Posted: Mar 18, 2021
Pricing is one of the most important elements of every business. With the wrong price, you risk driving customers away. With the right price, you have the ability to maximize profits and when managed well, can lead to business growth.
Being confident in a pricing strategy is often rooted in having real data to back it up. Guessing about customer motivations and values can often create gaps in the value versus pricing, and can mean businesses losing out on opportunities to increase revenue or customer acquisition, ultimately stunting growth. Understanding and utilizing pricing analytics can provide a stronger foundation for businesses to understand how price changes affect the business model and how to optimize the pricing strategy for maximized profits.
What are Pricing Analytics?
Pricing analytics are metrics and tools used to integrate data from diverse business channels and analyze factors such as sales forecasts, demand, market intel, seasonality, competitor positioning, and referencing price points to create a holistic pricing analytics model and allow for more accurate, data-driven pricing decisions.
Price Elasticity Analysis
Pricing and Promotions
To predict how demand varies at different price levels and to leverage to the optimum price points to maximize profits.
To determine how sensitive the target audience is to price changes and maintain customer retention.
To measure ROI against promotion performance and provide insight on how to enhance overall promotion effectiveness.
To better understand customer segments to increase both revenue and profit, keep a high level of customer satisfaction, and reduce churn.
To understand where your business is positioned among market competition in regards to pricing structures.
How Can Pricing Analytics Improve Profitability?
Instead of doing a historical analysis of previous projects to determine future pricing, using intelligent data analytics can save businesses time and resources by creating streamlined solutions that track margins. In Service-focused companies, utilizing pricing analytics tools is particularly insightful because of the tiered pricing models that are generally offered. Having data-driven insights into how many tiers should be offered, the optimal price for each tier and which consumer segment might use each tier can set the foundation for more targeted growth without the need to add products or features to current offerings.
The use of pricing analytics ranges from customer acquisition and ensuring your pricing strategy targets the right customer segment, ensuring the current prices are optimized for their value, or discovering which promotional strategies and marketing channels are creating the highest ROI. Having the ability to analyze high level data or evaluate the details of pricing can identify quick wins – pricing leaks, underpricing/overpricing, missed upsell opportunities – or set your company up in achieving long-term strategic goals.
By starting to track pricing analytics today, you can mobilize your data and use it to your advantage. When companies use these analytics well, they see the immediate benefits to margins and start to build a stronger foundation for growth. Contact us today at [email protected] and let’s talk about how your organization can unlock the value of your data and use it for growth.