Module-2

Product And Customer Analytics

Pricing and Revenue Management:

Pricing is a factor that gears up profits in supply chain through an appropriate

match of supply and demand. Revenue management can be defined as the
application of pricing to increase the profit produced from a limited supply
of supply chain assets.

Revenue management is the application of disciplined analytics that

predict consumer behaviour at the micro-market levels and optimize product
availability, leveraging price elasticity to maximize revenue growth and thereby,
profit.
2.1:Point of sale Data-Deciding on the “Right” Pricing Approach

A point of sale (POS) is a place where a customer executes the

payment for goods or services and where sales taxes may become
payable. A POS transaction may occur in person or online, with receipts
generated either in print or electronically.
Cloud-based POS systems are becoming increasingly popular among
merchants.
Point of sale (POS) system is the spot where the customer
makes the payment for goods or services that are offered by
the company.
For example, restaurants, retail businesses, and grocery stores
all have their specialties and that is why they need a POS system
that meets their specific needs.
• What is Data Collection?

• There are essentially two ways in which data is collected from customers
online. An example for this would be a POS system.
• This is known as passive data collection where the customer is not required
to take any specific action and data is collected by the POS.
• This could be anything from information about repeat sales and time of
sale.
• Active data collection means that a customer has had to take a specific action
on the website to provide you with more information about them.
• Good examples of this are registration forms as part of the purchase process.
It’s important to note that there is not only a limit to how much information a
customer will provide and the ever-increasing fears about privacy and
security.

• POS Data – Where Is It?

• Every time we use our POS, we are accessing and creating multitudes of data
points about our customer, about buying habits, about the market that we
serve and about ecommerce capabilities and potential growth areas for our
business.
• Strategic Pricing:
• Strategic pricing sets a product's price based on the product's value to the
customer, or on competitive strategy, rather than on the cost of production.
• This approach recognizes that people often make purchasing decisions based
more on psychology than on logic, and that what's most valuable to the
customer may not be what's most expensive to produce.
• Significance
• What customers are willing to pay for a product may be vastly more, or less,
than a company would charge if it simply priced based on cost.
• Discovering what consumers value about the product and how much they
value it can let a company increase its price or might suggest that a new
product has no chance of turning a profit.
• Implementing tools to support pricing strategy:
• Based on our experience with successful pricing project implementations, we have eight
key success factors to implement price strategy successfully.

• 1. Make price strategy a top management priority

• It is crucial to have board-level awareness on the importance of price and a good pricing
strategy.

• Firstly, you need management buy-in to regularly emphasize the importance of pricing
towards the entire organization.

• Secondly, the management needs to set direction and define clarity on positioning and
price levels.

• top management needs to be involved in the price strategy to create a profit oriented
culture. The way to create this is to set an example and clearly communicate the pricing
strategy to the market through press releases and interviews.
• 2. Set an ambitious pricing roadmap with a phased roll-out

• A successful price strategy implementation needs measureable goals that lead to a clear goal.

• In order to achieve this, take a differentiated view on pricing and identify which pricing topics impact the
bottom line.

• 3. Select an experienced pricing manager to drive change

• Executing a pricing strategy will require intensive coordination between internal departments.

• Therefore, a seasoned program manager is needed to oversee implementation of the roadmap.

• This program manager should have (a) an analytical mind-set,

• (b) be able to translate the numbers to commercial solutions,

• (c) have experience with leading large programs, and (d) have the skills to manage all stakeholders
within the organization.
• 4. Embed the new price structure in concrete tooling and systems

• most price optimization projects result in a structure or a process to support decision making.

• This could include peer comparison to compare performance within the sales organization .

• Methods or checklists often fade away after a certain period, while tools are a powerful way to translate
a strategy to a practical process that can be used for daily business. User friendliness and simplicity
are key words to enable a successful translation of a new pricing strategy into tooling.

• 5. Define clear governance and responsibilities

• Responsibility for pricing is often divided between different functions and departments.

• This leads to limited ownership pricing decisions.

• Pricing responsibilities range from sales, marketing and product management to finance functions,
depending on the industry.
• 6. Train your salesforce and prepare your customer communication

• Pricing projects are often tougher to sell internally than externally.

• Involving sales at an early stage, training them and clearly showing the benefits of the new
structure is crucial.

• Your sales force needs to believe in the pricing structure and be able to explain it to customers.

