Pricing Challenges in Financial Services
Today in financial services, markets and business
models are becoming increasingly complex.
- Auto Finance
- Mortgage
- Home Equity
- Deposits
- Consumer Lending
- Treasury Services
- Personal Financial Services
Proliferation of financial products, distribution channels, and
targeted customer segments has led to an increasing challenge of
achieving optimal pricing. Technological advances, in particular
the Internet, have driven an increase in the number of potential
vendors, distribution channels, and product alternatives available
to customers of financial products. This proliferation has
exponentially increased the amount of price information that companies
must track in order to ensure their offerings are competitive and
optimally priced.
Experts unanimously concede that Pricing is the most
powerful lever companies have to affect profits. Marn, Roegner,
and Zawada, in their revolutionary book, The Price Advantage, assert: “Failure
to take real initiative in pricing today virtually assures that
percentage points of price will slip through your hands annually—and
that huge chunks of operating profit will drop off your bottom
line.” In financial services, where mere basis
points can have such a dramatic impact on profitability, pricing
excellence becomes a competitive imperative.
Financial services face a broad range of pricing challenges in
both B2B and B2C markets.
- Segmentation: Lack ability to understand natural segments
and actionable differences in segment purchase behaviors.
- Proliferation of Pricing Entities: Too many pricing
possibilities to keep track of manually. Simply can’t
sort through pricing alternatives without a system.
- Price Elasticity: Lack robust tools for estimating
elasticity and customer price sensitivity.
- Competitive Intelligence: Lack ability to understand
how competitor prices impact demand and profit results
- Manual Limitations: Too much effort and time to
update prices, and don’t have time to consider impact on
existing customers and contracts. Excessive manual data
entry. There are gaps in the rationality rules applied
to our prices because they are difficult to maintain
- Price Testing: Difficult to plan, execute, and
evaluate price tests.
- Pricing Process: Pricing decisions made based
on “gut feel” rather than consideration of relevant
data
- Negotiation Tools: Sales people don’t have
adequate tools to negotiate confidently with customers. Cost
to serve, willingness to pay, current market climate, customer
price history and other important information are not incorporated
into price negotiations
- Win-Loss Tracking: Lack robust ability to systematically
track wins and losses and incorporate feedback into pricing
decisions.
These challenges commonly lead to opportunities to
dramatically enhance business results by addressing them with proven
processes, tools, and pricing science. PROS is a leading
provider of high-value solutions that specifically address these
challenges.
PROS Pricing Solutions for Financial Services
To meet the many pricing challenges across the financial services
disciplines, PROS provides a comprehensive suite of pricing software
tools, including Analytics, Execution, and Optimization.
These solutions drive high value in financial services in many
different ways:
With PROS Analytics tools, decision makers
can:
- Identify and correct destructive pricing trends
- Locate and correct poorly performing customers and
segments
- Drill down to identify root causes of poor
pricing performance
- Evaluate and quantify pricing improvement opportunities
- Understand demand behavior across segments
- Monitor market dynamics and pricing performance
to enable faster response to problems and opportunities
With PROS Execution tools, decision makers
can:
- Set up more profitable pricing and discount guidelines based
on defined pricing strategies
- Provide decision support tools to the field
to support better price negotiations. Visibility of key
deal terms, customer sensitivities, and market context
- Enforce pricing guidelines by systematically managing pricing exceptions and
approvals
- Eliminate pricing errors by ensuring that
negotiated prices are communicated correctly to ERP systems
- Use rationality rules to eliminate irrational pricing
- Improve time-to-market of price changes
With PROS Optimization tools, decision
makers can:
- Optimize price points based on best available
inputs, including forecasts, business rules, and constraints
- Use advanced analytics to guide better pricing decisions, considering price-demand
relationships, including zones of indifference
- Use price-testing to capture price elasticities
across business segments
- Minimize pricing mistakes by evaluating what-if scenarios
- Better forecasts to improve optimization results
- Automate price optimization routines for massive
data sets
Proven Results
PROS customers have reported hundreds of millions of dollars of
incremental revenues and profits from the use of PROS Pricing Analytics,
Execution, and Optimization tools. By eliminating profit
leaks, uncovering hidden price improvement opportunities, providing
sales people with better negotiation tools, and optimizing prices
across segments, PROS customers have been able to leverage the
power of pricing.
Pricing is by far the strongest lever available to improve your
corporation’s profits. McKinsey & Company showed that
a 1 % improvement in pricing will lead to an 11% increase in profits,
more than increasing sales (3.7%) and decreasing costs (7.3%).
To learn more about the opportunities to achieve
Pricing Excellence, please contact info@prospricing.com or
call our sales team at +1 713-335-5277.
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