It is about strategy, targets, positioning, but also controlling and ultimately all processes and tactics of the company that determine individual prices.
The quantitative analysis of net-net prices should be the start of every pricing project. The effective net-net prices must be made transparent, i.e. the prices after deduction of all customer-related discounts and rebates. To understand the current distribution structure, price structures, margins and revenues must be understood in detail. This requires a detailed survey of relevant revenue components per product, customer and distribution partner:
In order to optimally determine the price positioning of the entire assortment, individual product lines and individual items, an accurate information base must be collected. The most important elements are:
Price optimization must then be implemented in detail:
In order to harmonize prices within a region such as Europe, international prices must be managed in a targeted manner. Active international price management can avert a price collapse that could jeopardize the development of new, lower-priced markets.
The target price concept can be created after an analysis of the price drivers, for example with a so-called price cube. After a historical order data analysis (here in the example from the paper industry), segments are formed for product groups, regions and customer ratings.
A price corridor is defined for each constellation of price-determining factors. The result is a transparent price definition with room for negotiation for the sales department.
Another major topic are condition systems for trading partners. These are designed to reward and control value-adding partnerships. An example of a model comparison and control system is presented below.
Within the framework of a price concept, the overall corporate strategy must of course also be taken into account and price positioning must be based on the competitive situation.
The various product components should be based on the price-performance ratio. Price bundling enables price potential to be exploited. Companies should increase performance in areas that are important to the customer and reduce performance in unimportant areas. Conjoint analyses and customer surveys can be used to determine the profiles of the various customer segments.
Pricing guidelines and processes are very important for the successful implementation of pricing concepts:
Organizational requirements for implementing pricing targets in an international context are:
To ensure the success of the implementation of the price concepts, price controlling is important: actual prices and target prices are compared in price deviation analyses for follow-up control.
Price Optimization and Management (POM) software helps companies efficiently manage and optimize prices. More recently, these tools support sales-related decisions, e.g., by providing recommended actions and customer loss alerts. Some vendors focus on back-office price management and product management. Others focus on providing sales reps with real-time sales information. The best tools offer both.
To ensure successful implementation, we recommend long-term support in implementing the new concepts, processes, systems and organization.
Better look at price strategy, price system, instruments, software, processes, organization and sales enablement.
Understanding of initial situation, common definition of goals and methodology. Content Coordination and priorities.
Preparation of the workshop by Digitize!. Moderation by Matthias Kant, follow-up and derivation of the project plan and methodology.
Workshop with all stakeholders: Pricing strategy, correct approach to pricing, hypotheses and expected results, simulation calculation.
