Price & offer management

The price of a product or service is difficult to describe objectively and depends on many factors, such as price perception or communication. Our Pricing Excellence tool provides a systematic approach to optimizing sales and pricing.

For many companies, price management is a major challenge. Saturated markets and excess supply have made pricing increasingly important, as have rising price sensitivity, competition and the decreasing effectiveness of established steering mechanisms.

The price of a product or service is difficult to describe objectively and depends on many factors, such as price perception or communication. While most companies have systematically optimized cost and quality for years, the more complex issue of optimizing pricing and sales has been addressed on a case-by-case basis. For this reason, we have developed the Pricing Excellence tool, which provides a systematic approach to optimizing sales and prices.

With this tool, the levers for achieving pricing excellence can be systematically identified and developed. The tool helps avoid a broad spectrum of pitfalls, including giving hasty price discounts. It also enables companies to identify price increase potential as well as implement smart pricing models and smart price differentiation.

Pricing excellence can be achieved in several ways, including:

Developing premium strategies and eliminating pricing inconsistencies

First, the appropriate price of a product or service has to be determined. The premium and luxury segment, for example, often offers untapped potential. Next, pricing inconsistencies are identified and eliminated. In the pricing process, it is important to consider costs that at first glance appear to be borne by the customer, but are in fact incurred by the supplier (typical example: return of packaging). Here as well, major profit levers often remain hidden.

Implementing optimized price models such as bundling and non-linear pricing

Offering different products in a single package, otherwise known as bundling, can simultaneously improve profits and sales volume. The idea is relatively simple: complementary products are sold together, which increases customers' willingness to pay. For instance, the offer ranges from barbecue grills sold with charcoal, or package tours combining flight and hotel bookings. Another example is McDonald's "Value Meals": Customers are either hungry or thirsty. By offering a bundle, McDonald's ensures that most customers will buy both a meal and a drink, even through they would not do so if the "Value Meal" weren't offered. In cases where the customer would buy the product regardless of whether it is offered as a bundle, unbundling may be a more profitable option. Ultimately, the customer expects a price advantage, which should be considered when deciding which type of offer is more appropriate.

Treating different customer groups based on performance and importance

Adjusting reseller conditions or justifying higher prices by citing rising costs are other ways to optimize pricing. An example: In the past, a leading consumer goods manufacturer offered discounts to distributors that had many outlets, and another discount for selling many of the manufacturer's products. Today, distributors must have both, as only the combination is rewarded. This adjustment has had a considerable impact on profits.

Customer segmentation also makes sense. Differentiating not only between small and large customers, but between customers with differing levels of price sensitivity is particularly important. Customers with low price sensitivity are often charged the same prices as customers who are highly price sensitive – sometimes, even less. This means that profit potential is left untapped.