AI is transforming pricing strategies across industries. The use of AI can optimize pricing decisions, reduce pricing errors, and increase revenue. Join us to learn how you can use AI to stay ahead of the competition and improve your pricing strategy with AI.

· Understand the benefits of AI in pricing, including more accurate predictions and better pricing recommendations

· Learn how to implement AI into your pricing strategy and optimize pricing decisions

· Explore real-world case studies of companies who have successfully integrated AI into their pricing and selling processes

As shoppers purchase online in increasing numbers, they can display different preferences, needs, willingness to pay and price sensitivity versus instore. EPIC Conjoint's new Online + Offline rapid conjoint solution allows companies to capture all the aforementioned in just one conjoint survey. This webinar will provide insights on:
• How much customer preferences differ between online and offline and why
• Whether products are more likely to be purchased online versus offline
• If customers are willing to pay more or less online
• Does price sensitivity differ by channel
• Are price promotions more effective online versus offline

• Learn how to create a strong structure of a Pack Price Architecture in highly promoted categories
• Innovating in packaging, affordable brands, collaboration with retailers and different promotions in the light of innovative revenue models

• How to build holistic RGM optimisation success: leveraging promo, pricing, assortment, and profit pool analytics; challenges and key enablers
• Thriving within a data-driven RGM practice: Initiatives to unlock growth in an inflationary environment, offset losses and recover profitability

• The value of AI in promo planning
• Finding a balance between global scale, local needs and VUCA sell-out
• What we learned as pioneers?

Randomized controlled trials (RCT) with concrete clinical endpoints are the gold standard on the hierarchy of medical evidence. However, there are many circumstances where RCTs are not feasible to conduct, particularly for oncology and rare diseases, and ITC/ECA can be crucial to validating the value of a treatment. As well, concrete clinical endpoints in certain indications can be difficult to quantify and ultimately insufficient to truly demonstrate the impact of the treatment, leading to the need for support through patient reported outcome measures (PROM). In this webinar, we will discuss the growth in these alternate evidence methods, the receptiveness of the key HTA bodies through case studies and ultimately, what manufacturers can do to harness the power of these tools.

• • Evaluating key trends that will affect the future of pricing in the manufacturing industry. What are the emerging pricing models and strategies to look out for in 2024 and beyond?
  • Looking ahead: how are pricing experts tackling uncertainty and getting ready for worst and best cases scenarios? Has the last two-year disruption boosted resilience in pricing functions?
  • Reflecting on dos and don’ts when rising prices in a volatile climate
  • How can pricing professionals harness change and disruption to bolster the role of pricing within the organisations?
  • To what extend can dynamic pricing principles commonly used in B2C be adapted to B2B manufacturing in order to navigate uncertainty and achieve profitable outcomes?
  • Will digital transformation’s acceleration have a real, measurable, attainable impact on pricing in manufacturing? How can digital solutions help organisations to achieve pricing maturity?

   Panelists:

  -Paola Andrea Valencia, Vice President Pricing Europe, Schneider Electric

  -Robert Irwin, Senior Vice President of Business Consulting Europe, Vendavo

  -Laura Rathjen, Head of Global Pricing, Festo

   Moderator:Olivier Dallemagne, Partner, BCG

Dynamic pricing has the potential to support companies in developing more targeted pricing approaches by tapping on the growing amount of customer and competitive data collected. Dynamic pricing refers to the automation of price changes based on one or several contextual variables, such as time, demand, inventory levels, capacity, location, competitive prices, or external events. In most cases, dynamic prices can be adjusted in minutes. This approach to pricing has become increasingly popular in the retail industry – especially among online retailers - driven by the success of the implementation among major retailers such as Amazon, Walmart, and Target. However, implementing dynamic pricing for physical – or offline - retailers can be challenging, and they must overcome several hurdles to make it work effectively.  

Dual-channel pricing 

One of the main challenges is a dual-channel pricing problem, which occurs when integrating dynamic prices for physical and online stores. Typically, physical retailers base their sales on offline channels such as brick-and-mortar stores, vending machines, and kiosks. However, more retailers have developed their online sales channels due to several factors, including the recent COVID pandemic and rapid changes in technology and consumer behaviour. Interestingly, some pure online retailers are now developing a physical retail channel with a similar pricing challenge. This multichannel approach requires retailers to offer dynamically optimised prices that account for differences in the demand stream of channels, management of cross-channel revenues, and differences in fulfilment and delivery costs between channels.  

Implementation 

The implementation of dynamic pricing among online retailers has been documented for some time now, particularly among major e-commerce platforms and even retail platforms such as Shopify, which allows small online retailers to implement dynamic pricing without major investments in technology. Moreover, there is considerable growth in dynamic pricing software that considerably lowers the barriers to implementation for major online retailers. 

However, in physical retailing, implementation is still a major challenge. Manually adjusting prices in the physical store will be costly, time-intensive, and in most cases, unfeasible. To this extent, physical retailers are faced with three alternatives for implementing dynamic pricing in the store: 

• Digital price tags or e-tags. They will allow the retailer to adjust prices without relying on the store staff to change price tags manually. Some tags will have a larger display or even a colour display, allowing the retailer to present more information. The downside of these price tags will be their costs which might be prohibitive for some retailers.
  
  
• Showrooming. This implies that the store showcases the products, but customers must purchase the product online. The product can even be in stock at the time of purchase.
  
  
• Fewer categories. Working with fewer categories, such as some key value categories (KVC) or even some key value items (KVI), rather than with the whole assortment, will allow the retailer a more straightforward implementation and better focus on key categories and products.
  
  
• Customer experience 

Dynamic pricing has been widely adopted in various industries, including airlines, hotels, e-commerce platforms, and theme parks. While dynamic pricing has many benefits for retailers, its impact on the customer experience is a topic of ongoing discussion. On the one hand, dynamic pricing can provide customers with more affordable prices during off-peak times, making goods and services more accessible. For example, retailers can offer discounts during slow sales periods to entice customers to purchase products. Retailers can also use dynamic pricing to provide personalised pricing and reward customers based on their behaviour and previous experience.   

