From manufacturing to airlines to healthcare, large businesses are realizing the importance of understanding the impact of each and every pricing and costing decision on profitability. Instead of using gut feel, they want to use hard economics for pricing. Instead of using unquestioned thumb rules, they want to use data to continuously optimize cost parameters of their procurement, servicing and transportation contracts. Revenue management practices has been shown to provide 1-3% gains in profits across industries. To take its full advantage, however, revenue management practices must be integrated into day to day practices of the company, such as pricing, product-mix, service planning, procurement, and logistics.
What is the right price for a product in a specific customer segment? How much volume do you gain or lose by changing price? What mix of products and channels gets you the maximum profit? With the help of latest advances in pricing science, companies are in a position to continuously optimize their prices. Besides maximizing immediate revenue, they can use pricing as a strategic lever to shape the market itself.
Are your production and procurement plans consistent with your sales plans? Does your allocation strategy reward your best customers? Are you allocating too much of your capacity to low margin products? Are you better off reducing production? We use optimization science to answer such strategic questions that all too frequently remain unaddressed because they lie between silos. We leave behind tools that will help you continuously determine the right level of supply and production capacity and best match your demand and supply.
Is your customer segmentation based on real data? Do you need more segments or less? What set of attributes should drive segmentation? Customer segments allow companies to identify the true matrix of markets for their products. Each segment values products in different ways and hence should be priced independently. Defining a manageable set of customer segments that have similar demand characteristics lays the foundation for a rational, transparent and thus more profitable approach to pricing and promotions.
Do you have a process to continuously update the key parameters in your procurement contracts? What type of cost structure is best suited for your business? How much risk are you exposed to in your contracts? For many low-margin manufacturing businesses, the key to their competitiveness is costs. We help our clients minimize their costs via better risk management, improved outlook of commodity markets, dynamic adjustment of raw ingredients, and optimized purchase pricing.