Pricing
Pricing is the most impactful profit lever on the bottom-line in a business. Yet, most businesses have neglected to take a structured look at how they might improve it.
Our approach covers 3 primary areas of pricing and has consistently delivered 2% or more of measurable Return on Sales improvement with our clients.
Analytics: The "pocket margin" waterfall
The pocket margin waterfall measures margin erosion from list price, incorporating all discounts, allowances, rebates, and special costs to serve:
Our approach involves measuring and computing each price waterfall element at the transaction (line-item on an invoice) level. This deeper level of measurement enables us to perform detailed profitability analysis by customer, product, sales territory, region, and for other relevant entities in the business.
Through rigorous price waterfall analysis, we uncover a detailed list of "price-leaks" and develop a list of opportunities, usually in the form of process / policy changes, to patch those leaks.
Our expertise and experience in price waterfall analytics allows us to generate a pocket margin database for most clients within six weeks.
Segmentation: Pricing in line with value
Most companies rarely consider the nuances in market segmentation with respect to pricing. Depending on what you are looking to achieve, the definition and purpose of “market segmentation” will vary. For more information on Segmentation and Strategy, click here.
A smart pricing segmentation considers each of the following:
- All components of value in the offering delivered to the customer (not just product components - for instance, quick delivery, special packaging, small orders)
- The various customer buying situations (so one customer can fall into multiple segments, depending on their changing needs from order to order)
Through a market-focused approach, we develop new, creative, market-based pricing segmentations that enable clients to achieve higher prices, deliver more value to customers, while maintaining or growing unit volumes.
Tools: KiniMetrix® price & volume reporting and metrics
Most organizations arm their front-line sales representatives with adequate sales data. Some offer information and guidelines on margins to enable and encourage sales reps to enrich product mix.
However, very few companies provide their sales and marketing organizations with robust, meaningful, accurate price reporting tools. Our KiniMetrix® reporting service provides the metrics and reporting necessary to precisely track price performance ("price-yield"), isolating and eliminating the effects of product/customer mix and shifts in volume from one period to the next. These powerful yet easily understandable price-yield measurement tools, tailored for a specific business' needs, improve the judgment capability of front-line sales reps, resulting in more accurate price quoting. Similarly, KiniMetrix®'s volume-yield measurement enables businesses to precisely understand pure unit-volume growth, isolating changes in pricing, product mix, and customer mix.
For more details on our KiniMetrix® price & volume reporting service, click here.