Working with a Pricing Consulting Service?
The two biggest complications your pricing consultant will face are when you have lumped customers with different pricing behaviors into the same group, or grouped products with different pricing sensitivities into the same group.
Accurately segmenting customers and products involves both the knowledge of pricing strategy and direct experience in your specific markets Only you and your own employees can accurately answer questions about your customers and markets. With the right software to visualize gross profit performance and optimize pricing, your internal experts will be far more effective than any outside consultant could hope to be.
Improving your pricing strategy can bring an extra 2-4% of gross margin to your bottom line. If you are using outsourced pricing consulting services, epaCUBE can help you get even better results.
Apples Are Not Oranges
An outsourced pricing consultant service can only go so far to help with the basic math of price optimization. There is more to pricing strategy than just crunching numbers. An outside consultant cannot know your markets, strategy or tactics like you. Pricing strategy requires proper segmentation. Occasionally, an orange can fall into your bucket of apples. Not all small customers should be treated like small customers. Just because a product is in a price sensitive sell group doesn’t mean you couldn’t break it out for special pricing. Pricing consultants can only work with the data you give them. If you give your consultant bad segments, you’ll get bad answers.
epaCUBE Can Help Your Consultant Help You
epaCUBE can help you prepare you data so the results from your outsourced pricing service are relevent to you strategy.
Unfortunately, using inaccurate customer and product groups in an outsource analysis can provide disastrous results. Here are some of the risks you face if you don’t properly segment and rework the product, customer and historical sales data you provide to your consultant:
- 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 the “black box” pricing the system gives them based on historical data 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.
- Customers on contracts and those on supplier special pricing agreements are typically just thrown out of the third party consultants optimization analysis as simply outliers. There is gold in this data for potential gross profit improvement through better negotiation with both the customer and vendor.
You Must Own Your Pricing Strategy
The prices you provide your customers are your single most important touch point in your relationship. Your pricing strategy involves much more than analyzing sales history. Sales history can tell you something about where you’ve been, but you cannot drive forward by only looking in your rear-view mirror. You need to establish a pricing strategy that reflects you goals, your unique customer relationships, your product mixes and your relationships with your vendors and customers.
The good news is that by using epaCUBE, you will be able to better segment your customers and products into appropriate groups based on market information and real behavior so that when you deliver your files to your outsourced pricing consultants they will have much more accurate information on which to base their analysis.
epaCUBE puts you in total control of your pricing strategy, helping you perform ongoing analysis on your product and customer groups so you can quickly see which ones are grouped incorrectly.