The Challenge
Pricing is important for any business as it has the power to steer or destroy a company’s operating margins & revenue. In today’s heavy competitive world where price is a huge factor in consumer’s buying decision, it is utmost important to keep your product at the right price depending on what you want to achieve – Maximizing your profit OR maximize Revenue OR maximizing a balanced Profit & Revenue.
The Approach
Our Pricing solution is empowered by 4 following key pillars:
- Brand Portfolio Assessment & Brand Positioning: Identify brand architecture and determine effective brand portfolio strategy by looking into –
- Which brands are underperforming?
- What is consumer’s perception of the brand in the portfolio?
- Does the premium products higher priced than regular products?
- Competitive Benchmarking: Make pricing strategy decisions based on competitor actions by looking into –
- What is the price position in the market compared to competitors?
- Which competitors need to be focussed on?
- Price change frequency of own v/s competitors and who follows whom?
- What price changes required to gain competitive advantage?
- Price Elasticity: Measuring true price elasticity for products is important as it can be used to identify the price points of maximum profitability – i.e. the point where the increased prices & margins are offset by lower demand and sales. InvoLead brings in best-in-class pre-built ML driven non-linear modelling framework that truly captures the price elasticities along with other influencing factors. Based on Price Elasticity magnitude, following price elasticity zones can be defined –
- Perfectly Elastic: A small change in price results in very large change in volume sales. Consumers are most priced sensitive here
- Somewhat Elastic: A small change in price results in significant change in volume sales
- Unit Elastic: A changes in price matches with changes in volume sales
- Relatively Inelastic: Large change in price cause small changes in volume sales as people are not willing to change their consumption
- Perfectly Inelastic: Opportunity to increase the price as consumers don’t bother about the price increase as they absolutely need and must pay the set price to obtain
- Optimization: Our non-linear & convex optimization engine is flexible to optimize prices based on business need. It has the ability to optimize price points to maximize margin, revenue or a balanced approach between them post applying different business rules constraints like Family Rule, Brand Rule etc.
The Impact/ Potential Benefits
- Improved Gross Margin in the range of 1-5% annually
- Competitive pricing & promotion capability