Many companies today compete in a volatile marketplace. They are up against competitors using the classic “land-grab” approach and resort to extremely low, and sometimes-negative margins, to win market share.
While most companies understand that these “share at any cost” strategies are not sustainable, they feel compelled do something to respond to the competition.
Such is life in a hyper-competitive retail market – regardless of industry. In order to save your business, yet drive organic revenue growth, a balanced and strategic approach is needed. This allows you to keep existing customers at a more profitable rate while offering attractive rates to improve the acquisition of fresh customers.
A detailed and precise analytical approach to pricing is critical, providing data-driven margin strategies and a roadmap for competing effectively in the transparent, volatile marketplace. The following steps are essential for a successful and profitable approach:
- Conduct foundational analysis of your historical price and transaction data; simple statistical analysis can uncover millions of dollars in lost margin;
- Assess your position in the marketplace at a micro-segment level, driven by statistical modeling of all customer and product attributes to determine the key drivers of demand and price sensitivity;
- Implement varied pricing strategies at the segment level to drive both volume and profitability in the markets and with products where each is possible, driving long-term organic revenue growth and ensuring a less volatile marketplace.
This path to success was followed by a Revenue Analytics client suffering from the impact of a hyper-competitive and undisciplined pricing by competitors following the deregulation of retail electricity markets in the Midwest and Northeast. Intense competition led the CEO to seek out strategies and capabilities, which helped other industries, such as airlines, which had successfully navigated deregulation and the impact that followed. Revenue Analytics leveraged their expertise in these scenarios to provide strategic guidance to drive revenue growth while preserving market share.
By uncovering these opportunities, the client could execute these strategies immediately and unveiled tens of millions of dollars in revenue and profit gains.