Matters Graph developed its pricing methodologies using its deep Voice of Customer expertise, Commercial Diligence, and value generation strategy approach. We employ segmentation, a deep understanding of buyers, and rigorous analysis needed to help with the careful exercise that pricing opportunities often require.
Our pricing methodology incorporates three factors to optimize price:
- Winning the right (segments of) customers (noting that it's most often behavioral segmentation, not demographic, that uncovers the best opportunities) …
- …with the right product and services mix…
- …and pricing to maximize customer lifetime value.
At Matters Graph, our methodology is flexible to the case; typically, the right place to start on this list depends on a company's place in its industry lifecycle:
- Mature-industry companies benefit most in their core business from product mix and price, as they more often have saturated their prospective customer bases
- High-growth-industry companies often achieve the best results when they evaluate whether they are targeting the right customers and position themselves to capture the maximum account potential (share of wallet) over time.
Read more about the origins of our methodology in our Pricing Journey Best Practice Brief (here).
Our pricing optimization approach to pricing as a topic is multi-functional, and actions tie together what are multiple silos, using a:
- Price controls in Sales
- Pricing and positioning strategy in Marketing
- Product and packaging recommendations to support positioning and seek the highest-value evolutions in Product Management
- Mix evolution through cross-functional efforts often led by Strategy
Our view is that much of the language and frameworks surrounding pricing are built in and reflect these typical silos. Our approach is a method, a framework, and a language for coordinating across these silos to proactively tackle larger pricing improvements.
Our pricing optimization engagements culminate in an actionable playbook that touches on:
- Cycles: the frequency and approach through which prices adjust
- Indexing or "price coupling:" the degree of contractual or de facto coupling of your product's price against another good's price, often benchmarked to an input, substitute, or industry competitor
- Realization: the percent of the list price realized as the pocket price (i.e., captured after discounts, cost of capital, etc.)
- Premiumization: an increase in "mark-up" or gross margin
- Billing intervals: financing, subscriptions, gain-sharing, or other means for spreading customers' costs
- Offer construction: bundling or unbundling of items in a sale
- Product mix improvement: a shift in products and services offered/pushed
Our work often involves numerous case-specific considerations. For instance, software and services businesses can incorporate more nuanced considerations, such as feature availability, reliability guarantees, and performance.
In the complex B2B and B2B2C decision-making world, "taking" price increases is never as simple as updating terms or list prices. We conceptualize the process of achieving these improvements as "journeys" that vary by segment, and we tailor our approach to B2B and B2B2C scenarios. (In fact, in businesses with greater revenue concentration, this often involves feedback down to the individual customer level.)
Pricing opportunities fit naturally with our broader commercial value generation and Due Diligence mandates, and we're excited to discuss our pricing optimization offering both as a pre-transaction diagnostic and a post-transaction value lever. Ask us about our Pricing Optimization Diagnostic tools used in a CDD setting to assess the price lever pre-transaction.
Please reach out to us to continue the discussion.
