Pricing_Strategic_ImportanceStrategic_Price_ManagementValue_Oriented_PricingB2B_Price_Optimization

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Price Optimization Guide Contents
 
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Statistical Price Optimization: Non-Contracted/Matrix Prices

Our scientific price optimization tools for distributors and manufacturers deliver GM$ lifts of 2%-4% of sales, while improving revenues. We apply deep pricing science, and we leverage our extensive experience with distributor/manufacturer pricing projects, to partner with key individuals from our clients' marketing and sales management teams, to develop highly customized price optimization solutions/algorithms. This transparent, scientific, and collaborative approach helps ensure that resulting price recommendations are scientifically sound, and that they reflect the characteristics of our clients' specific markets and business environments. 

 SIGNS YOU MAY
 BENEFIT FROM
 OPTIMIZATION
  • Excessive/hard-to-control discounting behavior by sales professionals
  • “Price exceptions” and approvals part of the everyday routine
  • System prices disconnected from the market, having low credibility with the sales force/with management
Price_Optimization_arrow_up

 TYPICAL
 UNDERLYING
 ISSUES

Internally-developed Microsoft Excel/Access pricing models often fail to properly manage complexity, particularly in businesses with high SKU/product configuration count, high customer count, many price sensitivity factors (such as customer size, industry, geography, product velocity, price range, application/use, purchase frequency, etc.), and dynamically changing costs and competitive conditions.


We assist distributors and manufacturers with price optimization in the following ways:

1. Commercial Price Optimization Software Selection and Implementation

Our team has first-hand experience across all major price optimization solution vendors in the B2B space. We are prepared to:

  • In the context of an evolving pool of solution providers with varying methodologies, delivery models, and industry focus areas, provide an objective, educated perspective on which tools are likely to be "best fits" in meeting client-specific needs.
  • Help liaise with providers in clarifying business requirements.
  • Provide support in the areas of adoption, change management, and execution systems.

2. In-house Price Optimization Tool Development/Upgrades

We assist distributors and manufacturers with in-house price optimization tool development efforts in different types of situations: 

  • Some clients with only basic Excel/Access tools would like to "graduate" to world-class solutions, while avoiding a commercial software implementation project. We assist such clients with their efforts to configure their own custom-built solutions. 

  • Others have existing pricing analytics dashboarding tools (Oracle, epaCUBE, Profit2, etc.), which they would like to upgrade by way of layering on additional statistical/scientific pricing modules, such as applications to measure price elasticities, and tools to refine segmentation schemes using multivariate regression tools. We assist such clients by adding additional scientific pricing tools that build on their existing pricing analytics investments.

  • Finally, some businesses that use subscription-based, "black box" scientific price optimization tools (such as Zilliant, SPA) eventually develop an interest in bringing statistical pricing capabilities in-house. In addition to avoiding costly annual subscription fees, these clients are also interested in more customization (e.g., in regards to segmentation), which may require them to regain more direct control over their pricing algorithms. We assist such clients with efforts to develop in-house, highly customized, scientific pricing solutions that can successfully replace their prior "black box" analytics platforms and drive incremental improvements in their business.

In the context of building an in-house price optimization capability, we offer clients experience and expertise in the following areas:

  • Select and devise appropriate database infrastructures (cubes, etc.), including underling tasks involving data collection/extraction, data manipulation, data cleansing, and data normalization.

  • Provide expertise in the area of pricing science, including the selection and configuration of statistical segmentation and optimization techniques. Our proprietary, fully transparent OpTIPriceMax℠ price optimization methodology toolset allows us to partner with clients in designing innovative, customized pricing algorithms that best address the characteristics of their specific markets/business environments.

  • Where such tools are missing, implement "best practice" data visualization tools, such as pricing dashboards/KPIs, and ad hoc pricing analytics tools.

  • Provide continuing post-implementation assistance for as long as it takes, until clients develop sufficiently robust internal resources to independently maintain and operate their optimization toolsets.