On the other hand, customers are used to dynamic price changes when purchasing an airline ticket or booking a hotel room. Still, they need to be used for dynamic price changes for common goods, especially in a physical store. Frequent price changes can potentially alienate customers, thus jeopardising the entire customer experience. Retailers must ensure that their dynamic pricing algorithms help customers perceive a benefit from these price changes. Dynamic pricing can also lead to price discrimination, with potential legal ramifications if not communicated correctly.  

Furthermore, the dynamic pricing implementation should reinforce the price image chosen by the retailer; whether it is the image of a discounter or a premium retailer, the new dynamic pricing approach should match that image. 

Prices should be consistent among different channels. When shopping online, some retailers even ask customers for their zip codes to match costs to nearby stores, thus ensuring price alignment. Moreover, retailers should reinforce the desired perception of prices by communicating reference prices, using price anchors, and establishing price guardrails to prevent prices from moving outside a range of price acceptance. Using indirect tactics, such as the rewards program, can help retailers promote a positive perception of the dynamic pricing implementation. 

Furthermore, physical retailers must be careful that dynamic pricing is done in the product categories where it is justified and based on significant changes in the chosen contextual variables. For example, a retailer can adjust prices when changes in demand reach multiple thresholds rather than changing prices just for the sake of it.  

Data quality 

The quality of the data used in the dynamic pricing algorithms is a major concern for any dynamic pricing implementation. The effectiveness of dynamic pricing strategies depends on the accuracy and completeness of the data used to make pricing decisions. Bad data can jeopardise a dynamic pricing implementation. Moreover, in physical retailers, there is the additional challenge of deciding how to account for differences in store operating costs, storage, and order management and fulfilment. Moreover, physical retailers must decide which local contextual variables to use; will weather or events at the local level be relevant to use? 

Objectives and profitability 

Drivers of dynamic pricing implementation among physical retailers are customer acquisition, retention, and switching customers from competitors. Moreover, dynamic pricing can lead to long-term profitability in several ways: 

Maximising Revenue: Dynamic pricing helps companies maximise their revenue by charging higher prices during peak demand periods and lower prices during off-peak periods. By doing so, they can increase their sales during off-peak periods and maximise profits during peak periods. 
Managing Inventory: Dynamic pricing can help companies manage their inventory by incentivising customers to purchase products or services during slow periods. By offering discounts during slow periods, companies can reduce their inventory levels and avoid the cost of holding excess inventory. 
Responding to Market Conditions: Dynamic pricing enables companies to react quickly to changing market conditions, such as changes in customer demand, competitor pricing, and market trends. By doing so, they can stay competitive and maintain their market share. 
Increasing Customer Loyalty: Dynamic pricing can also increase customer loyalty by providing personalised pricing and promotions based on past purchases and preferences. By doing so, customers are more likely to return to the company for future purchases. 
Improving Margins: Dynamic pricing can improve profit margins by increasing the price of products or services during peak demand periods. By doing so, companies can increase their revenue without increasing costs, leading to higher profits. 

Dynamic pricing can help companies optimise their pricing strategy, increase revenue, and improve profit margins, leading to long-term profitability. However, the challenge comes when the implementation of dynamic pricing focuses on short-term profitability. For example, a retailer might ignore the importance of the out-of-the-door price. If customers end up paying more than what they used to, they could easily switch the purchases online or to another retailer, thus jeopardising long-term profitability. 

Dynamic pricing can be incredibly complicated for physical retailers, particularly when considering a dual-channel pricing problem: keeping prices consistent among online and offline channels. By focusing on key value categories (KVC) or key value items (KVI), using digital price tags, or considering showrooming, retailers can reduce the complexity of the dynamic pricing implementation. Retailers can use dynamic pricing to enhance the customer experience by offering personalised pricing, ensuring that customers perceive a benefit from dynamic prices, and avoiding price discrimination and price gouging. Good data is crucial. Furthermore, dynamic pricing should focus on something other than keeping prices aligned with competitors but on achieving the desired objectives and long-term profitability.  

Conclusion 

Dynamic pricing presents a unique opportunity for physical retailers to optimise their pricing strategies, maximise revenue, and improve profit margins. However, implementing dynamic pricing effectively in physical retail requires overcoming various challenges, such as the dual-channel pricing problem, maintaining a positive customer experience, and ensuring high-quality data for algorithms. By focusing on key value categories and items, leveraging technology like digital price tags, and considering showrooming, retailers can simplify the implementation process. It is essential for retailers to ensure that their dynamic pricing strategies align with their overall brand image, maintain consistency across channels, and promote a positive perception among customers. Finally, dynamic pricing should prioritise long-term profitability and objectives rather than merely mirroring competitor prices. By addressing these challenges, physical retailers can harness the power of dynamic pricing and unlock its full potential in today's competitive retail landscape. 

Explore how AI can revolutionize the way you access pricing and access information, making it simpler, faster, and more convenient than ever before! Plus, we will deep dive into how organizations are leveraging NAVLIN’s Analogue ID to identify analogues, leveraging key market access data such as: Pricing, HTA, Clinical, key data, regulatory, news, and more!

Earlier this year, I met with almost 50 CXOs to learn about some of their biggest commercial challenges. One theme stood out above any other topic.
 
They all wanted more pricing power. Every single one! But not one of them knew how to get it. When I asked them how to define it, they brought up things like channel partnerships, supply chain control, company size, quality, brand, sales effectiveness, competitor discipline, product margin, and product differentiation. 

With all these different attributes, how do you properly define pricing power? 

As a starting place, they mostly aligned with Warren Buffett’s famous quote: “The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business.” 

