Revenue Optimization & Pricing Insights

Stratinis is tomorrow organizing a very exciting webinar about dynamic pricing models: 

https://info.stratinis.com/webinar-dynamic-pricing-and-machine-learning

Sign up and learn some interesting things about using dynamic pricing to increase profitability.

"Floor Price" refers to the lowest acceptable price a sales person can go to. It can relate to different elements of the price waterfall, from the Pocket Price to adjusted pocket prices, to net invoice price or a multitude of other elements from the price waterfall. The floor price can visually be illustrated also with its counterpart, the maximum price, in a pricing corridor:

While the duality of a minimum floor price and a maximum price can be useful in certain international/channel scenarios, the most important is the Floor Price, as this helps secure minimum profitability. 

So how do you establish what the right floor price should be? Different approaches include:

• The current, average pocket price plus some sort of nice-to-have increase in this budget year. This approach is typically used when Floor Prices are used to drive financial performance of the overall company.
• A target price based on estimates or actual research about the customer's willingness-to-pay.
• A specific price for one or more customers/channels to avoid commercial problems when those customers compare pocket prices, either between channels, countries or other comparison bases.
• Costs plus an acceptable target margin: typically called "cost plus pricing".

While the purpose of Floor Prices is to drive net prices higher, by avoiding profit leakage below the floor, a world-class Floor Price system should have some variation to take into account channels and countries (it is implicitly understood that floor prices of course vary by product), so that differences in competitive levels, market attractiveness or other strategic reasons can be followed.

At RevBeam we have implemented many floor price systems for our clients and we would be pleased to help you with yours. Contact us for discussing your needs.

Great and promising article series over at Stratinis: https://blog.stratinis.com/revenue-control-improve-profits-in-complex-businesses

At RevBeam we can help you establish the process for revenue control, including defining KPIs, price waterfalls and approval processes to get maximum benefits from a revenue control system.

If you are looking to apply dynamic pricing models to your business, to benefit from the continuous updates and adjustments to market factors, then RevBeam can help. Models can take various forms and include a number of parameters.

Here is an example from Stratinis, using their price optimization software:

The typical dynamic pricing model includes:

• Input parameters, relating to customers, products, demand, supply, competition, etc
• The actual engine itself
• Parameters through which the engine is adjusted
• Output parameters, typically price, but e.g. also permissable discounting levels for the staff
• Self-learning / model adjustment: based on whether the outputted price delivers a sale or not, the model can be taught to adjust itself.

Such dynamic pricing models bring a lot of benefits, including ability to quickly adapt to changes in market conditions (or sometimes to ignore them where humans might have fallen for a panick reaction), optimization of prices and avoidance of human errors.

At RevBeam we can help you build a dynamic pricing model for your company. It is typically done over a 3 week period, where we analyze existing data and factors impacting your pricing or competitive pricing. This combined with two workshops with your team then in the end of the 3 weeks then yields a complete model, ready to use.

Great overview about price research and how it can help when building brands, be it individual or portfolios:

http://blog.stratinis.com/pricing-brand-health

Once you have established your price insights RevBeam can help your company with advice and expertise in how to do value-based pricing, price communication and price training. Combined it is a highly profitable approach, yielding superior profits compared to just basing pricing decisions on gut feeling.

Very promising webinar coming on on May 17th over at PriceBeam:

https://info.pricebeam.com/adding-portfolio-value-through-price-optimization

Venture Capital and Private Equity managers, or for that matter startup CEOs can gain a lot of by applying price optimization techniques.

At RevBeam we are proud partners of Stratinis and PriceBeam. Through these partnerships we can deliver solutions to all kinds of pricing needs:

• Pricing challenges requiring consulting services: RevBeam. Read more about our pricing expertise on our website.
• Pricing challenges requiring tools, e.g. for optimization or control: Stratinis Pricing Suite is a world-class tool having helped many companies in consumer goods, chemicals, ecommerce, logistics, electronics and more.
• Pricing challenges benefitting from research: PriceBeam offers fantastic willingness-to-pay research that is done both speedily in 1-2 weeks but also cost a fraction of what traditional market research companies have charged. All possible through some innovative cloud-based software. Read more about the different PriceBeam options.

We are very excited to be launching the RevBeam blog. Stay tuned for news, insights and knowhow about pricing.