• 7. Define KPI’s, monitor results, and steer according

• defining KPI’s and measuring results are key to track implementation progress.

• You will not be able to measure everything from day one. Set-up a simple and lean Excel-based
monitoring dashboard to create first insights.
• 8. Start small and drive continuous improvement

• Implementing a new price strategy can have a significant impact within the
organization and requires changing existing processes and a new way of working.
Change does not happen in one day; start small, learn and then roll-out.

• We typically start with small pilots, and scale-up gradually. This enables you to
continuously refine and improve your solution, based on lessons learned from
implementation.
• 2.4:Managing the prices to meet revenue goals:
• From a strategic point of view, hotels can apply different pricing strategies for the
purpose of creating value. Now we can find a brief summary of the various
strategies for creating value according to the chosen option.
• This strategic choice depends on some factors, such as the type of accommodation
we have, type of property, offered services, business goals, competitors and other
factors .
• What is pricing?
• It is the practice or set of practices adopted by a company in a more or less
procedural way with the purpose of defining its selling price.
• It usually depends on multiple factors and goals of the company. There are
different pricing methods and strategies that take into account several factors, such
as:-Ease of calculation
-Estimation and evaluation of costs
-Market competitive analysis
• 1. The implementation of an effective pricing strategy
we can say that for the development of a good pricing strategy, the hotel has to carry out a
multidisciplinary analysis, appealing to all the departments of the organization.

In this way, six organizational skills are identified that are essential for establishing a
highly effective and successful pricing strategy.

• Essential Skills:

• 1. Price execution (policies and procedures)

2. Pricing strategy
3. Advanced analysis and pricing
4. Organizational and management alignment
5. Technology and data management
6. Taxes and regulatory efficiency
These are the generic pillars, however there are factors such as, category, quality /
value, image, product life cycle stage, additional services, competition, sales
volume, demand, elasticity of the demand, affiliation in a chain, distribution power,
marketing strategy, organizational structure, taxes policy and costs, which will
decisively influence our pricing strategy.
• 2. General pricing strategies
• Prices (value) based on demand:
This is perhaps one of the most commonly used models today. The hotel
establishes high prices for those who have a larger budget, there being a
low price elasticity, but producing a great value perception.

• Price based on cost

The price of services at the hotel is established based on the associated
costs, the fixed and variable costs are calculated and the price is
established by a predefined margin or objective of the result.
• Targeted price for market penetration
A low price is established with the main objective of attracting and stimulating demand, this is widely used
when there is a new property opening or it wants to expand its market (increase market share or capture a
specific segment of customers).

• Price skimming
It is characterized as being almost the opposite of the previous strategy of market penetration. High prices
are set to meet the high demand, for example for a new service or product (it is intended to reach an
interested segment with high associated value).

• Price set in packages (Bundle or Packaging)

The hotel proposes to sell two or more services together in a package, with a single price for example,
accommodation, accommodation with meals etc. The goal is to stimulate the sale of other hotel services,
reaching superior revenue. The total price of the package must be less than the purchase of the services
carried out separately.

• Optimum product price

A base price is included only for accommodation or bed and breakfast (the lowest). All other services are
paid for and sold separately. It is a more comprehensive pricing strategy with base values and higher options
if the guest desires so.
• Psychological price
The price is established considering the psychological influence of numbers. For
example, there are numbers which are psychologically associated with promotions
for example, numbers ending in 9 or 99. While others have exactly the opposite
effect and communicate value, for example, 0 or 100. It is proven that there is an
effect associated with some numbers which may favour the booking and revenue .

• Promotional price
Hotels opt for a generalized temporary price cuts, to increase their competitiveness
and attract more bookings in that period. This reduction is temporary, with a
predetermined period of time.

• Captive product pricing

Applied when the consumption of two or more products, are dependent on each
other and linked. For example, consumables and printers, companies put one
product cheaper at the expense of the other. In the hotel proprieties we can lower
the accommodation to the detriment of the purchase of complementary products.
• 4. Main pricing tools in Revenue Management
• Price is one of the strongest tools with regard to the positioning of our hotel in the
market, through this are created expectations for future guests about the service
provided and their expected quality.
• Tools specifically related to price:

• Price discrimination (tariff barriers)

• Dynamic prices implementation

• Best price guarantee

• How the price is presented to the customer

• Price parity