However, Buffett’s definition felt incomplete to me. I believe there is a theoretical maximum to that price ceiling, and it needs to be considered as companies gauge their pricing power. Think about it: if Apple decided to charge $100,000 for the next iPhone, they would absolutely lose customers. 
 
That maximum threshold comes down to the differential value of the solution. All the above attributes roll up into differential value to the customer in one way or another. If a product is priced over the differential value created, that company will lose those customers. Fundamentally, you are not providing them any value because you are taking it all through your price. Creating differential value over time is essential to creating and sustaining pricing power.

If that’s the case, an updated definition could be: “If you've got the ability to create more differential value over time, then you will have the power to raise prices without losing business to a competitor.” This gives you the power to raise prices – and (to be later proven) a substantial advantage for long-term profitability.

It still begs the question: How do you create that differential value over time? And once you have pricing power, how do you protect it? 

Knowing where you stand

I needed to simplify things into a 2x2 in order to compare examples and create simple strategies for C suite leaders. There seems to be two major categories for measurement: the company’s differentiation and their ability to execute in the market.

Even with a highly differentiated product, businesses must be able to bring their solutions to market effectively in order to gain and protect their pricing power. Without that, pricing power could not exist. If you have a great idea and the market doesn’t pick it up, you can only go so far.

These two categories are very qualitative, so I used proxy measures. The higher the price achieved, the higher the differentiation – and generally companies that can execute well in a given market tend to have higher market share. We plotted a few segments as examples:

The difference in margin dollars was significant. Of course, if you have more pricing power, you have the ability to get more dollars than your competitor. With the data we studied, on average, companies in the first position were 67% more profitable than the next closest competitor. The benefits became clear – and as I looked at other examples, the downside of not engaging was clear as well.

Businesses fail to continuously build pricing power when they don’t see a pricing problem. It’s often masked by high prices, or general brand recognition in the industry. The business appears to be winning and often has decades of momentum behind it – particularly in longstanding industries.

These are the industries where we see adjacent tech companies come in and start taking share because the incumbent did not know how to maintain their pricing power. It requires continuous work and is not a mountain that is conquered through one project or activity. Companies that don’t follow that are the ones that are prime to be taken over. 

We’ve all seen large companies fall asleep at the wheel thinking no one can catch them. Think about Zenith, the dominant TV manufacturer in the 1950s and 60s, who couldn’t keep up with the new entrants of the 70s and 80s. Zenith's market share began to decline in the 1970s, as Japanese and South Korean companies began to manufacture high-quality televisions at lower prices. Zenith's stock price also began to decline, and by the early 1990s, the company was in financial trouble.

The company went from being worth $1.5B ($10B equivalent in today’s dollars) to being sold for $200M, a loss of 87%. That’s the cost of complacency and not striving for continuous pricing power in your industry.

The “why” is clear. Let’s look at the “how.”

How to get pricing power if you don’t have it

In the cases of (relatively) low differentiation, there are three focus areas for expanding market share through value creation. The overall focus should be on building and expanding value as a capability within the organization: the more value created and effectively communicated, the better differentiation, and the stronger the capacity for long-term pricing power. 

1. Quantification of differential value created for customers. These days, everybody knows what value-based pricing means - but it surprises me how many companies only measure use value or the total value of their products and services. Many still do not track how their products and services differentiate them from their competitors and use the differential value to price against. Leaders also forget to look at all the other services and activities they do for their customers to create value. As an example, a last second rush order can help a customer save one of their customers. Companies do a lot for their customers to add incremental value that sometimes doesn't get captured in the quantification, but should be.
   
   Some clients do a good job of quantifying the differential value and using it for their pricing, but they don’t communicate to and train their sales organization so they can be effective in getting the price that was set. One key component of this is the customer’s ability to experience the value used to set the price. Customers must experience value. Simply put, when customers can experience the value, they are more likely to believe sales, be less price sensitive and pay the asking price. Just think about us as consumers: it’s one thing for a car salesperson to say that a Ferrari is fast, and a whole other level for us to actually experience that speed for ourselves. I bet, if we had the money, we would be a lot less price sensitive if we could experience that speed versus just believing the salesperson.
   
   
2. Effective use of value throughout the organization. This practice can change things across an enterprise quickly. When surrounding teams are trained and listening for value drivers, they can impact the overall product or service in new and unexpected ways (therefore improving overall differentiation). Think of teams like product development, tech support, customer service, and sales: when they know what each customer derives value from, they can better focus on those areas. Holistically, decisions should also be made from the lens of creating sustainable differentiation. Some examples include R&D, marketing, product releases, resources, or internal training and capability focus areas.
   
   
3. Use of dynamic & long-term value drivers. Markets change, customers’ needs change, suppliers change, competitors and their products/features change… so why do we look at pricing as a one-time event? Companies need to stay on top of all these moving pieces and have a pricing process that can keep up with the dynamic nature of value drivers in order to lead the market.
   
   We must understand how customers evaluate and purchase today and how they will make purchasing decisions tomorrow. Long term value drivers are things that we know will influence purchase decisions in the future but may not be so quantifiable today. A perfect example is sustainability: we see companies advertise their sustainable practices knowing that purchase decisions of consumers today may not depend on this - but they're betting that in the future a portion of the purchase decisions will be based on their sustainable practices.
   
   Think about a fast food company like Wendy's. The other day, I saw a plaque showcasing their sustainable practices. Do today’s customers make their choice based on that? Unlikely. But Wendy's is smart to think ahead to the future, betting that consumers will make decisions based on these criteria. We want to start informing customers today, so they know that we are at the forefront of these measures thus creating an advantage in the future relative to competitors.

How to protect the pricing power you’ve created

In the case of high price but low market share, (you guessed it) enterprises need to focus on their go-to-market. Should you invest in product development to become the Ferrari of your market since you have the dollars? Do you intentionally want to be a niche segment? When market share is low, and you decide you want to increase it, this is a time for improving the enterprise’s ability to influence and execute. 

