Pricing structure key to surviving downturn

IRISH BUSINESSES have been urged to adopt a dynamic pricing structure to help them weather the storm, a leading expert in revenue optimisation has warned.

Global vice-president of profit optimisation with business intelligence software firm SAS Steve Pinchuk said Irish companies need to provide “compelling customer experiences” to attract and retain customers

According to Mr Pinchuk, up to 50 per cent of any business’s customer base will look at switching supplier in the next 12 to 18 months as the economic downturn hits home, and many Irish businesses are not prepared for the potential customer desertion.

The cost of acquiring a new customer is estimated by SAS Ireland as six to seven times more than retaining existing business. Developing proper relationships with customers is therefore essential to businesses.

SAS Ireland says that companies will have to deliver more personalised services and prices according to customer requirements and behaviour. The firm claims companies that combine better customer-experience management capabilities with a customer centric approach will gain a decisive competitive advantage.

“Most people understand their market as possibly a couple of market segments, large groupings of people they attribute the same attributes to,” said Mr Pinchuk.

“We think it’s very important to understand individual customers, because although they may share some traits they may be very different in others, and the traditional market segmentation many times misses a lot of the individuality of the customer.

“By being able to understand the individual customer and their behaviours and what they want and properly anticipate what they need or want next, you can build the loyalty to help retain them.

“In these times it’s very important to retain your customers, because you’ll find your competitors doing anything possible including some unrealistic low pricing sometimes to try to get your market share from you.

“A company that is facing extinction because of the economy will do all sorts of things on the way out to keep above water. It’s like a drowning person. You’ve got to be able to be able to counteract that.”

Mr Pinchuk has already had considerable success in the casino industry, as corporate vice-president of revenue management for Harrah’s casinos and hotels.

Many companies were gathering the necessary data, he said, but were failing to use it properly.

“It does no good to have just a database of names. You need to get predictive analytics and understand what these people are likely to do . . . what they are likely to pay for things and then we use that to help do some customer-centric pricing modelling, where we can determine based on who it is that youre talking to what they should be charged, what the willingness to pay is.

“It allows you to develop a real one-to-one relationship . . . so you can properly position your product and your pricing.”