Working with a Pricing Consulting Service?
[MATT: WE NEED TO START ALMOST FROM SCRATCH ON THIS ONE I THINK]
The two biggest complications your pricing consultant will face are when you have lumped customers with different pricing behaviors into the same group, or grouped products with different pricing sensitivities into the same group.
Accurately segmenting customers and products involves both the knowledge of pricing strategy and direct experience in your specific markets Only the distributor can accurately answer this question. The distributor simply needs the “right” tools to visualize gross profit performance and optimize pricing with a keen eye to customer & product segmentation and market dynamics.
Third party consultants can only apply the pricing optimization math to matrix pricing. What about improving group Gross Profit position on contracts and special pricing agreements?
Improving your pricing strategy can bring an extra 2-4% of gross margin to your bottom line. If you are using outsourced pricing consulting services, epaCUBE can help you get better results!
Apples are not oranges.
An outsourced pricing consultant service can only go so far to help with the “math” of pricing optimization. There is more to pricing strategy than just crunching numbers. An outside consultant can’t know your markets, strategy or tactics like you. Pricing strategy requires proper segmentation. Occasionally, an orange can fall into your bucket of apples. Not all small customers should be treated like small customers. Just because a product is in a price sensitive sell group doesn’t mean you couldn’t break it out for special pricing. Pricing consultants can only work with the data you give them. If you give your consultant bad segments, you’ll get bad answers.
epaCUBE can Help your consultant help you.
epaCUBE can help you prepare you data so the results from your outsourced pricing service are relevent to you strategy.
Unfortunately, using inaccurate customer and product groups in an outsource analysis can provide disastrous results. Here are some of the risks you face if you don’t properly segment and rework the product, customer and historical sales data you provide to your consultant:
- You raise the prices on high-margin customers because they fall into the wrong segment and price them out of future sales.
- Your historical pricing highs and lows can skew the data toward the lowest common denominator.
- You implement your new pricing matrix changing pricing without a corresponding price increases from your vendor, so your customers are mad and confused.
- You miss products that should be included in VIP pricing agreements, angering your best customers.
- Customers talk to each other and without a clear strategy driving your pricing conversations you face increased downward pricing pressure.
- Your sales reps start to mistrust the “black box” pricing the system gives them based on historical data and so pricing overrides slowly increase over time.
- Customers who aren’t assigned to a rep fall into the wrong segment and when prices increase, they simply stop calling and no one knows why.
- Customers on contracts and those on supplier special pricing agreements are typically just thrown out of the third party consultants optimization analysis as simply outliers. There is gold in this data for potential gross profit improvement through better negotiation with both the customer and vendor.
You must own your pricing strategy.
The prices you provide your customers are your single most important touch point in your relationship. Your pricing strategy involves much more than analyzing sales history. Sales history can tell you something about where you’ve been, but you cannot drive forward by only looking in your rear-view mirror. You need to establish a pricing strategy that reflects you goals, your unique customer relationships, your product mixes and your relationships with your vendors and customers.
The good news is that by using epaCUBE Optimized Segment Builder, you will be able to better segment your products into appropriate sell groups and customers into buying behavior groups so that when you deliver your files to your outsourced pricing consultants they will have much more accurate information on which to base their analysis.
epaCUBE Optimized Segment Builder puts you in total control of your pricing strategy, helping you perform ongoing analysis on your product and customer groups so you can quickly see which ones are grouped incorrectly.
Continuous Gross Profit Improvement
Are you fighting your sales force when implementing pricing optimization initiatives for gross profit improvement?
Do you want to find gross profit opportunities hidden deep in data during a vendor price increase?
Is the quality of your product data holding you back in all areas of your company?
Do you want to model the impact of “what if scenario” changes to cost, price and rebates to help make the right decisions for gross profit improvement?
If you answer is “YES”…epaCUBE can help!