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Simulation tool for Price Optimization

Higher revenue recognition
per unit
Detailed pricing insights and
Quantified impact of price
change on P&L

The client was a leading global consumer goods company with operations across world. It has a diversified portfolio of brands across health, hygiene, and home care products. The main agenda of this project was to design a solution which can simulate the prices for certain products and assess the impact on KPIs which impacts the pricing strategy of the organization.

Key KPIs impacting the pricing strategy:

  • Market Share: The objective is to increase the market share
  • Gross Margin: The objective is to increase Margin %
  • Competitor Index: The objective is to become a more premium product than the competitors
  • Net Price: To Increase net revenue per unit
    • The initial pilot is run with the carpet care products in UK, which later extended to other product categories across regions. The future solution should also provide optimized price suggestion at each distributor level and its potential impact on their consolidated P&L.

      Thoucentric managed to build a price simulator tool which could gauge the impact of price change on key KPIs like market share, gross margin, competitor index and net revenue. The solution was scalable to other product categories and geographic regions as well.

      We worked closely with pricing managers to gain complete insights on client’s pricing process and key objectives. SKUs were categorized in PPG (Product Planning Group) and key distributors were identified. The simulator was designed in collaboration with pricing experts and mathematicians to derive the fundamental equation to run the tool. User functionality was also provided to change the system’s recommended price and manually simulate the price to see its impact on P&L and key KPIs. The tool was set to provide different weightage to the KPIs basis the product, region and other influential factors.

      The simulation tool allowed business personnel to derive optimized price of their products which was in accordance with their pricing strategy. Simulation tool even offered customize pricing strategy by assigning custom weight to the above mentioned KPIs. It helped client to understand the impact of price change on the client’s P&L and distributor P&L. These insights proved vital for the client to realise higher revenue per unit and the tool was later scaled to other geographic regions as well.

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