Any evening that you go out for dinner gives you a basic lesson in economics.
As you would recall, the 3rd slice of your favourite pizza at does not taste as good as the 1st slice. The economist have a term for it. It is called declining marginal utility. And people want to pay less for something whose utility is low.If you were a restaurateur, this insight can be useful. It can help you design a price plan that offers discounts as people consume more. But how much of discount should be offered? Is there an objective way to assess it.
Discounts are common in B2B space as they are in B2C space. A carelessly designed discount plan can be harmful. Pricology’s discount management offerings helps you to steer clear of any potential minefields.
What is Discount Management Service? Discount Management service helps the clients plan discount frequency, discount depth and its duration. This service also identified those items and channels for discounting that maximise the revenue and profits.
How is it done? The Pricology team conducts field experiments and surveys to identify the relationship between utility and price.
The client’s internal data around price and volume is factored in as well.
The discount management is not free. Apart from the reduction in price, there are costs associated with changing the price in the system and the shelf. There are additional costs related to communication.
All this information is fed to the Pricology simulation software, that generates multiple options and their cost and benefit. These options are then validated with client’s management team before getting ready for a test market.
How does it help the clients? Discount Management service helps the clients develop a comprehensive approach to discounting. It includes guidelines on which items to discount, how much discount. It also offers a high level discount management plan along with the cost benefit analysis.
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