Pricing and Profit Optimization
To achieve superior results in the post-recession business world, companies need to optimize both their profit and cash generation. Axafina outlines the three elements of a profit and cash optimization solution.
One of the key drivers of superior results in pricing and profit optimization strategies is effective customer micro-segmentation leading to more targeted pricing, which in turn enables companies to shape demand. Axafina PPO creates superior results companies by helping clients better understand customer needs and price sensitivities. PPO develops a unique strategy and then translates the needs, price sensitivities and vision into market leading value propositions, prices, and tangible rules the business can follow by microsegment. The strategy and implementation program combines actions by marketing, sales, customer service and supply chain to deliver targeted pricing of particular offerings for specific customer segments.
Optimizing pricing must go beyond understanding customer needs and sensitivities, though. Product lifecycles and business cycles also play important roles in closed loop pricing and profit optimization.
Axafina’s PPO provides the agility companies need for management of yield and marginal economics to anticipate business-cycle fluctuations. New strategies are doomed to fail unless they take into account the existing infrastructure, culture and processes. Axafina’s strategic guidance includes Diagnostic services to understand the existing processes and create a transformation roadmap.
The PPO’s Operational Model Design service develops an operational model that includes systems and data quality evaluations, along with “to-be” process development.
One of the key levers of sustained profitability—and thus of superior results—is pricing.
Smarter pricing drives higher net income than cost reductions, and can lift revenues by up to 8 percent while reducing promotional spending and markdowns.
Just developing a pricing strategy and organization, or buying a standalone analytics package is, however, not enough. Axafina believes that companies must take a closed-loop approach to maximize the impact of pricing strategies on their profitability. This learning process continuously observes and responds to market reaction to price changes. A closed-loop approach also enables organizations to update pricing strategy at the microsegment level.
The closed-loop approach includes four fundamental pricing capability areas: strategy, analytics, price setting and execution. These areas are in turn supported by governance of the entire pricing process and a robust pricing data infrastructure. The result? World-class strategy aligned with execution for the long term.