Creating Strategic Pricing Capabilities

A report submitted to
Prof. Prantosh Banerjee

In partial fulfillment of the requirements of the course

Pricing

Submitted By – Group 2

Apurva Tomar 2011032

Iftekar Ahmed 2011089
Krithika GR 2011113
Prithviraj Patil 2011165
Shreya Saloni 2011238
Animesh Bordoloi 2011292

On

08-11-2021
Introduction: A plethora of firms, belonging to a wide range of sectors, struggle with their
pricing strategies. These companies can be classified based on the quality of their pricing
strategy, value -based or not, and the ability to execute a pricing strategy. They come across
multiple organizational challenges resulting in the shortfall in strategic pricing. These
include:

1. Pricing skills and capabilities: According to research, only 9% of business schools

offer a stand-alone course on pricing, leading to only 6% of the Fortune 500 having a
dedicated pricing function.
2. Need to coordinate pricing decisions: These decisions require input and support of
many decision-makers across multiple functional areas.
3. Access to the necessary information and tools

In order to succeed, a company needs to balance investment in all the three elements.

Essential elements of the pricing organization: High performing companies exhibit the
following characteristics:

1. Ability to challenge industry norms that regulate how particular products/services are
sold to the customers.
2. Capacity to adopt new pricing models and accept their subsequent risks.

Types of decision rights

Input Make Ratify Notify

Right to provide information
before a decision is made
Right to make decisions in
light of key input gathered
Right to be notified of a
Right to veto or overturn a
decisiom outcome after the
pricing decision
fact

Pricing processes to ensure successful strategy implementation: In order to ensure that all
elements of a pricing strategy get regulated proactive review, the following steps to create the
same should be followed:

1. Define major pricing activities: This step involves the defining of major process
activities. These activities can be price setting, negotiation and contracting.
2. Map current processes: This step creates a visual depiction of the processes by
which the pricing decisions are currently made. Even if there are no formally defined
process is this step is critical in finding the source of the undesirable pricing
outcomes.
 3. Identity prophet leaks: this step utilize is a variety of pricing analytics in order to
identify where the profit leaks, for example, unwarranted or unarranged discounts
appear in a pricing process.
4. Redesign process: the final step creates a series of redesign pricing processes for
each major pricing activity in order to implement the new processes. It is frequently
necessary to revise decision rights to account for current decision makers from whom
decision rights have been taken away.

Performance measures and incentives: Measuring performance motivates desirable

behaviors. Especially when measures lead to public rewards or financial recognition.
Therefore, instead of trying to create an overly complicated set of performance metrics, a
successful company should settle on a limited set of metrics that are tied closely to its
profitability and can hold people accountable for their performance with those measures. The
first step to align these metrics and incentives is to document current incentives for all those
that have been granted decision rights in the pricing process.

Systems to support pricing function

Data needed to inform the pricing function
Common protocols for creating relevant insights
Customer analytics to guide management
choices
Analysis of win- loss data
Customer Profitability and cost to serve
Process Management analytics
Price bands
Price waterfalls
Pricing systems
Records of historical sales, surcharges for additional services and
other descriptors of transaction.
Focus on two categories. That have historical data such as customer
analytics and process analytics.
Understanding customer motivations and behaviors that are relevant
to pricing choices.
Tracking the frequency with which our company offers, win or lose
to competition.
Assessing customer profitability in order to provide high level
guidance for pricing and cost reduction to improve company profits.
Measuring unsatisfactory pricing outcomes and tracing them back to
the pricing process where they can be sealed.
Statistical technique for identifying which customers are paying
significantly more or less than the band of peer prices for a given
type of transaction.
The possible sources of lost revenue and profits need to be well
tracked.
These systems need to perform two functions, that is support the data
analytics and enable the systematic execution of a chosen strategy.