Pricing

The New iPad and the Value of Increased Resolution in Pricing

By James Marland
March 4, 2012

Like most iPad 2 owners, I woke up this morning and found that I now owned an “old iPad.” One of the main benefits of “The New iPad” is the increased screen resolution: four times greater than existing models. As we move from megapixels to gigapixels we are reaching levels of resolution, which will require me to get new glasses to appreciate.

But in the world of price optimisation we also are going down a similar path of increased resolution. The critical metric here is not the number of pixels on a screen, but the number of pricing segments used to describe your business. And you need to be running your business in High Definition.

A segment is a set of transactions which has been grouped together for the purpose of providing meaningful analysis. And specifically, a Pricing Segment is a set of transactions which exhibit similar price outcomes, and forms the basis for predictive pricing. Some business run their business on a very small number of segments: perhaps just a country price list. You may have target prices on Customer Size and perhaps Industry. That’s about as far as you can go with manual systems such as Excel.

But in the Pricing world, low resolution costs money. With a limited number of segments you are having to provide a price which is averaged across a disparate set of sales situations. This means that in some deals you will be priced to high which puts the deal at risk, and in others you will be priced too low which leaves money on the table. High Resolution means that prices are targeted to that specific customer situation, taking into account all of the factors that affect price outcome.

Are you seeing the full picture?

Mona Lisa

 

– James Marland

  • Price Optimization , pricing , pricing analytics , Pricing Optimization , segmentation , segments Pricing Excellence , Target price

    James Marland

    James Marland is the Director of Business Consulting at Vendavo based in London. In this role he helps diagnose Pricing Opportunities and develops business cases for pricing projects with ROI models. James has been in the pricing software space for many years, both on the customer and supply chain side: so he has a view from “each side of the table”. Prior to his pricing career he was VP of Solutions at Ariba and has also spent 5 years at SAP America. He has a Bachelor of Science degree in Mathematics from the University of Southampton.