Written by Peter Bowley
A sub-optimal pricing strategy is like leaving money on the table, so I was very interested to hear what advice Christine Durman, a Partner at Abbey Road Associates, would share at IIS 2014 on how to unlock the power of pricing.
Christine emphasized understanding contextual variables about the customer’s willingness to pay. What is the purchase preference – bundled or a la carte? Do they need the item now or later? How brand conscious is the buyer? By knowing the answers to these questions, you can segment the customer and define price framing and tactics. Christine cited “big data” – demographics, purchasing history, CRM data and usage stats – as a key resource firms can leverage to identify and optimize behavior and price drivers. Christine discussed an example of Abbey Road Associates helping a client put pricing strategy into practice, using an algorithm to process customer data inputs about needs, to generate a client history, suggested purchase combinations and recommended price.
With so much emphasis on new product development and innovation, it is interesting that simply pricing smarter on existing products is often overlooked, despite being a great opportunity to improve profits and customer relationships.
Peter Bowley is currently an MBA student at Columbia Business School. Prior to business school, he started NEBSA, an educational company to help international students prepare to study in the U.S. Previously he worked in a Latin American farmland investment fund.