OpTIPriceMax℠ Methodology Overview

OpTIPriceMax℠ projects are highly customized, and they are designed to be affordable for businesses of various sizes. They can frequently be implemented within a matter of months, allowing distributors and manufacturers to return investment within a single budgetary cycle. 

Regardless of the project-specific approach being taken, OpTIPriceMax℠ projects yield fact-based, objective pricing recommendations that are based on fully transparent analytics. They drive more consistent pricing practices that treat customers fairly, while helping our clients capture more of the value they deliver in their markets. 

The following short videos further describe various aspects of our OpTIPriceMax℠ methodology (video viewing windows can be maximized for improved visibility):

OPTIMIZATION APPROACH
STATISTICAL OPTIMIZATION TOOLS
We believe that "black box" approaches are not ideal in the area of price management. Our transparent, full-service approach allows us to work in close partnership with clients in both work streams: 
  • Analytics: developing customized pricing algorithms that best address the characteristics of client-specific markets/business environments, and
  • Execution: driving field adoption, etc. 
We encourage knowledge transfer of applicable pricing tools to our clients, putting your business on the right track to building a strong internal price optimization capability. 
 
OpTIPriceMax℠ engagements deploy sophisticated, scientific optimization techniques to generate customer/item-specific pricing recommendations that are based on data-driven statistical analysis to mitigate risk to volume. 
 
Our methodologies are reflective of our extensive experience with contemporary, world-class price optimization solutions in distribution and manufacturing settings. 
 
The video below describes a real-life example application of some statistical pricing techniques often deployed. 
  
 
 
 
OpTIPriceMax Process Overview Video 
OpTIPriceMax Statistics Example Video 
Distribution Price Optimization Process Example
Distribution Price Optimization Analytics Example
Sample topics discussed in above video:
  • Major deployment steps
  • Typical data requirements
  • Representative timelines
  • Volume and profit impact
Approximate length: 8 minutes 
Sample topics discussed in above video:
  • Real-life example application of statistical tools
  • Segmentation methodology
  • Profiling of price distributions
  • Optimal price setting 
Approximate length: 15 minutes 



CHANGE MANAGEMENT/Price_Optimization_arrow_side
EXECUTION CHALLENGES 
TIP GROUP
EXECUTION SUPPORT

In addition to the strength of the analytics, the success of price optimization initiatives is often impacted by the team's ability to overcome execution issues such as:

  • Organizational history rendering the sales force skeptical to "corporate" pricing projects.

  • Need for “cultural” transformation in the organization on how to go about pricing in the business (overly cost-driven pricing mentality, etc.)

  • ERP system with too many “special” or “exception” price records, rendering price management a challenging task.

  • Lack of ability to track key aspects of pricing and margin performance.
 
OpTIPriceMax projects can be scoped to include specific components of execution/change management support, including any of the following:
  • Consulting on sales force training methods, internal organizational communications, etc. 

  • Assisting in the preparation of specific training collaterals or communications.

  • Consulting on updates to pricing execution systems/ERP modules clients may consider implementing in connection with the project.

  • Formulating KPI reporting, e.g., to enable measurement of realized benefit levels.

Additional Resources:

  • Use the sidebar to request a copy of our 20 page long publication titled "B2B Price Optimization Initiatives: A Preparation Guide."

  • Click HERE to download a copy of publication titled "Statistical Price Optimization FAQs" to learn more about these topics.

  • Click HERE for a case study/testimonial demonstrating the power of our price optimization solution in a distribution environment.

  • Click HERE to contact our team of distribution/manufacturing pricing experts for a free initial discussion on how pricing science can help your organization become more competitive and profitable.

We value your interest. Please complete the information below and a Partner from our firm will respond within two business days.

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The Innovative Pricing Group, LLC.
Tel.: 513.377.4692
Email: contact@pricinginnovation.com
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