1. Go-to-market effectiveness and customer advocacy. How do we set our pricing and sales processes to build transactional customers into loyal customers and advocates? How do we identify them? Most strong companies will have a high percentage of loyal customers, but companies with true pricing power will have a significant portion who are true advocates. This is what creates a cult-like following. Sales and pricing capabilities need to be developed around the objective of creating advocates over time.
   
   
2. Relationships within the channel. Partnerships with non-competitors in your ecosystem are a great way to create unique value and stickiness with customers. Think about laptop manufacturing – HP’s relationship with Microsoft and with distributors and resellers are a prime example of this.
   
   
3. Effective and disciplined negotiations.The impact of price leakage can never be underestimated – especially when it comes to rampant discounting, which we see across many industries. Nothing dilutes your value like undisciplined discounting. Commercial teams often need specified training on understanding the buying center, diagnosing buyer behavior, and preparing negotiation strategies for specific selling scenarios. Skills and confidence can be taught, but often needs to be called out as a focus area for sales teams to move the needle on profit margins.

When differentiation and ability to execute are both high, it’s important to set yourself up to properly sustain the pricing power you have. This is the position where leading companies fall asleep at the wheel and get taken out by disruptors if they aren’t ready. Most importantly, the focus should be on culture, systems, and processes for ongoing improvement.

• Focus on customer lifetime value (CLTV). For many, this looks like creating a monetization path for customers over time, incenting higher use and an upgrade path up and across products and services. This often also includes a mindset shift in looking at customers as long-term relationships where you will help them solve their problems instead of selling services to them. Those are the companies who learn how to monetize customers in more than one way. 
  
  
• Awareness of competitive actions and new entrants. Typically, we see clients get competitor information from public sites and ex-employees who have moved over. These methods tend to be one-off and only harvested because of a specific need, often providing stale information. Very few of our clients have this as a process to monitor competitive capability development, M&A activities, feature rollouts, new product development (NPI), and pricing over time. It’s important to note that all information about competitors should be obtained legally and based on available public information.
  
  
• Monitor customers and markets. Market drivers and value drivers should be monitored on a specified and regular cadence, typically through either a survey-based methodology and/or in-depth customer interviews. The more fragmented your industry is, the more likely you will need to use a survey methodology. The cadence is determined by how often your industry or vertical changes. Most of our clients are in verticals that change annually, but here are a few indicators for cadence:
  
  1) How often products and features are typically released to your market.
  2) Significant change in typical negotiation rates (e.g., greater than 10%)
  3) Higher than typical change in market share
  4) New entrants gaining market share at a rapid rate (e.g., more than 5% change)

The key: Ongoing measurement

The biggest change for most commercial teams will be focusing on the long-term and dynamic nature of their value drivers. We’re trained to deliver for shareholders this quarter, this year, the immediate results. Many businesses treat pricing and value measurement as a one-time project. But as technology improves and generative AI evolves, the rate of change across industries is exponentially increasing. Companies must be able to change with (and ahead of) customer needs.

Remember, markets are always changing. Your competitors are always coming out with new features and benefits for their solutions. Customers’ needs will continue to evolve. It’s essential that you set up processes for monitoring value drivers so you can change before your industry is disrupted, especially if you consider yourself to be a big player.

Those who can effectively build value-based organizations will not only serve customers better over the long term – but they will also see a significant advantage in enterprise profits.

Focus on pricing is the most powerful way to boost companies’ profitability. Nothing else impacts more positively the business than having the price right. Unfortunately, many companies also face the dark side of a poor price management with disastrous consequences. 

According to the Global Pricing Survey 2012, from Simon Kucher & Partners, companies have reached just 50% of the target prices previously planned. Also, less than 20% of the companies reached more than 80% of their prices initially planned.  

Why does this happen? Why such a gap between the target and actual price exists? Commercial execution is the moment of the truth and often is forgotten.

Many factors contribute to this gap in performance, such as: 

• vast and dispersed sales force poorly trained with excessive autonomy
• information systems limitation on providing transparency about revenue leakages
• sales incentives not aligned with business strategy;

Price implementation requires discipline and the following steps are necessary to achieve commercial excellence on pricing execution.

Step 1 – Provide transparency: manage price at transactional level

Transactional price management aims at making the best net price in each transaction. Every day salespeople negotiate not only invoice prices and discounts but also “other transaction terms” such as allowances, payment terms, and rebates with direct impact on the bottom line.

A high number of sales transactions brings enormous complexity to price management. To make things more complicated, most of informational systems often don’t report all sales terms consolidated at the customer level, and such lack visibility opens room for price and margin erosion.

Figure 1: Pocket Price and Contribution Margin Waterfall

The application of the Pocket price waterfall concept (figure 1) has helped companies to identify the sources of revenue and margin leakage. The first step to start the price management at transactional level relies on having the pocket price components identified.

“What we cannot see, cannot be measured and what we cannot measure, cannot be managed.”

Once identified the pocket price and its components, it is easier to determine inconsistencies in the pricing policies currently in place. Management usually creates policies to establish invoice prices, but such policies do not cover the other pocket price components.

The following figure shows three customers of a distribution company in Brazil (figure 2). These clients belong to the same segment, have similar sizes and are in the same region. Even though they have similar invoice prices, the different transactional costs lead to a huge pocket price variation.

Figure 2: Pocket price variation in a distribution company (R$)

On a macro level, the pocket price dispersion map (figure 3) provides great insights. When analyzing beyond the average prices, managers can properly identify profit improvement opportunities looking at the customers with lowest pocket price, the source of profit erosion.

Transparency comes when every salesperson has access to the same level of information. With accurate information about pocket price dispersion managers can diagnose revenue and margin leakages and create individual action plans to improve results at the client level.

However, the diagnostic of margin erosion always comes after the sales transaction has happened. It is also necessary to create mechanisms to avoid the revenue or margin leakage at the moment the sales transaction occurs.

