Smart Pricing

Pricing diagnosis: increase profitability

Pricing calculation schemes and systems have the greatest influence on profitability – for example, when it comes to high, supposedly standard market discounts. In practice, many companies are unaware of the untapped price potential.

Using our data-driven approach, we work with you to identify the hidden potential in your pricing policy. Along the price waterfall, we diagnose and evaluate where pricing is inconsistent and derive measures that have the greatest positive effect on your profit.

Start your profitability offensive with us and optimise your pricing.

Value-based pricing: using pricing models efficiently

Why do many companies fail to achieve the optimal prices for their products and services? One main reason is price lists – their architectures and structures are often based on outdated and inappropriate parameters. For example, over time, they ignore changes in customers' willingness to pay more or internal cost developments. If companies do not consider such influences sufficiently (or too late) in their price architecture and list, significant profit potential remains untapped.

PwC supports you in developing a value-oriented pricing strategy. This way, you increase sales through differentiated price increases without strongly influencing volume. And with our help, you can implement these measures in your IT system, a configurator, or both.

Our approach to value-based pricing

At first glance, different pricing models can seem complicated, which is why PwC supports your company in evaluating and applying the basics of value-based pricing.

We proceed systematically in several steps, in collaboration with you:

• Identify inconsistencies and weaknesses in your current pricing structure.
• Develop a new, systematic pricing concept based on various internal and external value factors. These include defining modern calculation mechanisms and formulas based on individual willingness to pay and price-relevant functions and options (for example, in SAP MM).
• Define new master and gross prices at item and option level.
• Implement the results in your ERP system – whether it's individual adjustments or completely new price architectures.

It pays off: our price architecture kit gives you fast and measurable results, typically in the range of one to three EBITDA percentage points. And in subsequent years, price adjustments are made almost automatically thanks to the new system.

Dynamic pricing: automatically adjust to the best price

Many companies manage their prices in Excel spreadsheets and re-enter them manually in their ERP system. This is time-consuming, error-prone, and inflexible – especially with changing price dynamics. More and more companies want to adjust their prices several times a day (for example, in online retail) or monthly (for example, in mechanical engineering). Adjustment criteria include: 

• Customer profiles
• Inventory levels
• Production utilisation rates
• Cost trends
• Fluctuations in demand
• Weather data

However, it is often unclear how dynamic pricing works because individual, short-term and automated adjustments are based on complex algorithms. Our study shows that dynamic pricing can increase sales and margin potential by an average of 3.9 per cent.

Can your company benefit from dynamic pricing? To find out, PwC first determines whether it is a fundamental fit for your company. If so, we will find the right approach for you. We ensure that your sales staff understand the accelerated and automated calculations – and explain them to customers in a comprehensible way. We can also programme the algorithms or implement new pricing systems for retail companies if required.

Customer conditions: performance-based discounts, bonus, and condition systems

Discounts are an essential part of companies' sales strategies. However, they often lack transparency and control over discounts: some companies grant discounts of up to 80 per cent or guarantee bonuses of up to 30 per cent. Unsystematic discount fluctuations of 30 per cent for comparable customers are not uncommon in our experience.

Out of habit, even small and unprofitable customers receive high discounts – even though the hoped-for benefits fail to materialise. Analytically validated and strategically differentiated bases for decision-making are rare. Consequently, many companies lack performance-oriented discounts, bonuses, and condition systems.

PwC gives you complete transparency on your discount, bonus, and condition practices. We put discount and bonus programmes and special pricing to the test and work with you to develop tailored, fair pricing systems with systematic rules and regulations. Our focus is on customer value and pricing strategy. As well as providing you with the discount rules on paper, we implement them in your systems.

We accompany you through all development stages, from concept to the specifications to the programming in your CPQ software (such as SAP SD or Salesforce). And so that you can implement the new strategies effectively, we involve your IT team right from the start. 

Service and logistics pricing: pricing and communicating value-added services profitably

Smart pricing is the only way to monetise the value of your services. Most companies offer a wide range of value-added services, for example:

• Specific delivery terms
• Consulting services
• Guarantees

The problem: communicating and monetising these services is often less than ideal. Customers are unaware of the value-added services available, so there is no willingness to pay.

Use your value-added services to build customer loyalty and generate revenue and profit. We support you in identifying appropriate services, evaluating potential monetisation, and developing suitable pricing models. Even services where there is (currently) no willingness to pay can be used profitably and monetised.

Our approach does not end with the pricing concept. Together with your sales teams, we also improve communicating value and overcoming objections. After all, these are crucial for success in service and logistics pricing.

Pricing analytics and governance: implementing sustainable pricing concepts

Pricing is not a one-time task. Companies must negotiate pricing elements regularly, adapt pricing processes, and implement appropriate measures to succeed.

Sustainable monitoring and governance are required to implement pricing concepts efficiently. The advantage is that pricing is a number-driven topic, so companies can effectively control it with pricing analytics and management.

In cooperation with your sales and marketing as well as your finance and controlling department, we support you in the following tasks:

• Identifying the right key performance indicators for your pricing management
• Developing meaningful reports and cockpits
• Defining results-oriented processes and responsibilities

We also offer pricing analytics, whether we use your existing business intelligence solution or implement your pricing software or not.