January 28, 2009
The art and science of price strategy is not easily understood, let alone mastered. P.J. Jakovljevic at Technology Evaluation Centers (TEC) has undertaken this field as part of TEC’s coverage of supply chain issues.
Jakovljevic demonstrates keen insight in the not-to-be-underestimated area of pricing and offers several interesting articles via the TEC blog. He recently posted Part 2 of his analysis of SignalDemand, which I encourage you to check out, along with his overview of other pricing technology vendors. Here’s a brief excerpt to give you an idea:
Pricing Science of Matching Supply and Demand
Other price optimization solutions really only consider the demand side of the pricing equation, and these results are insufficient for manufacturers to make decisions when they need information on capacity and production constraints as well. SignalDemand’s hand-picked team of scientists and mathematicians from prestigious universities have built a pricing science based on eight pending patents.
This sophisticated science drives the recommendations provided by the software application. When making decisions on margins, the idea is to account for all major profit drivers such as to
- align strategic business objectives with pricing decisions;
- understand demand drivers to forecast future sales;
- account for fluctuating costs;
- on the supply side, account for asset utilization, available capacity, and inventory situation; and
- determine the most profitable product mix for a given demand.
Accounting for all the above factors helps with much more complete, consistent and actionable information to better anticipate future costs, forecast demand, identify poorly performing products or customers, and explore projections in the context of historical sales.
I encourage you to check it out along with his overview of other pricing technology vendors and general supply chain coverage.
SignalDemand: Dealing with Supply- and Demand-side Pricing Matters — Part 1
SignalDemand: Dealing with Supply- and Demand-side Pricing Matters — Part 2
The TEC Supply Chain Logistics Blog
September 24, 2008
Apologies for the late notice, but you’re not going to want to miss this. Tomorrow, Thursday 9/25 at 9:00 a.m. PT/12:00 p.m. ET, the Professional Pricing Society will host a webinar with guest experts from SignalDemand. Bob Pierce, Ph.D., SignalDemand’s Chief Scientist and Mike Freimer, Ph.D., SignalDemand’s Director of Research and Development will take on your toughest pricing challenges. The SignalDemand “Pricing Doctors” have deep expertise in price optimization for manufacturers, an especially challenging field given today’s volatile markets. Per Sjofors, pricing expert and Managing Partner at Ategna, will also offer his insight on the pricing panel, make sure to check out his blog, Best Practice Pricing.
Participants can submit questions in advance to email@example.com to ensure in-depth analysis of pricing concerns, though I’m told the panel will also respond to questions posed during the webinar.
Register now on the PPS site, before space runs out.
September 19, 2008
Pricing technology is definitely not new.
The airlines industry first pioneered pricing strategy with what they called “yield management” – discounting seats on less popular routes and maximizing prices on routes that have a lot of demand. The Professional Pricing Society was established in 1984 as the field began to heat up (check out their blog). The hotel industry got on board in the late 1980s using what was referred to as “sophisticated computer techniques,” followed by retail-specific software technologies.
The manufacturing sector is one of the more recent industries to benefit from price technology, though technologies vary widely across vertical markets such as food, chemicals and consumer packaged goods. As Managing Automation’s Chris Chiappinelli points out, pricing technology for manufacturing has made a lot of progress since the days of scratch paper, gut instinct and spreadsheets:
“For a long time now, the practice of product pricing has involved more art than science, with product managers and sales professionals governed mostly by what ‘felt right.’ In recent years, however, science has started to gain the upper hand, and the sun may be setting on the era of ‘pricing by the gut.’”
As technologies have evolved and fragmented to serve more specific niches, analysts and vendors have struggled to classify different breeds of pricing technology. Some might say the category has had a bit of an identity crisis. Depending on the industry and market, you’ll find price-related software under labels ranging from “yield management” to “merchandise optimization” to “demand and revenue management.”
We’re currently experiencing the next evolution in the sophistication of pricing technologies with the maturation of the Software-as-a-Service (SaaS) delivery model. SaaS makes it possible to offer massively scalable, high-powered number crunching software based on finely-tuned, dynamic algorithms - a major stride compared to the past industry standard of static, rules-based systems that require on-site installation and ongoing customization. I could go on about the benefits of SaaS for price optimization, but I’ll leave that for another post.
September 16, 2008
The September 2008 edition of The McKinsey Quarterly features an excellent article with six tactics for pricing as costs rise and price sensitivity increases. It is clear that as margins grow ever more narrow, price becomes an even more powerful lever for driving profitability.
The article, Pricing in a downturn, points out the importance of monitoring customer-level profitability. My opinion is that with the right insight, it’s also possible to not only monitor, but manage product-level profitability as well…more on that in another post.