bankingciooutlook

Strategic Pricing: Devising Novel Pricing Opportunities for Retail Banking

By Banking CIO Outlook | Thursday, August 22, 2019

Strategic pricing is an approach to customer decisions, and retail banks are adopting this approach to enhance its customer experiences.

FREMONT, CA: With businesses becoming customer-centric, banks are looking for ways to enhance customer experience. Some experts in retail banking have made strategic pricing a core development and have consequently built a dominant presence in the business. Strategic pricing is a topic that has to be given increased attention in the world of innovation in retail banking. Bankers rarely discuss pricing as a tool for competitive differentiation and enhanced profitability. Retail banks have the possibility to alter their pricing strategies to reflect the way customers perceive and receive value. Reports suggest that most customers make decisions about products and services based on a series of attributes, such as type of bank, fees, and interest rate.

Strategic pricing is solving the pricing challenges for products of services in a profoundly competitive market that can prove to be a extremely challenging task. Strategic pricing models are mathematical applications that calculate how requirement varies at different price levels. It then integrates data with information on costs and inventory levels to recommend prices that enhance profits. This model allows businesses to use pricing as a powerful profit tool, which often is underdeveloped. It can be used to tailor pricing for consumer segments by simulating how targeted consumers will respond to price variations with data-driven situations. The sophistication of pricing of items in profoundly dynamic market conditions, modeling outcomes helps to forecast demand, develop promotion and pricing strategies, control inventory levels, and improve customer satisfaction.

Strategic pricing models are factored in various critical pricing elements, which are the value of the product to buyers and sellers, pricing strategy, tactics that manage all perspectives affecting profitability. Practitioners should select the adopted strategic pricing model and determine aspired outputs and expected inputs. They should streamline the business's value proposition and set imperative rules to guide the modeling method. They observe results and upgrade data input to develop modeling accuracy continually. This model helps businesses determine initial pricing, promotional pricing, and markdown pricing. Initial strategic pricing operates well for companies with a steady base of long life-cycle products. Promotional price strategies benefits in setting volatile prices to impel sales of items with prolonged life cycles introduce products, products bundled collectively in special promotions and loss leaders. These strategies help companies selling short life-cycle products subject to fashion trends and seasonality.

Though modernized banking, companies have invested massively in efforts to improve consumer experience, some of them conduce to overlook ways to innovate its pricing approaches to attract different customer segments. Strategic pricing delivers magnified profitability and provides a better understanding of overall business administration. For most businesses, the actual benefits are achieved via advanced financial and operational management and the capacity to respond to evolving economic environment dynamically. Strategic pricing model lets businesses enhance its customer decisions based on an individual's particular characteristics. There are many ways to set a price for a product. Businesses, too, are developing more complex strategies recognizing the requirement for pricing decisions to classify different profiles and needs. The advancement of developed analytical techniques has helped businesses experience customers better and differentiate strategies accordingly.

Strategic pricing enables businesses to develop a comprehensive strategy for pricing that will create a high level of profit within its business compulsions. Businesses can access the most beneficial tradeoffs between competing objectives and then implement individual consumer decisions to meet the goals. Pricing is a sophisticated customer decision that needs to exhibit vibrant market conditions and individual consumer behavior. Businesses are acknowledging how to address fundamental business challenges in customer decision making in the best way, and strategic pricing is increasingly being seen as a crucial part of the change process. 

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