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Cost and Price – The Yin and Yang of Price Optimization

Setting and managing prices for tens of thousands of products against multiple customer categories across multiple markets, together with changing competitor behaviour, is indeed a challenge. Thankfully, companies using Navetti PricePoint™ are well equipped to handle this, and the Price Management module is where it all starts.

 In some companies, cost is still seen as the input for setting prices. However, with the Cost Management module in Navetti PricePoint, cost management instead becomes a true business efficiency tool. And by integrating the Price Management and Cost Management modules in the same set-up, companies take control of their entire pricing process. This means they can capture additional revenue from better understanding of the customer logic, as well as manage their target cost structures to secure improved procurement efficiencies that reduce cost and boost margins.

 Working these modules in tandem means that users can create smarter cost structures, with all their products categorized into groups based on predefined characteristics. And then use these cost structures to make better decisions when setting global target prices that reflect both the customer perceived value and provide full transparency on the internal cost structures.

Some additional benefits of this tandem approach include

  • More efficient cooperation between procurement and pricing in defining business targets and strategic priorities
  • Support for the procurement team with a product centric focus where costs can be evaluated in comparison with other similar products in the same market.
  • The ability to re-use product classification data, which enables more efficient internal processes.
  • Helping procurement identify which products and components that need special attention
  • Supporting the pricing team with procurement intelligence
  • Enabling more efficient sales processes by utilizing target cost information when evaluating the profitability of a specific deal

 Creating an optimized global pricing and cost structure is the first critical piece of the price optimization puzzle and the foundation for operational pricing. With the combination of modules in Navetti PricePoint this complex task, which often involves many different parts of the company, can be done in a sequence of well-defined steps, making the process both faster, more accurate and with a higher contribution to both top- and bottom-line growth.