Maximizing Profits: Credico Shares 3 Key Pricing Imperatives

Stay ahead of the game with these three strategies for maximizing profits.


November 10, 2023


Insights, Global

Maximizing profits can be quite a challenge for businesses, but why? Because the business world is constantly evolving, and competition is fierce. Companies need to focus on setting the right price for their products or services to ensure they meet their customers’ needs while effectively maximizing their profits.

Credico fully understands how important it is to implement the right pricing strategies. We are committed to helping businesses thrive. How do we do it? We have developed a deep understanding of the three pricing imperatives that can make or break a company’s success:


  • Identifying gaps in pricing and discounting structure
  • Pinpointing margin leaks
  • Price deviation

How can businesses stay ahead of the game by addressing these issues?


Identifying Gaps in Your Pricing and Discounting Structure

You can capture quick wins by identifying gaps in your pricing and discounting structure, then making small changes that can achieve better results in the short term. This boosts revenue and allows businesses to see positive change, which can encourage them to make more significant changes at the right time.

The first step to maximizing profits to achieve those quick wins is thoroughly investigating current pricing and discounts and identifying gaps where adjustments could be made. You can do this by:

  • Studying market trends: Conduct market research to help understand customer needs.
  • Interviewing customers:¬†Customer surveys are a great option for providing insights into what customers are willing to pay for a product or service.
  • Considering competitor’s prices:¬†Understanding the competition allows businesses to set prices competitively and implement their own initiatives.
  • Analyzing customer behavior: Perform market segmentation by dividing people into segments (based on area, demographic, age, gender, etc.) to identify important motivational factors on consumer spending.

Businesses should understand the different segments within their customer base and their price sensitivity. By segmenting customers based on their preferences, purchasing behavior, and willingness to pay, you can tailor pricing strategies to capture higher profits from each segment. This may involve offering premium pricing to specific segments while providing value-based pricing to others.

It’s also crucial for businesses to remember that product and service prices must be linked to real and perceived value of their offering. However, they must simultaneously consider supply costs, seasonal discounts, competitors’ processes, and retail markup.


Pinpointing Margin Leaks

The second step to fully maximizing profits is to pinpoint any margin leaks. Margin leakage occurs when a business’s profit margin takes a hit due to various factors, especially those related to offering incentives and promotions.

How should you identify this information?


Create earnings reports

One effective way is by creating an earnings report. Earnings reports are like a snapshot of a company’s financial health. They show how much money the company made and spent. These reports only show the big picture, like how much money was made from different customers or how much was spent on different types of costs. But this is really useful information to help discover margin leaks. Why? Because these individual decisions on where money is spent can have a big impact on a company’s profits.

These decisions might be about where to get supplies, how to sell products, or how to manage the supply chain, and they can either boost profits or cause them to leak away.


Identify exceptions in financial performance

Profit improvement opportunities can be quite significant when you can identify exceptions in financial performance. These exceptions could be related to specific products, customers, stores, or channels. While some root causes may not be easily changed, some actions can be taken to minimize future impacts on profit margins, so businesses need to incorporate this capability. How can they do this?


Consider cloud-based platforms

Cloud-based platforms that offer an all-in-one solution can provide businesses with the resources to captivate this data regularly, thus helping them make needed changes to pricing strategies. These platforms reduce the workload by automating certain functions and providing useful data and insights.

You can use these data analytics tools to identify areas where your margins are being eroded, such as:

  • Cost structure
  • Production processes
  • Supply chain to identify inefficiencies
  • Wastage
  • Unnecessary expenses.

By plugging these leaks, you can improve your profit margins significantly.


Price Deviation

Price deviation is the difference between the actual selling price and the target price a business sets for a product or service.

If the deviation is negative, it highlights that the price is set too high, resulting in reduced profits. However, if the deviation is positive, it suggests that the price is set too low, which means the business could be missing out on higher profits. This is a useful analysis for identifying customer behavior.

For example, suppose the price deviation consistently shows customers are willing to pay more for certain products or services. This then encourages businesses to fine-tune their pricing strategy to capture additional profit.

Price deviation analysis provides valuable insights into the competitiveness of a business’s pricing strategy. If the deviation consistently shows that prices are significantly higher or lower than competitors, businesses can take action and make changes to maximize profits. How can companies find this information?


Price deviation tracking

Businesses can implement price deviation tracking. They can track and analyze price deviations across different sales channels to identify unauthorized discounting or pricing discrepancies. This will help them identify and rectify instances where their products or services are being undersold, ensuring that they maintain consistent pricing across all channels and prevent revenue leakage.


Pricing optimization tools

Businesses can also Invest in pricing optimization tools. Advanced pricing optimization software or tools can analyze vast amounts of data and provide data-driven recommendations for pricing adjustments. These tools can help identify opportunities for price improvements.

In summary, these three pricing imperatives can help businesses maximize profits effectively by:

  • Identifying gaps in pricing and discount structure by studying market trends, considering competitor’s pricing, and analyzing customer behavior
  • Pinpointing margin leaks by creating earning reports and Identifying exceptions in financial performance
  • Understanding price deviation by implementing price deviation tracking and optimization tools

Businesses often struggle with pricing, leading to poor profits and overspending. However, companies can implement strategies to increase profits by understanding the importance of correct pricing and utilizing the customer acquisition services from Credico.

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