Price Modeling Pillars
In order to achieve pricing excellence, a strong foundation is required. The pillars of good price modeling are data, analytics and process documentation. On every project, data is a large commitment, because without solid data, the analytics has reduced power. Codarex firmly believes that analytics should always address a business problem. Understanding business processes can isolate areas to benefit from analytical injection.
In many cases, dashboards and reports are pumped out without any downstream notion of how to make the output actionable. Most BI software installations have this affliction. An old consulting adage comes to mind,
Start with the end in mind.
There are many techniques that can be employed to help focus effort. First make a commitment to understand your business processes and where reports are needed, approvals required, and customer support crucial then you can map out analytics and pricing needs. Use cases, user stories, wireframes, strawman and Agile methods provide a framework to force organizations to tackle difficult problems and document nebulous issues.
“Make Certain What is Uncertain, Know What is Unknowable!” – Rebecca Solnit, The New Yorker
Applying the Johari Window analysis technique to pricing, or in the more familiar form of Donald Rumsfeld quote of “known knowns”, we find logical quadrants that companies can address. In order to address the areas of unknown pricing issues, Codarex provides support by viewing pricing in a holistic sense that involves business requirements, resource limitations, and technological investments. Only when all three main pillars are addressed then effective pricing models can be implemented. Excellence 2.0 framework supports “make stronger what is strong“. Hence, for companies that have solid pricing processes in place, there is still a need to push forward.
Codarex Price Modeling
Codarex provides analytical support services for pricing applications. This includes contract negotiation and contract management. Furthermore, for many companies Marketing is the owner of pricing functions. Hence, we have provided support of segmentation, consumer choice models and price testing. Analytics…
We take a two pronged approach for success in our engagements. Transaction analyses of historical data is the foundation for our solutions and services. We then add value-based pricing techniques to augment our analytics, thus resulting in predictive pricing models and strategies with robust results!
The goal of value-based pricing is to match your price with your customer’s perceived value by setting your price based on the value delivered through attribute analysis, value maps, and customer behavior analysis. The combination of these qualitative methods, along with the quantitative inputs from tactical analysis, provides a price setting platform with much greater impact, and customer satisfaction. In many cases, profits are left on the table because corporations do not understand the true value of their products in the marketplace to customers. Airlines have pioneered the concept of offering product(or seat) prices to match the many different customer segment values. Their complex mathematical approach attempts to maximize a single flight’s profit by matching price to customer segment value and controlling product availability.
Value Pricing methodology moves beyond cost-plus pricing. In fact, a corporation can benefit in other ways by employing Value Based Pricing. The results of attribute analyses, competitor value maps, geographic market maps and other reports can be used to: drive sales negotiations by competing on value not on price; absorbed in product development and replacement plans to reduce product development risk; combined with marketing plans to leverage key drivers and create targeted messaging; and leverage by C-level for determining growth goals.
When these methods are used in tandem, prices for any customer and product combination can be customized to reflect the specific value delivered. This approach to pricing is intended to help companies become more competitive and more profitable by including competitive advantage into the value-selling process. Know your strengths to accelerate profits & know your weaknesses to drive change.
Value Based Approach
The goal of value-based pricing is to match your price with your customer’s perceived value by setting your price based on the value delivered through attribute analysis, value maps, and customer behavior analysis. The combination of these qualitative methods, along with the quantitative inputs from tactical analysis, provides a price setting platform with much greater impact, and customer satisfaction. In many cases, profits are left on the table because corporations do not understand the true value of their products in the marketplace to customers. Airlines have pioneered the concept of offering product(or seat) prices to match the many different customer segment values. Their complex mathematical approach attempts to maximize a single flight’s profit by matching price to customer segment value and controlling product availability.
Value Pricing methodology moves beyond cost-plus pricing. In fact, a corporation can benefit in other ways by employing Value Based Pricing. The results of attribute analyses, competitor value maps, geographic market maps and other reports can be used to: drive sales negotiations by competing on value not on price; absorbed in product development and replacement plans to reduce product development risk; combined with marketing plans to leverage key drivers and create targeted messaging; and leverage by C-level for determining growth goals.
When these methods are used in tandem, prices for any customer and product combination can be customized to reflect the specific value delivered. This approach to pricing is intended to help companies become more competitive and more profitable by including competitive advantage into the value-selling process. Know your strengths to accelerate profits & know your weaknesses to drive change.
Benefits from Additional Support
The cost advantages of outsourcing certain pricing functions are linked to time consuming duties and subject matter expertise. Some of the value associated with outsourcing pricing functions can include, but are not limited to the following,
- Reallocation of your team’s time from mundane work to the most important functions
- Cost effective method to extend your pricing team to include analytical scientists
- Provide extensive data and database skills
- Benefit from our abilities to publish data in many forms
- Benefit from our powerful mathematical outputs: prescriptive and descriptive statistical models, price sensitivity models, list price sensitivity, etc.
Contact us to discover the possibilities.