What is Pricing Optimization: A Comprehensive Guide

Building a Pricing Model to Maximize Share and Margin

The NovaLex team recommended that the client reject any competitive pricing strategy, and the client agreed. Instead, a pure demand-based approach was implemented.

Using a unique, demand-based method of research, NovaLex was able to select between two options: maximizing margin or maximizing penetration (market share).

As this was a new product, it was decided that in the initial stage of introduction, maximizing penetration would produce the best results. Importantly, this technique yielded not only a center point for optimum pricing but an acceptable range, giving the sales team latitude to negotiate an acceptable price and accelerate the sales close. The pricing strategy ultimately implemented by the company represented more than five points of margin over competitive-oriented methods.

Organizational Development: Building a Team That Yields High Performance

NovaLex team members developed a comprehensive organizational plan for a healthcare company, empowering it to grow from $400M to $1B. The design followed the process, expanding the role of marketing from a single-focus, promotionally oriented department to a broader team with R&D and new product development capabilities.

For a large retailer, the organization was uniquely designed to enhance the marketing communications efficiency, support the CEO in his need to get closer to the frontline personnel and implement initiatives in a more responsive manner.

Externally, on the agency side, a network-of-agencies concept was designed and implemented using a single agency holding company but drawing upon multiple agencies of the same discipline who competed for major assignments. The impact was significant, raising the quality of the creative output from the agencies while controlling agency cost.

For internal communications, a network of “influentials” was established, identifying key employees who were strong performers and respected by others. Internal communications and initiatives would flow from the Executive Committee and CEO to this group first, followed by a general release of information. The result was to create a network that seeded and quickly solidified action around initiatives.

Each of these actions led to a higher-impact team and improved productivity and performance.

Metrics that Matter

The lead NovaLex team member conducted an assessment on the measures to determine the key results the company sought. Specifically, NovaLex wanted to outline those measures that resulted in leads that converted to a sale.

Using a regression analysis against a battery of measurements, a correlation was revealed that drove the key bottom-line measure and reduced the number of key metrics to a few dozen.

From there, NovaLex created a set of index measures that vastly reduced the number of critical measures down to less than 10. These indexes allowed the company to have a manageable group of key measures that provided an “early warning” if anything was found to be off track. At the same time, the company retained a broader set of measures for a deeper analysis if needed.

Finally, NovaLex used techniques to measure what had been considered by the company to be immeasurable: branding activities. By deploying a multivariate regression analysis with media lag factors, NovaLex was able to quantify even the “softest” measures of brand messaging.

Engineering a Customer Experience to Drive Satisfaction and Repeat Business

The lead NovaLex team member developed a statistical process control approach to the entire customer experience. Processes were mapped and reviewed and values assigned for each step of the process.

NovaLex’ unique approach identified “customer impression points,” not just “touch points.” Impression points are those steps in customer service that have emotional content… not just a transactional interaction. By identifying those, a company can focus on a few key points that will do the most to drive the satisfaction of customers.

For this client, NovaLex efforts resulted in increases in customer satisfaction and store traffic .

Planned Innovation for Profit Growth

The process deployed by NovaLex resulted in not only a new product launch that contributed to top-line and bottom-line growth but also a second and third product in line for development. This allowed the company to create a pipeline of new products, further reducing long-term risk and positioning the company for ongoing revenue opportunities.

Most impressive was that it was accomplished in nine months from concept to launch.

Brand Image Development

Repositioning a Brand to Regain Market Share

NovaLex knew that the news arm of the movie studio would provide exceptional coverage of the event and vastly expand the limited promotional budget. The results were beyond expectation. Estimates of monetized PR exceeded multiples of millions. Product supply had to be bolstered to keep up with demand, and many company franchisees saw record profits during the promotion.

Return-on-investment was several multiples beyond original projections, and market share was taken from competitors in two of the possible three day-parts.

Eventually, the promotion was recognized with EFFIE awards (the American Marketing Association awards for sales effectiveness) and a Gold Lion for promotional work at the Cannes Film Festival.

A Laser Focus on Target Audiences to Drive ROI

The targeting segmentation allowed the client to go after an audience originally sized at over 5M to actually focus on 1.7M clearly defined respondents. Media cost was significantly reduced through optimization of media utilization and reduction of duplicate reach. For example, in the case of radio advertising, while typical planning would have identified radio as an appropriate media, this engagement determined the exact stations to select and avoided costly live media testing and optimization.

The result was an unprecedented and otherwise impossible to achieve ROI on media investment and the ability for a smaller company to implement a “pay-as-it-goes, pay-as-it-grows” plan moving forward with limited resources.

Innovation-Driven Strategy for Higher Profit

The concepts derived from this approach scored some of the highest in company history. In fact, the top-two box scores in test results set a record for new product concepts in the company’s portfolio.

The program elevated net margin nearly two points for the company in less than one year.

Once again, innovation — thinking about the client’s needs in a nontraditional sense — led NovaLex to deliver a powerful brand-differentiating strategy.

Results: Building a Mission That Motivates Performance

Within a few months, the marketing team, which had scored the lowest ratings for engagement and motivation, moved to the top to become the number one-rated department of the 20,000-person company. Perhaps the most important result was that team members took the initiative and responsibility for efforts that elevated the mission beyond what management had seen as necessary to move ahead.