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Using Data Science To Impact Your Pricing Strategy

Using Data Science To Impact Your Pricing Strategy

 

There are said to be four P’s of marketing; production, promotion, place and price.  Of the four, price is the primary revenue generating component.  By analyzing your product lines, business operations, and customer behavior, among other elements, data science can help you unlock the nuances of your pricing strategy.  Evaluating company and industry data may allow you to make more informed decisions to create the most optimal pricing strategies and generate more revenue for your business. The opportunity lies in being able to mine these seams of information to yield useful analytical insights.

Data Science

Data science refers to the collection and analysis of historical or real-time data regarding a specific business or industry, to create meaningful guidance based on such data.  For businesses whose objective is price optimization, analyzing information to identify impactful areas of business is key to developing a successful pricing edge.  There are software programs that take into consideration such factors as product revenue, cost, market price, and customer behavior, among other factors, and incorporate these elements into an analysis that may result in valuable information influencing business solutions.

Price Management

There are many factors that are a part of setting an appropriate price for a given product.  Software programs that are instrumental in data mining and analysis use both internal company-specific data as well as external industry-specific numbers.   Internal information would include company product sales data, cost figures, customer, and transactional records.  External data may include energy, commodity, currency data, and other factors that may impact pricing.  When setting prices with distributors, companies must also consider the perceived value of a product as well as a customer’s willingness to pay.  Analyzing data is influential in understanding your business, how it relates to the industry and its value in the market place, and may assist in providing meaningful guidance for price-related decision making.

Customer Management

Having a pulse on customer behavior is important in determining a price point.  When negotiating with distributors or direct consumers, knowing what product lines customers are buying, the volume, and at what price they are paying, can help in identify pricing successes or shortfalls.  Use databases to drill-down to the pricing information that drives your business and help identify opportunities to distinguish your business from competitors.  Data may also be important in recognizing when customer behavior is changing and how that may impact your business.

Sales Support

Company sales teams often need reliable information to forecast product sales and opportunities for product line improvements and diversification.   Using data, sales teams can better measure trends and the impact of marketing efforts to come up with pricing effectiveness solutions in a more timely manner.  Data sets of information assist sales managers in creating marketing strategies for specific products or general brand promotion.  It is helpful for sales managers to understand whether the behavior of a customer is fluctuating, when and why.  By analyzing what products are being sold across all customers, the data may also show opportunities to expand product purchases into multiple product lines.

Valuable information from your business operations can be collected and compiled.  Having this data can assist in establishing how best to manage your customers and achieve company objectives.  Whether it is being able to identify the preferences of your consumers, or understanding the factors that are driving your business, analytics can be a vital part of determining optimal pricing for increased revenue and profitability.

Emily Flores is a Marketing Consultant and has always had a particular interest in creating brand development strategies and discovering ways to get a competitive advantage using meaningful data.

Published by Valentine Belonwu

My name is Valentine, founder of this site, an entrepreneur working as a moderator at Bizsugar a small business community news site. Connect with me on Google+ at Valetine Belonwu

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