This video will provide an introduction to the role of the Solution Architect in developing a pricing solution that encompasses the best practices approach recommended by Pricefx.

Learning Objectives

Core topics and takeaways:

• Understanding how to effectively use the accelerator and administer it.

Video Highlights

Learning Highlights:

• Defining Accelerators as pre-configured components:

  • Price calculations based on pricing strategies:

    • PSP calculates multiple prices for each product using different pricing strategies.

    • The system prioritizes the pricing strategies based on configuration.

    • The prices can be different depending on the selected strategy.

    • Users can manually override the automatic decision and change the price using a price selector.

  • Warnings and error handling:

    • Errors are displayed in a clear and helpful way throughout the accelerator.

    • Examples of warnings and errors are shown, such as a warning about a smaller margin than the specified minimum.

    • It is important to read the issues from top to bottom, as seemingly minor problems can lead to bigger issues later on.

    • During configuration, it is important to ensure that the system picks up the settings as expected.

  • Pricing strategies:

    • Anchor pricing is when the price of a product depends on the price of another product.

    • Recommended retail pricing is simply getting the value from a table based on competition.

    • Kit pricing, also known as bill of material (BOM), calculates the price of a product based on the prices of its components.

  • Use of product segmentation:

    • Product segmentation is a core component in PSP tables.

    • The speaker mentions the strategy selection and its presence in different tables.

    • The speaker clarifies the selection process based on business units and product groups.

    • The system tries to find the most specific combination in the table, but also considers alternative combinations if the specific one doesn't exist.

  • Pricing flexibility levels:

    • The first level allows for setting up various settings based on the combination of product attributes.

    • The second level, called pricing levels, allows for creating different price lists for regions, countries, or stores, with the ability to set up dependencies between them.

  • Use of cost plus table:

    • There are several versions of the Cost Plus table, and each version corresponds to a specific level and has its own table.

    • If a specific level is not available, the system will use the universal fallback table called Cost Plus.

Core Learning Concepts

The following are the core learning concepts from this learning path:

Learn how the PSP accelerator calculate prices for products

The PSP accelerator calculates prices for products based on the pricing strategies set by the user. It considers factors such as anchor pricing, recommended retail pricing, and kit pricing. Users can configure different pricing levels and dependencies to determine the final price of a product. Manual overrides are also possible if needed. The system takes into account various parameters and rules to calculate accurate prices for different products.

In the PSP accelerator, let's consider an example where a product has a base price of $100. Based on the pricing strategy set in the system, such as anchor pricing or recommended retail pricing, adjustments may be made. If the anchor pricing rule is applied, the final price could be set at $120. Additionally, if there are kit pricing rules in place, bundling certain products together may result in a discounted price for the bundle. These calculations showcase how the PSP accelerator determines prices for products based on the configured pricing strategies and rules.

Price list configuration

Configuring price lists involves setting up different lists that contain pricing information within the PSP. Users can create multiple price lists based on criteria such as customer segments, regions, or product categories. Each price list may have its pricing levels and rules that determine how prices are calculated and applied to products. By configuring price lists, users can manage and customize pricing strategies effectively to meet the needs of various customer segments and optimize revenue generation.

Different pricing strategies available in the PSP Accelerator

The PSP accelerator offers various pricing strategies to help users determine product prices effectively. Some of the common pricing strategies available in the PSP include:

Cost-Plus Pricing

Cost-plus pricing is a pricing strategy where a company determines the cost of producing a product and then adds a markup (percentage or fixed amount) to set the selling price. The markup is the profit margin added to the cost to ensure the company covers its expenses and generates profit. It helps companies ensure they are earning a desired profit margin on each product sold.

See how it works in PSP here.

Anchor Pricing

Anchor pricing is a pricing strategy where a reference price, known as the anchor price, is set as a point of comparison for customers. This anchor price serves as a benchmark or starting point from which discounts or premium prices are perceived. By establishing an anchor price, businesses can influence customers' perceptions of value and make subsequent prices, such as discounted prices, appear more attractive.

See how it works in PSP here.

Recommended Retail Pricing

Recommended Retail Pricing (RRP) is a pricing strategy where a manufacturer or supplier suggests a retail price at which a product should be sold to end consumers. The RRP serves as a guideline for retailers to follow when pricing the product. It helps maintain price consistency across different retail channels and ensures that the product is not undersold or devalued in the market. Retailers may choose to sell the product at the RRP or adjust the price based on market conditions, competition, or promotional strategies while considering the manufacturer's recommendation.

See how it works in PSP here.

Kit Pricing

Kit pricing is a pricing strategy where related products or services are bundled together and sold as a package at a combined price. This strategy allows businesses to offer complementary or related items as a set, often at a discounted price compared to purchasing each item individually. Kit pricing can create value for customers by providing convenience and potentially cost savings. Businesses can effectively promote specific products, increase sales volume, and enhance the overall customer experience through strategic implementation of kit pricing strategies.

See how it works in PSP here.

