Price & Value Strategy
Companies need to manage pricing strategies with the same rigor that they apply to manufacturing costs and other operating areas. Pricing impacts business performance at the highest operating level in three basic ways: (1) it can drive margin pressure, (2) contribute to customer attrition or adoption, and (3) force companies to "leave money on the table" when products and services are priced too low for specific customer segments.
Today, executives across a broad range of industries are dealing with pressures from a number of sources across the enterprise value chain that include:
- Suppliers: "The price of fuel escalated another 15%, increasing our transportation costs as a result."
- Local and global competitors: "Our competitor just launched a better product at the same price as our flagship product, so we're dropping our price to keep current customers"
- Customers: "We had to drop prices in Account 'X' because they found out we were offering 20% lower prices to Account 'Y'"
If your company employs a reactionary approach to pricing pressures, it can become costly and precarious to your bottom line. Firms that successfully deal with these types of pressures take a proactive approach and reap enormous benefits as a result.
At Kalypso, we have worked with clients on creating pricing strategies, processes, and structures that have yielded impressive results with pricing model improvements that correspond with the appropriate mix of revenue drivers such as volume, product mix, and net price.
While there is no easy way to determine the best pricing strategy for all products, we can assist you with creating guidelines and pricing models to optimize revenues. Areas of expertise include:
- Pricing & Positioning Strategy
- Implementing appropriate price strategy (Skim, Neutral or Penetration pricing) based on market dynamics, revenue/profit expectations and product lifecycle considerations
- Determining appropriate KPIs and understanding when a strategy should change
- Constructing and communicating a value proposition for a product and/or solution
- Price & Revenue Planning
- Establishing list prices that accurately reflect the value inherent in the offering
- Designing processes to allow for effective list pricing management throughout the product lifecycle comprehending market and competitor feedback
- Establishing discount guidelines appropriate at any level of segmentation
- Linking demand planning to list price management for coherent business management
- Price Model Definition-Deals & Offers Structure
- Supporting profitable sales efforts and buyer behavior
- Structuring discount breaks to minimize lost revenue
- Setting volume based discounts to increase profit
- Serving customer segments profitably, including "segments of one"
- Moving past simple importance-based segmentation (A, B, C) to include applicable criteria such as buying behavior
- Designing service offerings that are appropriate to each segments buying behavior
- Channel Discount Structure
- Recognizing the true value of each channel
- Offering discounts that incentivize channel partners to perform appropriate services
- Removing waste (over discounting)
- Seeking customer feedback at appropriate stages of product development and product lifecycle
- Engaging the customer effectively and efficiently
- Using customer feedback to make hard decisions