Price Management

The organization and control of tactical and strategic elements of price setting, the quote to cash process and price positioning through competitive, market and industry strategy.

Price Elasticity of Demand

The sensitivity of demand to changes in price. More elasticity denotes greater sensitivity. Less elasticity denotes less sensitivity. 

Price transparency

Indicates the level of visibility that purchasers have regarding the prices and related attributes of any given product or service.

Price Discrimination

The sale of identical goods or services transacted at a different price from the same supplier. The term discrimination is not intended to represent unfair or illegal behavior.

Predatory Pricing

Setting a low product price in relationship to others in order to drive a competitor from the marketplace.

List Price

The published or starting price for a given product or service, often reduced to a lower actual invoice price due to volume or competitive environment.

Invoice Price

The specific price charged on an invoice for each individual transaction, often including freight and other specific charges or general discounts.

Pocket Price

Invoiced price less off-invoice services and activities such as payment terms discounts, annual volume rebates, covered freight and others.

Pocket Price Waterfall

A graphic model that depicts the discounting activities from List Price to Invoice Price to Pocket Price.

Pocket Price Banding

A graphic model that depicts the variation in pricing across multiple dimensions. For example, variation in pocket prices for different customers purchasing the same product.

Price Leak

A process break-down or error resulting in a gap between negotiated price and cash received for each transaction. Price leaks directly affect profit margins.

Contribution Profit Margin

Equals Revenues less variable costs.

Gross Profit Margin

Equals Revenues less variable and fixed Cost of Goods Sold (COGS). Also explained as the profit margin prior to factoring in Selling, General and Administrative costs (SG&A), depreciation and interest.

Operating Profit Margin

Equals Revenues less variable and fixed Cost of Goods Sold (COGS), less SG&A.  Also explained as earnings prior to interest payments and income taxes.

Net Income

Equals Revenues less all expenses. Also explained as the “bottom-line”.

Profit Lever

Core business activities/categories that impact profitability. The most common profit levers include: Price, Volume and Cost.

Customer Segmentation

The marketing process of dividing customers into distinct subsets based on the benefits they seek and observable characteristics or behaviors exhibited. Each subset should be unique in their needs and attitudes and are likely to respond similarly to a given market strategy regarding a products features, services, pricing, promotion etc. as defined by the products marketing mix.

Conjoint Analysis

Also called multi-attribute compositional models is a statistical technique utilized to determine what combination of product attributes is most preferred by target customers.

Product positioning

Positioning is the process by which marketers attempt to establish an image or identity of a particular product in relationship to competitive products as perceived by the target market.