How would you define your company’s worth in the absence of sustainable pricing?
One can create the best of products, offer the best of services, and place them on the best of platforms with the support of the best of resources, however, its all obsolete unless an efficacious pricing strategy is applied to administer the investments, sales, ROI, and ultimately the KPI.
Like every other step in a supply chain, pricing is reaching out to join hands with digital technologies to revolutionize profit potentials and the pricing decision making processes. Before we delve deeper into how this can be brought about, let’s first understand what our ultimate pricing goal is.
The Concept Of Pricing Excellence
Pricing Excellence is a five-step framework, which aids the assessment and analysis of maturity of the value and pricing performance of an organization’s pricing policy. A company that has reached the stage of pricing excellence is believed to have obtained the most optimum and optimum pricing strategy that ensures the presence of all variables.
Pricing development in any company is typically measured in five phases of growth based on the degree of deployment of, and extent of adherence to systems and structures with regards to pricing policies on the corporate level as a whole. Based on the maturity of the process implementation, they are disaggregated into the following grades:
Level I Out of control
Level II Controlled
Level III Value-Based
Level IV Optimized
Level V Excellence
After successfully classifying the processes, planned efforts are made in the directions of implementation of new policies and amending the existing ones to upgrade the potential to the next level with the ultimate aim of reaching excellence.
Impact of Digital On Pricing Excellence
Pricing is driven by several determining factors such as the market for the product/service, the current time of the year, demand, and the characteristic features of the product. Human-oriented conventional pricing techniques have long been redundant and in no way are capable to comprehend the pecuniary impact of all the above mentioned dynamic factors on establishing pricing excellence.
Digital tools, technologies, and transformation have brought in the whole world of difference in pricing by ensuring expansive data management, precision in analytics, and burgeoning growth. Let’s break up the scope of digital and explore the four top ways it is impacting and thriving pricing excellence.
Artificial Intelligence and Machine Learning’s Pricing Revolution
Softwares and tools based on artificial intelligence or machine learning evaluate a wide range of aspects such as consumer behavior, seasonality, elasticity, currency rates, brand perception, among others on a real-time basis and in a synchronous manner.
This leaves little to no scope of error, thereby increasing the chances of attaining ‘excellence’ in its true sense. Three primary ways in which AI and ML are revolutionizing pricing are:
Computing: Algorithms, simplex, and complex equations set in price-specific programs compute the prices at which products should be listed, in sync with market conditions, competitor price elasticity and other factors at any given point in time.
Analytics: Big data processing and pattern analysis can be done in a fraction of second by intuitive tools that also help to make optimum decisions with regards to discounts and promotions policies.
Strategizing: Algorithms replace exhaustive programs to interpret trends and predict exclusive ones for brands. Intelligent tools generate flexible pricing strategies catering to requirements -- dynamic in case of competition in the market and optimum for finding the optimum and most highly defined cost function.
Digital Generating Innovative Pricing Models
There’s no limit to the extent to which the right pricing models can take your brand in terms of reputation, sales, profits, and overall sustainability. The goal of digital pricing models is to create a dynamic pricing environment and there are several such tool services available at your disposal that global industry leaders are turning to, for optimized models.
Trifacta Pricing Models are excellent with handling and interpreting Big data to generate strategies with a focus on core wrangling and key features like data profiling.
BigML offers competitive pricing models that are excellent for predicting trends and market sentiments along with being incredibly easy to use ML tool.
Tableau’s models are popular for its live connections and real-time insights with the reliable back up of Hadoop, Salesforce, and Google Analytics for data storage and processing.
Digital Advertisements Facilitating Cost-Saving Price Shifts
Hatching profits through advertisement has been the way to go forward for organizations, no matter what the industry is. However, digital transformation in advertisements has created the need for advanced pricing models that can capitalize on the shift to generate profits.
Let’s have a look at a comparative logic to understand this better:
Advertisement shifts from simply billboards and magazine pages to websites and social media.
What could reach a million people in investment for about 50 pages or 50 times expensive billboards can reach multiples of millions in a single post.
Cost-cutting through digital advertisements is facilitated while also paving the way for optimizing further pricing strategy through demographic data obtained by the information of views, clicks, impressions, and engagements with such advertisements.
The short-Term result is a drastic price-shift and Long-Term results are improved sales and profit margins.
The Counter Approach: Pricing Excellence Adapting To Meet Digital Service Needs
We saw how digital tools and technologies are upgrading pricing solutions towards achieving excellence. Now before we conclude, it is only fair to take a look at the transverse scenario.
Coming of age strategizing calls upon pricing strategies and models that are best adapted for digital platforms and services. These include the subscription-based service models, e-vouchers, cashback options, and more such models that companies are integrating to match the fast-paced needs of the digital world.
Without ensuring that the pricing strategy gives adequate emphasis to digital, it’s impossible to connect pricing with the enhanced overall customer experience and attain excellence. This means we can safely conclude that digital transformation and pricing excellence are mutually interdependent.