The objective of pricing optimization is to achieve the highest sustainable prices for the entire portfolio of products across all market segments and channels.
The MarginMaxTM solution starts with a rigorous evaluation of contribution margin by product, customer, channel, and territory. From this evaluation, decisions can be made to rationalize products, manage customers differently, renegotiate channel relationships, or redeploy salespeople and marketing resources by territory – all to optimize contribution margin dollars.
One of the first implementation tasks is to assure that pricing policy is followed by all company personnel. This will mean retraining people, finding the right step in the process to establish an effective control gate, and finally for management to reset expectations and respond to any non-compliance with quick corrective actions.
Companies often design products and then ask “How much can we get for this?” Many companies are still basing prices on actual costs. Advanced managements have moved to strategic pricing – pricing on their customer’s perception of value. MarginMax uses a proprietary, software-based model to test price elasticity by customer segment. Strategic value based price changes will optimize gross margin dollar contribution.
Pricing in all markets today is a dynamic challenge. Prices must respond to competitive moves, product life cycles, economic conditions, and customer's changing perceptions. Establishing a responsive process, which can quickly reset prices as required, is critical to achieving the highest sustainable prices, revenue, and gross margin dollars. A MarginMax optimized pricing process implementation will train your team to use the proprietary modeling tool and maintain prices at the highest sustainable level.