Pricing and Margin Analysis for PE Portfolio Companies

Pricing built on econometrics, joined to the true cost to serve

Pricing without cost to serve pushes volume toward the wrong customers; cost programs without willingness to pay leave money on the table. We work both sides and join them where it matters: margin by customer, product and channel.

From work we have done

We have done pricing, cost and margin work including a program that cut a specialty pharmacy's costs about 40% in two months, fee and attrition modeling for a payments processor, and rebate work in pharmacy and pharma.

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The market side · for the CCO and sales leadership

What will the market bear?

Willingness to pay, estimated from your own transaction history rather than a survey or benchmark deck, and where list price leaks through discounts, rebates and exceptions.

Drill-down: Pricing, the market side

The cost side · for the CFO and operations

Where do you stand today?

True cost to serve by customer, order and product, and which accounts are unprofitable once it is counted.

Drill-down: Cost to Serve and Profitability

Every customer lands in one of four places

Neither side alone can tell you which customer is which.

High value · underpriced

Reprice

They would pay more, and they cost more to serve than the price reflects.

Price-sensitive · costly

Re-serve

Keep the price, lower the cost to serve.

Profitable · well priced

Protect

Don't disturb pricing that already works.

Unprofitable · no headroom

Let go

No price they will pay covers what they cost. Exit deliberately, not by neglect.

Figure 1. Joining the two sides tells you what to do with each customer.

Test the price move before you make it

The model that sized the opportunity can be handed over as a working tool: choose a price move and see the expected effect on volume, revenue and margin, with the uncertainty shown.

Pricing fails at execution more often than at insight. We stay through the rollout until the margin shows up in the P&L.

Find the margin on both sides

Most of the analysis runs on transaction and cost data the business already has.

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