The impact of Big Data on pricing strategies

The arrival of Big Data analytics is set to introduce a new era of efficiency in pricing. Many organizations may be underestimating the importance of proper pricing structure, and therefore potentially leaving significant revenue opportunities on the table.

According to, a 1 percent price increase in the price of a product or service leads to an average 8.7 percent increase in operating profits, with no assumed loss of volume. Unfortunately, up to 30 percent of pricing decisions made by organizations fail to set the right price, resulting in the forfeiture of substantial potential resources.

Traditionally, prices are set manually, an incredibly time-consuming process that can quickly overwhelm even the most analytical minds.

"What happened in practice then was that every year we had price increases based on scale and volume, but not based on science," Roger Britschgi, head of sales operations at Linde Gases, told "Our people just didn't think it was possible to do it any other way. And, quite frankly, our people were not well prepared to convince our customers of the need to increase prices."

Today, implementing new pricing strategies that increase an organization's profits is more of a technical challenge than a marketing issue. By using automated systems to determine what is driving value for each product and reviewing narrow market segments, organizations can better provide a rationale for their prices to highlight value.

Of course, existing staff will need training and guidance on how best to develop these strategies through analyzing the appropriate data and explaining the rationale to stakeholders. Working with a business management consultant can provide the targeted expertise necessary to develop a pricing strategy that positions an organization for greater market share and profits.