Dynamic Pricing

Dynamic pricing is a pricing strategy where the price of a product or service is adjusted in real-time based on various factors such as demand, competition, time of day, customer demographics, and inventory levels. This flexible pricing approach allows businesses to optimize prices dynamically to maximize revenue and profit. Dynamic pricing is commonly used in industries like e-commerce, travel, and hospitality to respond to market conditions and customer behavior swiftly. By leveraging data and algorithms, businesses can set prices dynamically to reflect changing market dynamics and consumer preferences.

Promotional Pricing

Promotional pricing is a pricing strategy where temporary discounts or special offers are applied to products or services for a limited period. The aim of promotional pricing is to stimulate sales, attract customers, clear out excess inventory, or promote new products. Common promotional pricing tactics include discounts, buy-one-get-one (BOGO) offers, coupons, rebates, and limited-time sales events. By offering promotional pricing, businesses can create a sense of urgency, drive customer traffic, and increase sales volume during specific promotional periods.

These strategies allow users to set different pricing rules and methods to calculate prices for products based on specific criteria and business requirements.

Product segmentation impact pricing in PSP

Product segmentation in PSP involves categorizing products based on various attributes such as market segment, customer type, geography, or product features. Product segmentation impacts pricing in the PSP system by allowing users to apply different pricing strategies, discounts, or pricing rules to specific product segments.

This customization enables businesses to tailor prices to meet the needs and preferences of different customer segments, optimize pricing strategies for specific markets, and enhance overall pricing effectiveness.

Using PSP, a company selling electronics may segment its products based on customer types such as retail consumers, wholesale buyers, and corporate clients. By applying product segmentation in the PSP system, the company can set different pricing levels for each customer segment. For instance:

• Retail consumers may have standard pricing for individual purchases.

• Wholesale buyers may receive volume discounts based on the quantity purchased.

• Corporate clients may have negotiated contract pricing for bulk orders.

Different levels of flexibility available for setting up product attributes and pricing levels

In setting up product attributes and pricing levels, the PSP system offers various levels of flexibility to accommodate different business needs. Some of the key levels of flexibility available include:

Global Pricing

Global pricing allows users to set pricing strategies and rules at a high level that apply across all regions, products, or customer segments.
Users can define global pricing guidelines, discounts, surcharges, and promotions that are applicable to the entire organization.

Regional Pricing

Regional pricing enables users to customize pricing strategies based on specific regions or markets.
Users can set region-specific pricing rules, currency conversions, taxes, and regulatory requirements to cater to regional variations in pricing

Product Pricing

Product pricing allows users to define pricing strategies at the product level, including setting prices, discounts, and promotions for individual products or product categories.
Users can apply product-specific pricing rules, bundling options, and differentiation strategies to optimize product pricing.

Customer Segment Pricing

Customer segment pricing enables users to tailor pricing strategies for different customer segments based on their purchasing behavior, loyalty status, or market segment. Users can create personalized pricing offers, discounts, and incentives for specific customer groups to drive customer engagement and loyalty.

Promotional Pricing

Promotional pricing features enable users to create and manage promotional campaigns, seasonal offers, and limited-time discounts to boost sales and attract customers. Users can set up promotional pricing rules, coupons, special offers, and dynamic pricing strategies to drive customer engagement.

Dynamic Pricing

Dynamic pricing capabilities in Pricefx Price Setting Accelerator enable users to implement real-time pricing adjustments based on market conditions, demand fluctuations, competitor prices, and other factors. Users can set dynamic pricing rules, price optimization algorithms, and automated repricing strategies to maximize revenue and profitability.

These levels of flexibility empower users to tailor product attributes and pricing levels in the PSP system to meet specific business requirements and optimize pricing strategies effectively.

Flexibility in setting up product attributes and pricing levels

Flexibility in setting up product attributes and pricing levels in the PSP system allows users to customize and tailor pricing strategies to meet specific business requirements. This flexibility enables users to:

• Define and customize product attributes such as size, color, or material to categorize products effectively.

• Set up multiple pricing tiers based on customer segments, regions, or product categories to apply diverse pricing strategies.

• Create dynamic pricing rules and dependencies to adjust prices based on real-time factors like demand, inventory levels, or market conditions.

• Manage prices centrally across different regions or markets while accommodating local pricing variations.
  Define conditional pricing based on specific conditions or events to enable targeted promotions, discounts, or pricing adjustments.

Overall, the flexibility in setting up product attributes and pricing levels empowers users to optimize pricing strategies, cater to different customer segments, and adapt to changing market dynamics effectively within the PSP system.

Troubleshooting pricing issues

Troubleshooting pricing issues in the PSP system involves identifying and resolving problems related to pricing strategies, calculations, or configurations. Some common steps in troubleshooting pricing issues may include:

• Reviewing pricing rules and dependencies to ensure they are correctly set up.

• Checking for any conflicting pricing configurations that may be causing discrepancies.

• Verifying data inputs and calculations to identify any errors in pricing calculations.

• Testing different scenarios to pinpoint the source of the pricing issue.

• Consulting system logs or error messages for clues on potential issues.

• Collaborating with technical support or system administrators for assistance in resolving complex pricing issues.

❓ Quiz

Test your knowledge of this section, here.