Basics of a Price Improvement Initiative

Are you thinking about creating a Price Improvement Initiative in your business?

Good news first

The good news is that likely, your system already has most of what is necessary to execute a basic pricing initiative, resulting in higher profits and higher revenue. In fact, price optimization is largely dependent upon the same historical data within your ERP that purchasing, inventory control, marketing, and sales rely upon. Without changing much, your organization is already in a position to benefit from powerful price optimization science.

Minimum requirements

In the early phase of a price optimization initiative, a minimal amount of ERP historical data is required. This might include movement, margin, and a minor assortment of other segmentation options if available. Once an individual becomes comfortable with the interface, there are many more analytics to consider, implement and build upon, as an organization advances in their pricing science initiative.

Understanding the pricing science initiative

Often times, companies have an incomplete understanding of what it really means to initiate pricing strategies and tactics through automated software. Pricing strategy is all about being proactive and anticipating customer behavior, as opposed to adapting to it afterward. Price alone is seldom the only cause of poor performance. It is important to understand the whole picture in regards to value based pricing, price automation and optimization methods. The pricing science initiative is the process of not only discovering the majority of your customer’s maximum willingness to pay, but also the process of learning which products that merit an increase in the price, which should be lowered and which should not be changed at all. Understanding your customer’s willingness to pay is the path to value-based pricing initiatives. This in turn forms the foundation for value-based price optimization.

Communicating value

Do you put a premium on products that offer substantially more value than the competition? When shopping yourself, what is it that you universally value? Is it a freight discount? Is it the fact that the company has the product in stock when you need it? Or is it the reputation of the organization? All of these issues (and more) create value in the mind of the consumer. Estimating the value of your product requires an honest assessment of your firms organizational strengths, and how those strengths answer your customer’s needs. In turn, translating those needs into product features and benefits are strategic tactics that your customers will appreciate. These value-propositions may be directly or indirectly related to the product. The value strength can then be measured, filtered, and used as an analytic in your pricing initiative. This is just one example of how communication of value can play a strategic role in price optimization.

Cleaning your product data

Leveraging good data is paramount to the pursuit and execution of pricing excellence, and of course is a goal that you should always strive for. The more complete your ERP information, the more powerful options you will have to strategically price with. If your data needs work, there is a hidden value in that Promoter® also features a trove of opportunity that goes far beyond simply correcting and optimizing prices.

For example, Promoter® is highly effective as a clean-up tool as well, quickly identifying anomalies and erroneous issues in your product data other than the price. Are your product descriptions inconsistent? Promoter® will find them. Has someone in the organization failed to input a cost on a new product, or is supplier information missing? Promoter will find it all. Promoter® makes discovering, cleaning, and maintaining your data infinitely easier.

As always, I hope that this information is helpful, and good luck in your pricing journey!

For more information, contact:

Advanced Pricing Logic® Software Inc.

1770 Saturn Way

Seal Beach, Ca 90740

562 594 0275 B

562 594 7275 F

www.aplpromoter.com

By Dave Leonard

Chairman, Advanced Pricing Logic Software, Inc.

ABOUT THE AUTHOR

Dave Leonard is the CEO of Advanced Pricing Logic. He has over 30 years of executive management experience in multi-channel retail, distribution, manufacturing, and catalog merchandising. Mr. Leonard has extensive experience in the area of technology analytics as it relates to price optimization for the mass marketer, inventory control and optimization, purchasing optimization, and consumer pricing psychology.

ABOUT APL

At Advanced Pricing Logic we are dedicated to designing innovative analytic software that makes our customers more profitable. Our software transforms data into insight and provides the platform to turn insight into action. Designed by business professionals, our software follows three guiding principles: encapsulate world class analytics, enable customers to take sound action through easy to use applications and ensure ROI less than a year after purchase.

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