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The Revenue Management Paradigm
Driving profitable growth through strategic revenue management
Revenue Management is one of the most powerful levers for driving profitable growth. The most successful companies shape consumer behavior through effective merchandising choices, flawless store execution, and designing the right price and promotional strategies to maximize margin growth. The key to unlocking the potential is a detailed understanding of how value is created and human experiences are shaped in the marketplace. The most successful companies seamlessly align their offer design and revenue model with the ways customers experience value and are willing to pay for it. By harnessing the disruptive forces of the Digital Era, these companies create new ecosystems, new business models, and ever-more personalized offers. Revenue management is a key driver of large-scale commercial transformations that deliver sustained profitability growth.
- Pricing in B2B2C environment
- Trust drives profitable pricing
- The pricing paradigm
- How we can help
- Deloitte's proprietary tools
- Why Deloitte?
- B2B. B2C. We’ve got you covered
- Get in touch
- Join the conversation
- Related topics
Pricing is a lever that can be extremely powerful for driving sales and profitability in any organization. Unfortunately, it is also a topic that generates a significant amount of fear and trepidation in most organizations. When an organization gets pricing right, it can be incredibly profitable.
Featured in the book, “Pricing—The New CEO Imperative: A Book from the Pricing Profession to the C-Suite”, our pricing and profitability leaders share key principles in the chapter, “The Five Myths about Raising Prices That Every CEO Should Know”, and address the common myths around pricing that often lead to deferred decisions, missed opportunities, and defeat in the marketplace.
Pricing in the time of inflation
Effective pricing is more crucial than ever before. With building inflationary pressures, an economy in recovery from a global pandemic and the aftermath of disrupted supply chains, companies are feeling the pressure from all sides. Our experiences indicate that while many companies recognize the need for price increases in the current environment, they often run into challenges ranging from how to structure the increases to customer communications, and lose momentum. Our latest report explains these common pitfalls, offers guiding principles crucial to success and provides case examples as to why now is the time to take advantage of the current market to increase pricing.
Pricing in a B2B2C environment
Pricing (in general) is hard. And in B2B2C businesses, diversity of products, customers, and channels often leads to increased complexity and derails pricing ambitions. Our experiences show that complexity in B2B2C environment can be a source of advantage that provides the opportunity for deliberate and surgical pricing strategies to drive margin AND volume growth simultaneously, enabling companies to achieve transformational commercial impact of 300-500 bps growth in EBITDA and increased market share. Our latest report explains the reasons for why pricing is so hard in the B2B2C environment, explores potential product, customer, and channel pricing structures, and provides case example that debunks the margin versus volume trade-off in B2B2C environment.
Trust drives profitable pricing: In the Consumer, Travel & Hospitality Industry
Trust is the foundation of the human experience; it is impossible to build successful relationships without it. And, trustworthy behavior garners loyalty and greater willingness among customers to spend more. In our recent survey, we discovered when trust is high, customers are 4X more likely to spend more on the brand compared to a similar product or service from a competitor. However, building trust requires a deep understanding of the factors affecting human behavior, and making targeted investments to garner the relationship with customers.
Our latest report, Trust drives profitable pricing, explores the four signals of HX TrustID™ and how these factors impact consumer willingness to pay. It outlines the importance of trust and how organizations can capture margin from the elevated trust.
The pricing paradigm
Pricing is as much an art as it is a science. Set your prices too high and price-sensitive customers will go looking for a better deal from someone else. Set them too low and you’ll be leaving precious revenue on the table. We help clients get their pricing right by showing them how to find the sweet spot where value and revenue meet, how to establish confidence and discipline among their sales teams during pricing negotiations, and how advanced data and analytics can help increase both competitiveness and customer loyalty.
Deloitte recognized as a global leader in Pricing Consulting by ALM
We are pleased to announce that ALM Intelligence has named Deloitte a global leader in their report entitled Pricing Consulting 2018. The report notes: “Combining the scale and diversity of its multi-service platform with specializing pricing resources, Deloitte is notable for its ability to drive pricing performance in highly varied sector and market contexts. The [network] continues to push its service delivery along the continuum from consulting to implementation and, in select instances, operating client functions to ensure impact delivery.”
Source: ALM Intelligence; Price Consulting 2018; ALM Intelligence estimates © 2018 ALM Media Properties, LLC. Reproduced under license
Our pricing and profitability practice has also authored two top-selling pricing books. The Strategy and Tactics of Pricing: A Guide to Growing More Profitably is now in its sixth edition and remains the best-selling book on the topic, and Pricing and Profitability Management: A Practical Guide for Business Leaders presents a pragmatic approach to driving profitable growth for any company.
Our valuable experience is augmented by Polaris™, our proprietary insight-driven commercial analytics platform that serves as the basis of a sustainable pricing capability.
Our Pricing as a Service (PraaS) offering allows clients the ability to set location-specific pricing dynamically using the latest in AI technologies.
Our strategies and insights have helped our clients across a wide range of industry sectors meet and exceed their most ambitious top- and bottom-line growth goals.
How we can help
Deloitte’s Pricing, Product, and Commercial Spend practice works with CEOs, CFOs, CMOs, and CIOs to address all aspects of revenue management strategies and processes and to align the organization's capabilities with its business, market, and channel strategies.
