Pricing – A marketing Tool

Pricing – A Marketing Tool

Price is the value that a consumer is willing to pay for a product or service that he would like to use.

Analytics is a Decision Support Science that processes historical information to solve present problems from a future perspective.

Having established these definitions, we will discuss Pricing Analytics as a marketing support system.

The direct impact of a good pricing strategy is Revenue Maximization.

Pricing is probably the oldest marketing tool known that has a tactical and strategic impact on the consumption behaviour. Pricing strategies have a very short-term impact while bringing about a cascading long-term change in the brand-equity.

The effects of manipulating pricing are easy to conjecture for any marketing manager. It is almost reflex to say “Price goes down; Sales go up”. Often, this unsophisticated approach proves to be a bane of marketing.

Pricing Analytics should provide a road-map to create a favourable value perception of the brand in the consumers’ mind.

The objective of the pricing strategy is driven by the value-perception of the product that needs to be strengthened by the pricing strategy. For example, in retail the category-role determines the pricing strategy, a Destination category should be a price-leader while Preferred Category should be competitively priced and a Convenience Category should have a market-acceptable-price.

Another dimension is the overall marketing objective for a brand / category that is desired by the marketer that acts as a rudder in setting the direction for the pricing.

The matrix below describes a sample strategy-map that a marketer creates to determine the pricing objectives.


Pricing Intelligence | Kaara


Pricing Intelligence – Depth of Analytics

Having set the goals and guidelines for the pricing, the marketer needs to determine the support that he requires from analytics. This decision drives the amount of analytics investment that the marketer is willing to spend and the level of sophistication that his / her organization is ready to consume and implement. It would be partisan to say that higher sophistication gives better results. The sophistication is dependent entirely on the data available and the pricing strategy.

One should not forget that analytics is a decision support science and any decision is as good as its implementation. The following broad solutions should provide an insight into the levels of analytics advancement possible

  • Competitive Benchmarking Analysis entails dashboards and benchmark reports that provide a good indication of the market scenario.
  • Consumer Price Sensitivity Analysis provides diagnostic and predictive solutions like Price-Corridors and Price Elasticities.
  • Image-Perception Analytics takes a psycho-analytic approach to understand the strategic impact of long-term price manipulations. These determine the price structures that help build a favourable value perception.

Successful strategies are built by understanding the advantages and limitations of the analytics tool and the adaptability to the decision-makers’ choices. Analytics is ultimately about providing a new-dimension to what they already know about Pricing.


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