Figure 3: Pocket price dispersion map

Step 2 – Drive salespeople behavior through clear processes, policies and escalation rules

The second step relies on having a clear process to create such mechanisms. At the moment of the transaction three conditions need to happen to drive salespeople behavior:

• Provide commercial team with relevant information to the price setting decision. Information, such as, customer size, segment, volume, revenue, pocket price and margin;
• Measure financial impact on customer margin/pocket price when the transaction happens;
• Forward decision to different approval levels if profitability requirements are not met;

A better quality of pricing deals also comes with the senior management involvement. Top performers companies in their industries have the participation of C-Level on the most important commercial decisions and consistent accountability for pricing control according to a study conducted by Deloitte Consulting.

Proper escalation rules will force the salespeople fight for better prices to avoid that the decision goes to their superiors. Escalation rules also have another positive effect on the sales team: shared accountability for non-profitable decisions with the senior management.

Step 3 – Train salespeople using the top performers as a reference

Persuasion and negotiation training are important to sales, but they are not sufficient for a successful price management.

The best pricing practices can be mapped using the peer pricing concept, brought by Simon Kucher & Partners, which takes into consideration the outcomes of the most successful sales rep and uses them as a benchmark for the whole team.

Put the salespeople together in the same room to explain the reasons behind the pocket price dispersion, debate about causes of revenue & margin leakage and learn the best pricing practices will help them to make a precise diagnostic and to identify the critical success factors for fully target price achievement.

With the peer pricing concept implementation, the top performers are the object of recognition among their colleagues. The proper credit associated with the right incentive, steer the behavior of the sales team in the opposite direction of predatory pricing execution.

Step 4 – Review incentives stimulating a non-discount practice behavior

Right incentives, first of all, should be aligned with corporate strategy. When setting the business strategy, the senior management should prioritize the key performance indicators (KPI’s), which should be reflected in the sales incentives scheme.

The incentives should also focus on profitability and not only on revenue. Today companies are creating incentives based on a set of components: volume driven (e.g. sales volume, revenue or market share) and profitability driven (e.g. contribution margin, pocket price or EBITDA). More and more, profitability has become a relevant part of the incentive.

Finally, some incentive design methods have been proved to be successful in pricing implementation: 

• Incentive (variable compensation) as a relevant part of total compensation
• Establish more frequent payments for variable compensation
• Automatize KPI generation for the variable compensation calculation
• Simplicity and transparency on the incentive composition and calculation

Final remarks

Price execution excellence should be one of the top priorities for the senior management, and the following steps are crucial to achieving it:

• Provide transparency: manage prices at a transactional level
• Drive salespeople behavior through clear process, policies and escalation rules
• Use salespeople to diagnose the current situation and identify margin improvement opportunities
• Train salespeople using the top performers as reference
• Review incentives (alignment with corporate strategy) and stimulate a non-discount practice behavior 

Excellence in pricing implementation takes time, requires discipline and commitment of the senior management. Companies should focus on the steps described above to reach their target prices fully.  
 

Join this webinar with members of the Kantar XTEL team for a deep dive into the results of the company’s 3rd annual RGM Study. The study investigates the top ambitions for FMCG’s in terms of investments for the future, negative and positive impacts across revenue management, trade spend plans, top major challenges in the next 12 months and more. It’s the only CPG industry study into RGM priorities and challenges, top ambitions of FMCG leaders plus actionable recommendations for successful RGM transformation. Register today.

Pricing managers have conflicting edicts with other functional teams. If you can't centrally control your strategy it becomes piecemeal, multiple business units run clashing strategies, and frustrations become obvious. Understand your pricing decisions with bespoke price diagnostics, the ability to isolate and evaluate your pricing strategy and tactics, and centrally manage and rollout your pricing across the entire organization.

• Discover key solutions can help you design, control, and manage pricing strategies and increase profitability
• Learn how to use insights proactively to make better business decisions
• See applications of how companies have optimized and improved their organizations

• A concrete roadmap to a successful stakeholder management
• Nailing the RGM levers - Hear a real case study and its implementation
• The key challenges and solutions of Regional / Local governance

• Data & analytics road map to improve pricing maturity
• Data visualization & management – How to leverage the full potential of data and what tools are available
• Testing different points: hear a successful revenue management, pricing and analytics integration

Have you hit a ceiling when it comes to price increases? Feeling the strain on your volume growth and bottom-line? Considering promotions to drive growth, without sacrificing profits?

If there’s a growing sense of urgency to dial up promos in 2024, join this webinar to learn how to effectively command the "promotion lever" with precision and certainty.

The key to optimal promotions strategies which drive incremental value, is understanding and predicting consumer behavior.
Given today’s market dynamics, SKIM’s revenue management practice conducted new research to explore shifting price perceptions in Europe.

Join us to hear these insights and the promotion secrets to creating a win-win-win for your company, retailer and consumer.

Key takeaways:

• New consumer insights on how promotions influence purchasing decisions across multiple FMCG categories
• Key consumer behavior “considerations” to incorporate when devising an effective promotion strategy
• Where and when promotions should best be utilized to drive a healthy business for you and your retail customers
• Which promotion attributes best drive conversion from consideration to purchase, across channels.

Introduction to Pricing Initiative Challenges 

Pricing initiatives can be derailed by a lack of executive commitment, resistance to change, or lack of resources or investment... the list is long, and anyone involved in implementing pricing projects is familiar with most of them. 

However, even within these undesirable scenarios, you can achieve some level of success. For example, if there is no executive buy-in or your budget is very limited, you can always run a small pilot with one business unit and prove the impact. 

But there is one limiting factor in any pricing or revenue management project: data quality. 

No matter how good your model is, if you are using machine learning or any other type of artificial intelligence, the adage "garbage in, garbage out" always applies. 

Pricing models are fed with many different data sets: transactions, customers, competitors, products, and weather forecasts...  

