Price optimization is more than just crunching numbers. It requires proper segmentation, which requires the application of your own knowledge of markets, strategy and tactics in your business and industry.
Bad segments can lead to skewed data. For example, not all small customers should be treated like small customers. Some products in price-sensitive groups might still be eligible for special pricing agreements. Here are some examples of gross profit losses that can result if you don’t properly segment and rework your product, customer and historical sales data:
- 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 your strategy 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.
epaCUBE allows you to analyze your pricing by product or customer, product or customer group, a combination of different customers groups who buy different product groups, by vendor, branch or salesperson. This allows you to continuously improve your gross profits through optimized pricing.
Many of these gross profit improvement opportunities are buried deep in your sales, product and customer data. Identifying and analyzing them would be easy if you only had one type of customer and one type of product. Unfortunately, most distributors have many different types of customers with different buying behaviors that reflect their unique type of business, industry and particular goals. And distributors must deal with a wide assortment of products and product groups.
You probably deal differently with commodity products than you do noncommodity products. You might have to respond to different competitive positions by market or address technical specifications for certain customers. The amount of data you must analyze to optimize pricing is overwhelming. And as soon as you settle on an analysis, something in your market changes and you have to start over again.
Analyzing segments and pricing with a large volume of complex data that is constantly changing is real power that epaCUBE helps you unlock.
Photo Credit: Beta-J