Our approach to pricing allows organisations to set prices with explicit knowledge of the effect that their decisions will have on volume and margin. This allows them to treat price elastic and inelastic segments differently in order to increase both volume and profit. Our price optimisation framework and decision support system is called PriceOptimiser®.
The approach we have developed, which has been customised for each organisation, has been successfully applied in industries including financial services and insurance, fast moving consumer goods (FMCG) and manufactured materials.
Questions We Have Helped Answer
Financial Services
- What is the best price to achieve my new balance or net interest margin target?
- How should I respond to a major competitor reducing interest rates for a particular part of their portfolio?
FMCG
- Which Stock Keeping Units (SKUs) are the most elastic and on which lines should I increase or decrease prices?
- What will happen to volume following a period of deep discounting?
Manufacturing
- How can I manage elements of pricing through an appropriate discounting structure?
General Insurance
- How can I introduce optimal pricing where each customer is charged a premium which maximises portfolio profit as well as retention?
One of the key focuses of our approach is to understand customers’ sensitivity to price. We draw on our actuarial heritage to understand price elasticity at the most granular level, allowing us to predict response at the individual customer level.
We consider both internal costs and margin requirements, as well as the competitive environment. We have developed innovative approaches to establish competitor prices when these are not obvious.
Historically companies have based their pricing decisions on supply side dynamics. Supply side pricing involves focusing on the costs and associated profits assuming that a given number of products are sold.
At Quantium we bring together supply and demand in order to make truly informed pricing decisions. In many cases we forecast all elements of profit, enabling us to calculate the impact of decisions taken today on profits and cashflows into the future.
Price optimisation is the natural extension to being able to predict customer response to varying prices. One may estimate the impact from individual pricing scenarios, picking the scenario that comes closest to meeting the business’ objectives.
However, in a commercial environment there can be many millions of potential pricing scenarios and it is not possible to analyse the results of all of these scenarios. The price optimisation techniques we use include advanced mathematical algorithms to ‘find’ the pricing solution that best meets the needs of the business.
Pricing is a dynamic discipline, constantly needing to be revised with changing market and competitive conditions. A one-off price analysis project will soon lose its relevance in this climate.
Quantium has successfully deployed decision support systems that are used by product managers to understand the impact of price changes before they are made. The systems use all of the detailed analysis and models built in a readily accessible and transparent way.
Now expert in the creation and installation of these customised systems, we have enabled fundamental changes to the way pricing is carried out in some of the leading organisations in Australia and the UK.
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