During a pricing conference, I conducted a survey and product data was a headache for 71% of the audience, so in this article, we will cover some best practices for product data governance that can be adapted to other contexts. 

In most cases, brick-and-mortar companies are lagging in digitalisation, and the focus is on other parts of the business, mostly on ensuring smooth transactions. On top of that, acquisitions and integrations are part of the growth path, so we have the perfect breeding ground for a perfect product data mess. 

Mastering Data Quality: Ensuring Consistency and Quality in Pricing Models 

In today's increasingly data-driven business landscape, product data consistency is crucial for organisations to maximise the potential of their data and make informed decisions. Ensuring that all departments and business units are on the same page when it comes to product data can be a challenging task, but it is essential for driving growth and maintaining a competitive edge.  

1. The Importance of Product Data Consistency
   
   The entire company needs to speak the same language when it comes to product data. Regardless of the business unit, geographic region, or department, a part must always have the same SKU ID. Period. Sounds basic, right? Go and check in your company. You might be surprised.
   
   Similarly, SKU aggregations to build meaningful and relevant hierarchies must be the same, as well as units of measure and conversions between different units.
   
   I remember one sales organisation that decided to classify 25-yard rolls as 22 meters instead of 22.86 meters because it was "easier to manage in the warehouse", so imagine how tricky to answer the simple question “How many meters have you sold during the last 12 months?”
   
   
2. Key Requirements for Product Data Excellence
   
   Based on personal experience and successful company practices, three basic requirements can be identified for product data excellence:
   
   - A dedicated team responsible for data governance and feeding data into all enterprise systems. 
   - Clear (and strict) rules for product classification and product data attributes. 
   - Processes in place for regular cleansing and maintenance to keep data content and structure consistent.
   
   
3. Challenges in Decentralized Organizations
   
   We see pretty often in decentralised organisations, or with very powerful business units, or in companies that grow and extend via acquisitions, that product data is managed at a local level, in siloes where each subsidiary does its best but without a common strategy and processes. 
   
   In these scenarios, data quality can be okay-ish -not quite often, to be frank, but consistency is hard to see.
   
   
4. Building Consistency Across Business Units: Inclusive Approach to Product Data Governance
   
   Consistency or, in other words, that everybody talks the same language when it comes to product attributes and aggregation is capital to:
   
   - Take advantage of larger datasets that are required to feed segmentation and classification models, and
   - Build meaningful and actionable reports, especially when consolidating information from different areas of the business.
   
   To build consistency, you need to establish some common ground and also acknowledge that, whatever you create, you are not going to satisfy everybody.
   
   But this does not mean you have to establish your product data requirement and processes in a “data lab” and cascade it down.
   
   The best practice here is to collect requirements and inputs from corporate but also deep-dive and make sure local organisations and business units are part of the process.
   
   It is not always the case, but most of the time, there are good reasons why people do stuff in a certain way. But that a certain product aggregation makes much sense in, let’s say, France due to local market specificity; it doesn’t mean it can work in Australia or Belgium as well.
   
   The best approach here is to listen to everybody who can contribute, gather best practices, ideas, and requirements, identify the highest common denominators, make a case for why and how the initiative will help the company achieve its goals, and explain to all parties what is in it for them.
   
   
5. Leveraging Top Management Support for Successful Implementation
   
   Persuasion, good communication skills and making everybody feel part of the process are your allies, but notice that from time to time, or with some individuals or departments, you will need reinforcement and support from the top management to make sure they embrace changes, so make sure you will have this support from top executives within your company.

Implementing Product Data Governance: Centralization, Cleansing, and Scope Management 

In the world of business, data is king. However, having access to data is not enough to drive growth and success. It's what you do with the data that matters. That's where a product data "dictionary" and "grammar" come in. But once you have built this foundation, what comes next?  

1. Establishing Product Data Governance Roles and Building Your Team
   
   Once you have built your product data "dictionary" and "grammar," it's time to determine who will be responsible for making decisions related to product data and who will be responsible for introducing the data into the system. There are different approaches to this, but one that has demonstrated success is to centralise product data governance to maintain consistency and efficiency in data feeding. As a result, you should prepare to ask for the necessary budget and create a team to handle these responsibilities, which will need proper training.
   
   
2. Implementing Robust Data Cleansing Processes and Monitoring Quality Metrics
   
   Once you know how and who manages your product data, you also need to put robust cleansing processes in place working at two levels: quality and legacy.
   
   No matter how well you have defined your rules of engagement to classify and define product attributes, and no matter how well the team is trained, there will always be mistakes. That’s a fact, and I have seen pricing initiatives derailing after a promising start a few times due to product data quality issues that generate a lack of trust or even the impossibility of measuring and tracking the impact.
   
   You need to define data quality metrics to track consistency and allocate time to regularly spot-check.
   
   The rule “it should be OK as nobody is complaining” does not work here.
   
   Basic data quality analysis should ensure that:
   
   - Each SKU is assigned to one and only one classification string,
   - Data attributes population follow a normal distribution, and  
   - Data attributes outliers and those sitting in the long tails (above 22- in absolute value) are reviewed and fixed.
   
   
3. Managing Legacy Data and Defining the Scope for Prioritizing Product Data:
   
   Legacy data management and cleansing is a large and complex topic that will require another article to just scratch its surface, so let’s cover the most basic principle: defining the scope. You can’t fix everything in one go.
   
   You might need to start with some specific product ranges or business lines, but if this is not given, common sense is always a good starting point.
   
   Identify the 20% of your products that generated 80% of your sales during the last 24 months so you can work with the current year and compare with the previous one, and then make sure all those products follow everywhere in the “dictionary” and the “grammar” you have already established.
   
   From that, expand the scope by adding more products in waves until you cover 99% of your revenue for the last five years.

The Final Principle: Data First, Then Pricing 

One final concept that should be carved in stone and is valid for all companies, all industries and all kinds of pricing or revenue management initiatives is that one: 

Only start your pricing project if you have got good data. 

