In today’s competitive market, Sales are under constant pressure to not only attract new customers but also to retain and maximize the value of their existing ones.

An effective pricing performance monitoring is crucial to ensure that your customers achieve contract commitments but are also aligned with the overall profitability goals of your company. As market conditions change, the ability to quickly identify and respond to deviations in contract performance can make the difference between maintaining a competitive edge and falling behind.

In the following sections, we will explore 4 Pricing Performance initiatives you need to enhance your pricing performance management, ensuring that your pricing strategies remain competitive and your customer relationships profitable.

1) Option and Surcharge Compliance Monitoring

This involves ensuring that all options and surcharges are correctly applied and compliant with contractual agreements and company strategy to maximize revenue. By tracking the application of Surcharges and optional services, Sales and pricing can prevent revenue leakage, capture all applicable charges, and maintain the integrity of their pricing structures, ensuring alignment with agreed terms, alignment between customers and ensuring you recover costs from extra activities.

Key Activities:

  • Determine price policy and capture customer price validated in contract.
  • Monitor application of options and surcharges.
  • Identify any discrepancies or missed opportunities and address any non-compliance issues by correcting billing errors, updating contracts, or revising processes to ensure future compliance.

2) Customer commitments Monitoring

Monitoring and managing customer commitments involves tracking the actual shipment profile against the profile specified in the customer contract. By effectively overseeing these commitments, Sales and Pricing can ensure alignment with pricing agreements, identify opportunities to enforce contract terms and adjust pricing based on actual volumes delivered. Ultimately this monitor and adjustment process will optimize revenue and ensure tariff consistency among your customers.

Key Activities:

  • Integrate effective shipment profile in each customer agreement including volume, destination mix, weight and cubic volume.
  • Capture customer commitments in a database.
  • Leverage commitments to Identify customers who are under or over-performing (start your journey with simple volume compliance monitoring).
  • Use data to have informed discussions with customers about their purchasing patterns and potential adjustments to their agreements. This not only optimizes revenue but also strengthens customer relationships through transparency and adherence to agreed terms.

3) Customer profitability monitoring

Assessing the profitability of customers, products, and services involves a comprehensive evaluation of the profit generated by each segment for the business. By analyzing these factors, companies can pinpoint their most profitable areas and identify underperforming ones. This enables Sales and Pricing to concentrate on high-margin segments, make informed decisions about adjusting or discontinuing unprofitable customers, and strategically price products or services to enhance overall profitability and capitalize on profit opportunities.

Key Activities:

  • Implement an accurate Cost Models to support your decisions (Listen to our podcast on Costing for Pricing)
  • Identify high-margin customers and adjust/discontinue low-margin or loss-making customers.
  • Generate customer price adjustment or adjust customer process to improve costing.

4) Gap to Fair Price Analysis

This involves identifying and closing the gap between current pricing and the fair market price to optimize revenue and competitiveness. By comparing a company’s prices to the “fair price” derived from market benchmarks, competitive pricing data, or willingness to pay analysis, the Sales and Pricing team can generate opportunities for price adjustments that maximize revenue without compromising competitiveness.

Key Activities:

  • Determine Fair Price based on customer profile, market conditions, cost structures, and value propositions. (Learn more on what is Open Pricer’s Fair Price model).
  • Monitor the customer gap with Fair Price. Positive and Negative are both important as it will help you to identify opportunities (current price lower than fair price) and potential attrition risks (current price higher than fair price).
  • Leverage this information during rate increase campaigns to adjust targets by customer. 

Conclusion

These 4 Pricing Performance initiatives, when implemented effectively, can significantly improve your pricing performance management, helping your company stay competitive, maximize profitability, and strengthen customer relationships.

Open Pricer can help you to implement robust pricing performance monitoring practices and ensure that you are getting the most out of your customer contracts. Open Pricer has developed Smart Contract, a module optimized for the post and parcel industry.

Smart Contract provides a comprehensive overview of pricing performance by tracking critical metrics such as price variance, margin, and discount levels. Smart Contract allows Sales and Pricing teams to detect anomalies, trends, and opportunities instantly, enabling swift action. Learn more about Smart Contract

Open Pricer empowers logistics groups to manage and optimize all their pricing processes: price setting, execution (quote and rating) and monitoring. Learn more about Open Pricer.

Want to know what you should prioritize to optimize your pricing?