Pricing Models

The Open Pricer Suite provides a set of pricing models enabling enterprises to make efficient pricing decisions with consideration of all relevant factors:

  • Price policies
  • Costing
  • Transaction profiling
  • Market value
  • Price optimization

These models can be implemented with a custom configuration depending on business context, sales channel and type of deal and with a phased approach in line with enterprise pricing maturity.

Price policies

OP Price Policies is a flexible offer and price configuration engine based on meta data (transaction attributes). It provides a central repository for price plans and pricing rules which is the basis for the effective enforcement of the price policy. Key elements are:

  • Offers catalogue: definition of products, options, services and product bundles
  • Dimensions management: setting of transaction attributes used in the definition of the price structures such as rate measures, rate zones…
  • Price plans for products, options and services with their allocation rules that may vary by customer micro-segment and deal profile
  • Discount and rebate rules
  • Score models and price corridors: can be defined by customer micro-segment based on price, margin…

Costing

OP Costing enables to define and implement different cost models. Each cost model is composed of a set of cost types/activities. There are two types of cost models:

  • Actual cost models: used to allocate actual costs to historical transactions and then to products and customer accounts
  • Forward cost models: used to allocate forward costs to each deal in order to simulate its future profitability at quote time.

Forward cost models may be based on different formulas depending on the type of deal. For example:

  • Target costs based on historical cost averages adjusted to take into account foreseen evolution in capacity usage, productivity, unit costs of resources and exchange rates. Target costs may be used as the default cost for the quotation of recurring business
  • Short run marginal costs based on regression analysis may be used to calculate the walk-away prices for spot deals
  • Long run marginal costs based on practical capacity usage may be used to quote key accounts’ business

OP costing is robust, embed defaulting rules, supports a high numbers of cost types and cost segment combinations and provides cost override management.

Transaction profiling

In many deals, the knowlegde of the future transaction profile is limited, which rises specific risks. This is the case for open business agreements over a limited or unlimited period of time, either for new business or for renegotiation of existing business with expected evolution of volume or business mix. In such cases, transaction profiling enables to:

  • Enter the forward profile at the thinnest level of detail known/estimated by the user
  • Use reference data from similar deals to model missing/unknown profile

Once a transaction profile is built using the reference data it is stored in a multi-dimensional profile (MDP). The user is then able to visualize and modify the profile. The profile is then used for revenue and costing simulation and, once the deal is won, to monitor actual profile versus expected profile.

Market value

Whereas cost provides guidance to set the floor of the negotiation corridor, market value provides guidance to set the target price. Market value depends upon two different measures:

  • Competitors’ prices
  • Value differentiation: based on offer advantages/disadvantages versus competitors

OP Market Value enables to:

  • Simulate an intended price plan versus competitors’ price plans for a given customer or for a whole market segment
  • Model competitive prices based on captured price points
  • Evaluate customer value drivers, offer differentiators and price advantage/disadvantage versus competitors

Price optimization

OP Price Optimization brings together all factors relevant to derive optimal prices adapted to market situation. It combines historical facts, user knowledge and business rules. Key components are:

  • Market Response modeling based on historical win/loss analytics with consideration of value drivers, quality index and competitive offers/prices
  • Forward cost models such as target costs, short run marginal costs and long run marginal costs
  • Transaction profile used as input to derive revenue and cost simulation
  • Risk Analysis linked to probabilized costing scenarios in case of uncertain transaction profile