Pricing & Commercial Excellence

Two questions are at the heart of consumer loan price optimisation: (1) how profitable is a newly funded loan as a function of price and (2) how does the demand for this loan change in response to price adjustments? To determine expected loan profitability (1), it is key to leverage the bank's existing risk, regulatory and funding expertise. The current interest rate environment has not only had an impact on loan funding but has also led to increased competitor dynamics. Thus, a solid understanding of customer demand (2) – supported by appropriate conversion models – becomes all the more important. 

Establish an optimisation engine and the necessary business processes that unify all relevant pricing data and optimise loan prices regarding price-sensitivity, competition, behavioural aspects, and risk-based KPIs (RoE, RAROC etc.). The solution recommends optimal prices accordingly and forecasts the response of customer segments to changes in prices by channels. Based on this approach the price-setting and optimisation processes could be improved within a single platform.

• Higher margins through optimised loan rates adapted to market conditions and clients’ willingness to pay 
• Lower operating costs due to increased automation

Targeting the right leads with the appropriate product via the best channels at the right time was identified as one of the main goals to address costumer needs and achieve revenue targets. However, three main challenges arise: (1) high complexity due to many (potential) customers and a wide variety of products, (2) lacking appropriate processes and system capacities to respond to changing customer behaviour and (3) inefficient processes execution due to insufficient definition of tasks and responsibilities.

Realise revenue potentials by developing and implementing an effective sales pipeline concept based on user-friendly and interpretable lead ranking and targeting recommender systems. Our solution enables the client to drive continuous optimisation through experimentation, management reporting and model quality monitoring. Alongside, we support the client in system and process integration through capability analysis, governance establishment, processes elaboration and organisational enablement.

• Improve conversation rate and finally increase revenue through approaching the right leads 
• Decrease cost per lead but also improve customer satisfaction due to the prediction quality of the model and adequate customer approach

Product performance and profitability is only judged retrospectively based on incurred losses and expenses. For active sales and portfolio steering, a more recent feedback loop on sales performance and expected profitability of newly underwritten business is required. The necessary methods and expertise are available within the insurer’s actuarial pricing unit, but the key challenge is making the actuarial models and their insights available to other business units and to translate them into real business value.

An actuarial portfolio monitoring solution based on technical prices enables the client in forward-looking portfolio and sales steering. The utilising of actuarial risk models enables real-time monitoring of portfolio mix developments and their impact on expected profitability. The insights are available on-demand to all relevant stakeholders through dedicated dashboards tailored to the respective business functions and through periodic or ad-hoc automated reports.

• Improved underwriting result through active and better-informed portfolio steering 
• Higher operational agility through early warnings and shorter reaction times

Hurdles in establishing consistent and efficient price-setting processes due to a high number of SKUs, customers, markets and channels as well as price dependencies between products and services. The price and category managers must manage a vast number of price changes according to diverse pricing strategies considering market changes, competitor prices, value contribution, and inventory levels. The integration with sales and distribution processes as well as ensuring real-time accuracy adds to the complexity.

A unified pricing solution that can be tailored for all markets and channels, designed to meet the individual needs perfectly. This system allows for the flexible implementation of custom pricing strategies, ensuring a consistent and efficient process, capable of updating hundreds of thousands of prices weekly in a (semi-)automated manner.

• Increased profit margins through a more precise price setting that is perfectly aligned with the market conditions 
• Time reduction thanks to high degree of (semi-)automation and an intuitive user interface

To overcome volatile market conditions and economic downturn the client wanted to focus more on the after sales business for realizing revenue growth and stabilizing profitability. To successfully increase revenue and realise the earnings potential, the implemented pricing strategies (mostly cost-based) and processes (highly manually, for example regarding the comparison with competitor prices) were no longer suitable.

Establish a market and value-oriented pricing approach based on an individual pricing software to handle efficient price setting for more than 100,000 spare parts and services. This enables the client to improve monetisation in its after-sales business by automatically comparing its prices with competitors’ offers and applying appropriate value-based pricing rules and intelligent optimisations.

• Increased revenue and profit through value-based pricing and selling 
• Operating cost reduction thanks to high degree of automation

Price negotiations with customers are often characterised by individual decisions and gut feeling. Particularly in times of high inflation and increasing cost pressure on the customer side, targeted, objective and data-supported preparation is required for important price negotiations.

Establishing a cohesive deal management process based on an appropriate system to provide all required details in a single source. As one core module, negotiation scenarios can be simulated based on client-specific input factors and the results can be analysed in a customised manner (e.g., based on what-if-analysis). Based on the data-backed insights, the negotiation target can be approached in a consistent and targeted way by the entire negotiation team.

• Increased pricing power and profit margins through data-backed negotiation insights 
• Operating cost reduction thanks to high degree of automation and the sharing of knowledge within the team