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Statistical Price Optimization: Contracted National Accounts/Bids
In
our national account/bid price optimization projects, we develop customized, statistical price optimization tools for clients, which integrate with their
current bid/national account pricing toolsets (frequently Access or Excel).
Clients use these scientific, statistical price optimization tools as
decision-support mechanism, to generate objective price guidance on where
available data suggests bid/national account prices should be set.
SIGNS BID
PRICING
TOOLS MAY
BE
INADEQUATE
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- If a prospect calls three sales managers to quote the same items, they may get three quotes back with three significantly different prices.
- Larger bids/larger contracted accounts may be priced higher than smaller ones with otherwise similar profiles.
- Certain sales managers viewed as "uncontrollably giving away he shop" in the bids/national accounts area.
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TYPICAL
UNDERLYING
ISSUES |
- Inconsistency
in bid/national accounts prices may be due to pricing decisions being overly
reflective of differences in aversion to risk taking, market knowledge, and pricing
philosophies among sales managers.
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Current bid pricing toolset may not be viewed as sufficiently robust to produce effective price guidance that is viewed by all stakeholders as credible and market-aligned.
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The underlying analytics involve developing customer/product segment-specific estimates of how win probabilities are affected by pricing decisions.
The resulting “bid-response functions” can be leveraged to configure pricing
recommendations that optimally balance the risk of not winning the
bid on the one hand, with profitability objectives on the other hand. Accordingly,
the fact-based, scientifically derived pricing recommendations generated by these tools help clients:
Avoid over-pricing, by helping the business systematically recognize instances (across all customer/item combinations contained in the bid or national account price file) where granting just small incremental discounts can significantly improve win probabilities.
Avoid under-pricing, by helping the business systematically recognize instances where further
discounts/price cuts are not likely to greatly impact the probability of winning.
Contact us for a free initial consultation, or DOWNLOAD the document titled "Bid Optimization FAQs" in the Publication section of this website for more information.
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