If not, fix it first. 

Not the other way around, not in parallel. 

First, data, then pricing. 

Conclusion 

In conclusion, the success of any pricing initiative is highly dependent on the quality of data fed into the models. By establishing transparent processes and rules for data governance, ensuring consistency, and emphasising the importance of data quality, businesses can overcome the challenges associated with data management and move forward with effective pricing initiatives. Always remember: data quality comes first, and pricing initiatives can only follow once the foundation of reliable data has been established. 

By implementing these strategies, businesses can unlock the true value of their data and set themselves up for long-term success. 

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Businesses have been steadily increasing their emphasis on pricing, seeking to extract more value from their products and services. Consequently, the depth of understanding the pricing techniques and methods has evolved over time. This shift has seen a move from cost-based pricing to value-based pricing, focusing on customer and consumer price acceptance and willingness to pay. Along this journey, innovative tools have emerged that enable pricing to be segmented and targeted in ways unimagined in the 80s and 90s. 

Pricing departments have begun to establish themselves as standalone functions rather than part-time activity within Marketing, Finance, or Sales. As large corporations recognised the potential benefits of pricing flowing into their bottom line, measuring the maturity of pricing activities became increasingly important. Various models have been developed to assess and measure an organisation's pricing maturity. The majority are summarised into 4-5 maturity levels based on pricing methods, data science utilisation, and tools employed (see Figure 1). 

Figure 1: Price maturity measurements

All these factors are crucial for businesses continuously seeking to enhance value and margins. However, this article examines a different maturity scale – one that focuses on the effectiveness of technical pricing knowledge. In other words, what is the necessary maturity scale for translating technical pricing language across an organisation? The most successful companies, in terms of pricing, integrate pricing, value, and revenue management into their culture rather than treating them as individual projects or isolated departments. 

There are distinct signs and indications when a company is growing its pricing culture maturity. As a pricing professional, you can assess your organisation's stage and determine the necessary steps for progression. It is important to note that developing a mature pricing culture does not detract from the significance of pricing knowledge, data science work, or other essential models required for analysing value-generating parameters. Consider the following five levels to transform pricing from a standalone function to an integral component of daily operations, akin to learning a new language: 

Level 1: The pricing department follows instructions without contributing to decision-making – no seat at the table. 

Level 2: The pricing department participates in sales briefings and financial discussions – a small seat at the back of the room. 

Level 3: The pricing department actively contributes to strategic decisions – a seat at the table when convenient. 

Level 4: The pricing department serves as a value-adding partner across the organisation – a permanent seat at the table. 

Level 5: Pricing is deeply ingrained in the organisation's mindset and DNA. 

Level 1: Pricing is perceived as a cost centre with intelligent individuals working on complex matters, but their insights seem unrealistic and impractical. Consequently, pricing professionals are excluded from critical decision-making sessions, resulting in an "Us versus Them" mentality. 

Level 2: Business leaders begin to understand basic pricing terminology. Occasionally, pricing insights are comprehended and deemed useful, leading to the pricing leader's invitation to important meetings but without much room for input. It's the observer's small seat at the back of the boardroom. 

Level 3: This level represents a tipping point in pricing culture maturity within organisations. Business leaders grasp key pricing concepts and see the practical applications of pricing experts' recommendations. A dialogue develops between the two parties, and the positive outcomes of good pricing work become evident, increasing business leaders' interest in pricing. However, pricing's seat at the table is still conditional and often accompanied by a "be grateful you're here" attitude. 

Level 4: At this level, a comprehensive conversation about value takes place. Business leaders comfortably discuss pricing concepts and welcome new insights from the pricing leader. Pricing is considered as important as any other function, and its input is deemed essential for the collective success of the business. Pricing is perceived as an enabler rather than an inhibitor, and a sense of unity emerges with the hashtag #OneOfUs. 

Level 5: Business leaders become fluent in pricing, even to the extent of creatively incorporating it into their communication. The distinction between Pricing and Business dissolves as pricing is embedded across all levels and decisions within the organisation. At this level of maturity, the Pricing leader is seen as an innovator, and there is keen interest in what Pricing will bring next. Business leaders see, understand, and appreciate the value of pricing. 

The aforementioned cultural maturity scale is relevant not only for senior pricing management but also across all organisational levels. Languages are not learned in one go; they are acquired through multiple interactions and consistent practice. To improve pricing language skills within an organisation, a cycle of communication, reflection, modification, and re-engagement is necessary (Figure 2). 

Figure 2: Price Communication Cycle of Improvement 

As with languages, if you don't use it, you lose it. Additionally, languages continuously evolve, and pricing is no different. The markets in which we operate are constantly changing, necessitating innovative methods and approaches to pricing. Therefore, if there is no conscious effort to continuously upgrade pricing abilities and capabilities to enhance language skills within the organisation, the sense of unity represented by #OneOfUs can quickly devolve into exclusion, epitomised by #AloneOutside. 

In conclusion, mastering the language of pricing is essential for integrating pricing into your organisation’s culture and driving business success. By assessing your organisation’s pricing cultural maturity and actively working to improve it, you can ensure that pricing remains a key strategic asset for your company. 

Introduction 

The journey towards a successful pricing policy begins with setting clear objectives and adopting a flexible, step-by-step approach. This article presents the lessons learned from our experience in developing and implementing a new pricing policy that helped our company achieve various goals, such as increasing sales or optimising margins, ultimately leading to a more sustainable and profitable future. This article serves as a guide for businesses looking to create a new pricing policy and emphasises the importance of careful planning and execution to achieve long-term success. 

1. Defining the Strategy: A Compass for the Journey
   
   Embarking on the journey to redefine our pricing strategy, we started with the essential first step: establishing the criteria. As wise experts have said, the more we differentiate prices, the more profit we capture. However, selecting the right attributes and priorities to segment our prices is crucial, as attempting to include every possible factor might result in an overly complex, unmanageable policy.
   
