Understanding the Context
Pricing is always at the center of a business’ priorities as it has a strong impact on business performance. Providing analysis on this lever requires complex arbitrages that need to take into account several factors. Amongst these factors, there are internal ones including marketing & financial strategic factors which implicate constraints tied to the competitive environment, the cost of goods, the coherence of the company’s product offering (price ladder) as well as margin/ volume constraints. In addition, external factors can also come into play in the form of fluctuations in the cost of raw materials, macro-economic environment and exchange rates for the deployment of a pricing strategy not only locally but also abroad. Companies are not always able to react appropriately to fluctuations of both internal and external factors and the responsibility being shared by several departments (legal, financial, supply chain/ merchandizing & marketing) often further slows the time of reaction. Often, the actors influencing pricing also have diverging priorities with regard to pricing performance with marketing often looking for growth in market share while finance mainly focusing on bottom line performance.
Because of its complexity, price remains a heavily under-exploited lever.
By utilizing the potential of Big Data as well as algorithms and methods commonly employed in finance-related applied mathematics, Ekimetrics has developed innovative tools to define the best price arbitrages applied to a product or grouping of products. We are currently guiding several of our clients on pricing optimization tools that are custom-fit toward their needs, structure and business goals. These approaches rely on the simulation of several thousands of scenarios that integrate exogenous factors including: macro-economic events, exchange rate, innovation, competitor activity. The methodology then delivers an optimized scenario under the specific constraints of the client based on his strategy (maximizing sales at a stable margin level or maximizing margin while maintaining a certain sales volume).