By Julian Short, Accenture
A pricing function focused on managing in a downturn is fraught with risk. At best, a company could miss the potential short-term gains offered by an improvement in the economy, and at worst it could damage the long-term price positioning of the overall enterprise. With companies clearly beginning to position themselves for an upturn, now is the time for executives to be sure that their business has the right pricing strategy and execution capabilities.
As companies prepare for an upturn, we see actions in the following areas as key:
• Ensure that your pricing strategy can accommodate a “multi-speed economy”. In an upturn, geographic, product and customer segments recover at different speeds. Companies need to employ micro-segmentation techniques coupled with differentiated pricing strategies to operate in this environment. Micro-segments should be continually re-analyzed and migrated across strategies as required during the recovery.
• Strengthen your analytical capabilities to support better pricing performance measurement and segmentation. A comprehensive set of analytical reports and KPIs is the basis for any pricing capability; especially if the performance of individual micro-segments are to be monitored and results utilized in strategy and execution.
• Increase the efficiency and accuracy of price setting, execution and control. As the recovery takes hold, prices may change rapidly for a specific micro-segment. Companies should utilize standardized price-setting models and processes mapped to the segmented strategies, enabling transparency, control and efficiency in the process. Differentiated price targets and floors should be utilized during sales negotiations, coupled with a clear price policy document to enforce segment-based rules.
• Integrate and automate pricing technology and data to improve decision making and efficiency. As the pricing environment becomes more complex, pricing technology is increasingly critical to driving effective execution. Leading-edge pricing applications provide the required insight and automate rote pricing tasks, freeing skilled pricing resource up to focus on the more complex processes and exceptions.
• Improve the skills and performance of the pricing organization. Processes, policies, technology and data all play key roles in effective pricing, but the human element is the most critical. Several areas will enhance the overall performance of the pricing organization including: revising and documenting clear pricing roles, authorities and accompanying training for the organization; developing an effective performance management system based on the chosen pricing strategies; and exploring ways to bolster the pricing team through selective hiring.
Optimizing pricing can be challenging even during the best of times, but it is particularly difficult during uncertain economic conditions. By creating a robust pricing capability that leverages leading practices and technologies, companies can effectively capitalize on emerging growth opportunities and, as the economy recovers, position themselves for high performance over the long term.
Julian W. Short leads the Accenture Price & Profit Optimization practice across Europe, Africa and Latin America. Mr. Short works across multiple industries to help companies shape and deliver their pricing strategy. He is based in London. Learn more at Accenture.
