Sales strategy and pricing

Traditionally, the pricing mechanism has involved adding a fixed margin to the cost of the product or service. The reality, however, accentuated by increased competition and greater complexity and speed of change in the socio-economic environment, has shown that pricing cannot be static.

Thus, pricing systems must be based on real-time models which consider, among other factors, the upward or downward market trend, competitive positioning, company cost structure, as well as supply and demand indicators, segmented, at all times, by product, channel and client type. Obviously, this pricing strategy should be part of the company’s strategic plan framework and must be accompanied by an effective communication plan.

When it comes to a business with high fixed cost structure, a non-storable product or service and the possibility of advance sales, real-time pricing can be obtained through Yield Management, with the constant adjustment of pricing according to algorithms based on capacity and demand, records and segmentation of other variables. This is, for example, the case in sectors that have spent many years working in this way, such as hotel chains, airlines, car rental companies, online sales companies and the railway sector. The Retail sector is gradually adapting to market demands.

“For the same volume of sales, a 1% price increase generates an improvement in Operating Income that is three times higher than that produced by the same cut in fixed costs or twice as high as the same increase in sales”.
The joint use of dynamic pricing models, multi-test environments and BI creates a short-term revenue increase, making it possible to measure the impact of different strategies in real time for the eventual application of optimal policies.

Range of services IdeAnd Consulting:

At IdeaAnd Consulting, we believe we can help guide you throughout this entire process, offering you a specialised and tailored service, focusing on, among other things:

  • Advice on pricing and revenue strategy.
  • The implementation of a pricing system:

    • Initial analysis of existing policy.
    • Identification of opportunities.
    • Implementation of dynamic pricing management tools and of a multi-test environment.
    • Implementation of Business Intelligence (BI) for test analysis.
    • Final knowledge transfer phase and team training on computer tool use and results analysis.

Similarly, we also develop automated systems to:

  • Analyse research, sales and conversion, identifying changes in behaviour with a system of alerts.
  • Capture of competitor information.
  • Construct data mining and reporting systems.
  • Source sector benchmarking assessments and identify opportunities.

Pricing policy is frequently not seen as a strategic issue for a company. There are several reasons for this:

  • It is a complex process, with a large volume of data and there is no single methodology to manage pricing in a way that is flexible yet rigorous.
  • There are few professionals who specialise in pricing management. There is no single clear view with regard to cost structure, the perception of value and pricing policy.
  • Many companies mistakenly believe that they must passively accept pricing across all products, markets and sales channels.
  • Resistance from the sales force when personnel are rewarded based on volume of sales.
The pricing and revenue management systems seek to sell the right ‘room’ to the right customer at the right time and at the right price. This is, without doubt, one of the least professionalised disciplines within companies and the one that has the greatest and most immediate impact on results.
Greater pricing reductions are certainly not synonymous with greater client fidelity or with larger sales volumes. On the contrary, there is a risk of selling less with a lesser margin or even of selling more but without satisfactory compensation. It is therefore clear that this is a strategic issue for any company, with a direct impact on results.

Please do not hesitate to contact us to discuss any requirements you may have and explore areas of activity for improvement in this field.

IdeAnd Consulting