Business Issue
Businesses can obtain a real competitive advantage by determining the optimum price for a service or product and understanding the behaviour of markets, customers and competitors. Price optimisation solutions (also known as yield or revenue management solutions) enable organisations to achieve this. These solutions address:
- How best to vary prices
- How best to control availability
- How best to adjust production capacity
Many organisations fail to recognise the very direct link that pricing has to profitability. Businesses without price optimisation solutions often make reactive responses to changes by increasing or decreasing production, under- or over-charging, and discounting with little or no detailed understanding of the likely impacts. This focus leads to suppression of demand, dilution of margins, reduced revenues and a lack of responsiveness to the market.
Other organisations have often failed with price optimisation solutions, because:
- There is a lack of support or confidence from senior management
- Different business units within the organisation price to suit their own purposes.
- Pricing processes are poorly integrated into the organisation
Truly informed price optimisation requires the use of appropriate analytical techniques to segment customers, forecast behaviours and optimise segment price offerings. These need to be aligned with the strategic, tactical and operational objectives of the organisation to exploit sources of hidden value and improve operating margins.
High level Price Optimisation processes
Our Expertise
Capgemini’s price optimisation capability lies within our Operational Research group based in the U.K. and has unparalleled experience of solving problems and delivering solutions for clients worldwide. Capgemini Operational Research has competencies in the related analytical areas including forecasting, customer analytics, business case analysis, simulation, data mining and optimisation. We use specialist analysis software packages such as Clementine, SPSS, SAS, Manugistics, Arena, Witness, Crystal Ball and @Risk.
To support client engagements and solution development, Capgemini has formed relationships with several leading technology and information providers. These relationships ensure our solutions are robust and powered by high-quality, accurate data management.
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Business Benefits
Many business benefits can be realised from the implementation of an effective price optimisation solution:
- Standard, enterprise-wide pricing initiatives aligned with operational, tactical and strategic objectives
- Consolidated “single source of truth” of customer information
- Increased revenue generation through direct contribution to bottom line figures
- uild market share through fact-based commercial decision-making
- Improved responsiveness to market change and price competition
- Increased customer satisfaction through improved understanding and responsiveness
- Increased predictability of business outcomes
- Improved ability to respond to better informed and more demanding customers
- More efficient and effective use of enterprise resources
Application Areas
Pricing optimisation solutions have wide-ranging applicability across many sectors:
- Transport: airlines, rail operators, shipping & freight companies, car rental
- Entertainment & Hospitality: cinemas, restaurants, hotels
- Telecommunications: internet & telephone network providers, cable & digital TV providers
- Energy & Utilities: electricity & gas generation & transportation companies
- Media: TV & radio, newspaper & magazines
- Manufacturing & Retail
Related Success Stories
Economic segmentation and revenue enhancementThe client was a highly successful UK holiday company, but they had little understanding
of their customers at a segment level. We used data mining and market research
to apply yield management techniques to increase profit and improve client satisfaction.
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International price comparisonThe client sold a range of products to private and public hospitals throughout
Europe, but had inconsistent pricing. We developed a statistical analysis model
to allow the client to investigate the reasons for price variations in different
countries or segments.
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Revenue yield analysis toolWe designed and built a prototype decision support tool to enable the client
to monitor all their revenue drivers (not just sales volumes) and hence improve
revenue yield.
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Retail Space Occupancy ChargingWe evaluated potential charging frameworks for retail space to support a clear
understanding of the underlying costs and values of different categories of retail
space, allowing fair negotiations between two subsidiaries.
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Business case for differential pricingThe client was unsure about the potential benefits of being able to differentially
price items during a sale. We analysed their sales data to determine price elasticities,
and developed a model to optimise departmental markdown budgets.
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