To retain your best customers, your company must be nimble in reacting not only to your market, but also must respond to the needs of customers when their markets change. Using pricing software, optimization and analytics helps ensure you know what’s going on in the market and within your customer base.
Many companies have a decent sense of what is happening in their market. They can see when customer groups are churning off or buying less of certain products. Where they fall short is knowing why this is happening. Oftentimes their analytics do not give them a clear line of sight downstream into what is happening in their customers’ markets that may be causing shifts in buying patterns.
For instance, let’s assume that you are selling consulting services and you see increases in demand among certain customer groups happening concurrently with churn in other groups. On aggregate, margins look the same, but market dynamics are changing. Your product and pricing strategy have remained the same, so what’s causing the shift?
The shift may be happening in your immediate market or further downstream. In your market environment, you could be facing new competitors looking to steal share by targeting some of yours with lower rates. Solid analytics allow you to see which customers are at risk of leaving and take proactive steps before you lose their business. When you have this data early, it helps your sales reps talk with customers about changing market dynamics and work with the customer to evolve your offer to best fit the customer’s needs.
The hardest changes to address are churn-inducing events happening downstream in your customers’ markets. For instance, let’s assume that you are selling consulting services in Texas. When oil prices go down, demand drops among oil and gas companies that have edicts to tighten their belts. At the same time, demand for your services may be going up among chemicals companies producing oil derivative products since they’re cash flush. These dynamics are harder to uncover and if your company is slow to react, you lose out on opportunities.
To stabilize your customer base, it’s vital to have up-to-date information on market changes throughout the value chain and the ability to quickly change your prices in response. A good solution for many organizations is to combine pricing software that uses market data to optimize prices and customer analytics.
Price optimization helps you go beyond analytics and adapt quickly to changing market dynamics that may not be evident in your data. Price optimization is grounded in a scientific segmentation that places customers and products in peer groups based on their buying patterns. There groups are statistically proven to react similarly to pricing actions.
Further, these groupings of customers and products exist in like “micro-markets,” so customers in the same group will have similar reactions to external events like the drop in oil prices described above. Best-in-class companies are adapting their prices in real time based on pricing trends happening within these “micro-markets.” Price software automatically identifies these trends and suggests prices that are optimized for the unique environment of each customer. This allows companies using pricing software to be agile in their response to downstream events in their customers’ markets and adjust prices even before root cause is determined in analytics.
A good pricing strategy requires visibility: You can’t react appropriately without it. That’s where analytics come in. When your pricing analysts have that visibility into market data, they’re able to see early signals that your competition is offering a lower price or newer product, and change your pricing strategy as appropriate. When you’re using sophisticated pricing software, making these adjustments is fast and automated. Many of these adjustments are taking place even before the underlying dynamic is uncovered via analytics since your prices update dynamically based on transaction data, so that your pricing recommendations pivot with the market.
Change is inevitable, but your company has a lot of choice in how to respond. The combination of pricing software, price optimization and analytics allows you to see what’s happening, while simultaneously reacting to changing conditions. This speed and nimbleness is a great way ensure you meet the changing needs of your customers and build customer loyalty.