Pricing: VDDW Corporate Performance Management Initiatives for Results



	Initiatives: Overview Pricing Supply Chain Routing Planning & Budgeting Return On Advertising NOP–driven Negotiating NOP–driven Commission & Incentives Sku Rationalization Customer Profitability Market Segmentation Partner and Product Benchmarking Improved Category Management Staffing efficiencies Process Costing

Setting the right price is a crucial component of corporate performance management, with significant potential bottom-line impact. Depending on the industry, the process of price-setting can be extremely involved, involving vast amount of internal and external data, sophisticated software tools, and dense organizational interaction.
To whatever extent a business engages in sophisticated techniques on the revenue side of the equation so as to optimize price (game theories, elasticity regression analyses, yield optimization, etc.), one fact remains: All businesses should understand their cost and capacity constraints before finalizing their prices. Why? To ensure the prices set result in a profit.
The VDDW approach pulls all the pieces of information together so that pricing decisions can be made with full intelligence around cost-to-serve, capacity constraints, and fixed / variable costs. This is important for the following reasons:

1. To determine if a discount-for-volume tradeoff will cause demand to exceed the capacity of available resources.
2. To understand how different customer segments drive handling activity, suggesting various surcharge / discount opportunities for value-added services.
3. To determine if a one-off price deviation (spot-pricing) exceeds at least its incremental cost burden so that an incremental profit is earned.
4. To be easily defensible at the negotiating table, and possibly even in court.

How does the VDDW do this? It dynamically reveals, customer-by-customer, product-by-product, supplier-by-supplier, the expense of every activity supporting that slice of the business, the drivers of that performance, the resource capacity consumed, and the decomposition of those expenses by financial categories (i.e., fixed vs. variable).