   During our initial meetings with the commercial managers, we brainstormed attributes such as region, volume, zip code, the role of the brand, cost of logistics, strategic value of the customer, competitiveness, etc. We managed to list nearly all critical components of a successful pricing strategy. However, when we tried to integrate these concepts into a coherent policy, it became overly complex. We realised it may be way too difficult to explain it and make it easy for our sales representatives to understand and execute it.
   
   At that point, we took a step back to assess the most relevant aspects of our business and evaluate their execution feasibility. We decided to simplify and focus on the top two or three attributes. After all, taking that first step is often the most crucial. With a streamlined approach, we were prepared to add attributes and key factors incrementally to refine our price discrimination.
   
   So, when embarking on the journey to redefine your pricing strategy, we learned that you need to start small, focus on what matters, and evolve your strategy as you progress. This approach will set you on the path towards pricing excellence.
   
   Companies can either build their own pricing solutions or invest in best-in-class software, depending on their resources and vision. Automation and efficient workflows are essential in managing and updating multiple price lists.
   
   
2. Setting: Charting the Course
   
   Moving on to the second step, we needed to convert our strategy into tangible prices. The objective was to establish a price list that factored in the key attributes of our strategy. As you're probably aware, the market offers a plethora of pricing software, tools, and systems out there to help with this.
   
   My suggestion, as with all aspects of pricing, is to create a roadmap that reflects your company's pricing maturity. Evaluate whether you need best-in-class software or if a more flexible, custom solution would suffice. The decision to buy or build hinges on your organisation’s vision, resources, and expertise.
   
   In our case, we opted for an in-house solution using available cloud technology. This enabled us to create a tool that could generate and manage multiple price lists while expanding segmentation aligned with our strategy. For instance, the new strategy called for 13 additional price lists compared to our initial setup, making it impossible for any human being to set all the prices in time and form.
   
   Our solution overcame time and capability constraints by automating the process. In addition, by automating the process, we aimed to establish a workflow to manage data and business criteria for price list creation, followed by a framework for pricing analysts to review proposals, make adjustments, and update prices in pursuit of company goals. This was all integrated into a dashboard for analysis and detection of potential inconsistencies.
   
   So, when transitioning from strategy to pricing implementation, consider a tailored roadmap and weigh the pros and cons of buying or building a solution to ensure success.
   
   
3. Execution: Sailing the High Seas
   
   Armed with a strategy and robust price lists, our focus turned to execution. Sales representatives play a critical role in implementing the pricing policy in the market because they bring these prices to life. It is crucial to empower them. Never forget that they are the driving force behind price changes. A price in an ERP, excel, or another tool is not a price; it is only a wish until placed in the hands of the execution agents. It must be put into action to have any real impact.
   
   Understanding the processes and updating information for the execution part is vital. Effective communication and providing access to accurate, up-to-date information are essential to ensure that price lists are readily accessible and utilised by the sales force. To bridge the gap between setting and execution, we implemented a framework that connected the two processes.
   
   The final step in the setting review involved pricing analysts approving the previously reviewed proposal. They could then update the new prices in the company systems using an automated workflow. Additionally, analysts had the responsibility of monitoring price dispersion, updating it in the commercial systems to maintain control during execution, and ultimately, generating a tangible impact.
   
   As pricing professionals, it's essential to remember that the effectiveness of our strategies and price lists relies on seamless execution. Establishing a solid framework and workflow that connects setting and execution processes can make all the difference in ensuring a successful pricing implementation.
   
   
4. Processes and Control: The Steady Runner
   
   Processes and control are integral components of any pricing initiative. As Paul Hunt and Jim Saunders emphasised in "World Class Pricing," pricing is fundamentally a process. When adapting your pricing policy, it's essential to establish or refine your processes and measure performance. Neglecting the importance of processes and control while making changes elsewhere can render your efforts futile.
   
   Well-defined processes help maintain necessary structures, identify anomalies, control execution levels, analyse possible deviations, and be in control of your pricing power. Our experience required us to introduce new processes not only for pricing and sales teams but also for marketing and finance. This was due to the incorporation of competitive and value-based factors in addition to cost-based criteria in our policy.
   
   Addressing essential aspects like communication about new products, price list changes, discount establishment, and internal interactions became necessary. It's vital to ensure that the new working method penetrates all organisational levels; pricing leaders and their teams must develop and integrate these processes.
   
   While there's no one-size-fits-all approach, as each company must update or redefine various aspects of their workflows, we found that focusing on processes was a key factor. Initially, our attention was on devising the right strategy, enhancing execution, and communicating the policy. However, it wasn't until we implemented new processes that we confidently progressed on our pricing journey.

Final Thoughts: The Treasure Map to Pricing Mastery 

Looking back on our expedition, I would like to emphasise the most crucial lessons we have learned: 

• Invest time in defining your strategy and selecting the main attributes for price discrimination. Don't let your ideas gather dust - transform them into reality. Take action and start small to avoid getting stuck.
  
  
• Ensure your setting process is constantly in alignment with your pricing policy and transform your strategy into actionable price lists. 
  
  
• Integrate your approach at all levels of your company, communicate the value strategy, and make price lists available to those who need them.
  
  
• Never underestimate the power of processes and control. Focus on defining new processes or updating existing ones, as they are the backbone of your pricing strategy and will grant you control over your pricing power.

By embracing these lessons, you can successfully navigate your own pricing journey. As you forge ahead, remember that your pricing journey will be filled with twists and turns, challenges and triumphs. Keep your eyes on the prize, and never forget that the ultimate goal is to maximise profit and drive your company towards a more sustainable future.  

In the ever-changing business landscape, our tale of redefining pricing strategy stands as a testament to the power of innovation, determination, and adaptability. As you navigate the waters of pricing transformation, may you draw upon the lessons we have learned and chart your own course to success.