As a leading pricing strategy consulting practice, our team includes recognized thought leaders and authors on pricing, merchandising, and store operations strategy, along with advanced data modeling specialists who will work with you to address the key levers for profitable growth, including:
- How can revenue management be used to improve both top- and bottom-line performance?
- How can a firm's revenue model be redesigned to better align with a customer's buying process?
- What are the levers for optimizing assortment planning and demand forecasting?
- How can pricing help improve the predictability of earnings, and help manage risk?
- How can we more effectively capture the true value of our products and services?
- What quantitative and qualitative capabilities do we need to efficiently set and manage pricing?
- How can the physical and digital store be best integrated into a new “connected store?”
- What is the workforce of the future and the integration into technology solutions?
Deloitte's proprietary tools
Deloitte's proprietary tools and methodologies, combined with our deep industry and technical experience, mean we're uniquely positioned to help your business leverage pricing and profitability management strategies for a sustained source of competitive advantage designed to help you outperform your peers and improve your overall market value.
We draw from a suite of diagnostic tools to quickly assess profitable revenue management opportunities that typically reside in the following six areas:
- Transactional management systems that help guide the proper execution of your chosen strategy
- Price and discount policies that align your pricing with the value delivered
- Value and communications framing strategies to help you present customers with the most compelling value stories
- Segmented pricing and offering structures based on customer willingness to pay and perceived value
- A profitable growth strategy that allows for a definable and adaptable business model that can change to meet shifting market conditions and customer demands
- Strategies for addressing competitive pricing actions
Our capabilities, resources, talent, and experience around revenue management are unmatched.
For nearly three decades, The Strategy and Tactics of Pricing: A Guide to Growing More Profitably has served as a leading authority on strategic pricing. The book, now in its sixth edition and written by two Deloitte thought leaders, brings new perspectives, case studies, and updated approaches from this ever-evolving practice.
This knowledge, combined with Deloitte's proprietary resources—including PolarisTM—informs strategies and insights we have applied to help clients achieve significant commercial transformations.
The true value of a carefully crafted revenue management strategy is its ability to create a loyal customer base and a sustainable growth rate. Some keys to achieving these goals include:
- Understand how value is created and delivered: Clearly link your offerings with the benefits they offer your customers and set your prices to capture a share of that value.
- Improve your analytical capabilities: Develop a pricing dashboard to detect margin leakage, and to respond more quickly to pricing opportunities or threats. Establish a clear perspective on your most and least valuable products, customers, salespeople, and partners.
- Flawless execution: The ability to provide the right assortment, the right quantities, priced dynamically over the selling cycle.
- Optimize your pricing capabilities: Rigorously assess your standard and promotional pricing to determine what needs to be true for a price change to be successful.
- Invest for the long haul: Develop the skills and processes, data, and tools necessary to turn revenue management into a strategic capability, and make margin management a visible part of the executive agenda.
B2B. B2C. We’ve got you covered
Whether you're running a business-focused enterprise or a customer-facing organization, our pricing consulting services will help you maximize value through revenue management.
We help B2B clients:
- Develop pricing strategies to address new product launches and respond to competitive pressures
- Configure offerings across their product and services portfolio
- Identify and quantify value and develop value-based customer segmentation
- Develop pricing policies and processes to influence customer behaviors and work effectively with channel partners
- Harmonize prices across channels and geographies
- Establish deal desks to develop effective response strategies to customer procurement processes
- Design pricing organizations and governance structures
- Develop analytical and visualization tools and implement pricing/CPQ technologies
- Analyze customer, product, and salesperson profitability
We help B2C clients:
- Set a pricing vision that aligns to the company's overall business strategy
- Focus on a lifecycle approach to pricing and merchandising across base price, promotion price, and end-of-life procedures (markdown and clearance)
- Drive favorable value perception by identifying key value items, and establish a merchandising strategy that optimizes store performance
- Implement category roles and price logic (e.g. size relationships and rules, private label strategy) combined with in-store execution
- Establish promotional objectives and a toolkit to track and measure promotion effectiveness
- Marketing to one: Personalized offer design and execution
- Move beyond marketing and merchandising to integrate day-to-day pricing and promotion decisions with an organization's key initiatives like digital, loyalty, and customer engagement
As a managed, on-demand solution customized for select industries and sectors, PolarisTM can give companies the best of both worlds: time-tested tools and technology without the challenges, costs, and delays of application development, management, and maintenance.
Pricing as a Service
Pricing as a Service (PRaaS) is revenue- and margin-based optimization analysis that allows clients to optimize pricing across all their locations to improve overall business performance by providing periodic pricing recommendations delivered through an integrated solution. Its components include:
Comprehensive datasets: Aggregation of comprehensive internal and external datasets, including transactions, geo-location, weather, and competition
Analytics engine: Analytical algorithms plus machine learning to crunch the data sets and generate profitable menu price recommendations by item
Robust user experience: An easy-to-use portal which is integrated with store menu boards and systems for seamless interaction
Pricing advisors: Dedicated service designed to support the national menu architecture design and store adoption to manage change
A practical guide for business leaders
Drive organic growth profitability through strategic revenue management