The SPA Pricing Cube™ combines your understanding of markets with SPA’s powerful analytics, to identify the optimal pricing architecture for your business, focusing discounts on the most price-sensitive products and customers, where it will have the biggest payoff in competitive positioning; and extracting small premiums on less-sensitive products and customers. The SPA Pricing Cube™ takes the guesswork out optimized pricing in complex environments, allowing your sales force to focus on serving the customer and driving value. Our process provides for flexibility and discipline in pricing, to create a balance that works in your business.

1. SPA’s Multivariate Sensitivity Profiling
• SPA analyzes client invoice data, looking at
•
customer product baskets and customer order
patterns by product
SPA analyzes key predictors of price
sensitivity
• Order frequencies, volumes, repeatability
• Customers’ relative spend by product
• Distribution of many properties by customer and
across groups of customers
• Result:
recommended price premium map to
skus and vendors by individual customer or
customer group
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2. Customer’s Core vs. NonCore Pricing
y = -1E-06x + 1.0394
Core vs. NonCore Pricing
2
R = 0.0002
1.80
1.60
Customer's SKU Price Index
1.40
1.20
1.00
0.80
Low-Sensitivity SKUs Getting Lowest Prices
0.60
0.40
0.20
-
2,000
4,000
6,000
8,000
10,000
Customer's SKU 12 Month Sales
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12,000
14,000
16,000
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3. The Strategic Pricing Associates, Inc.,
Pricing Cube
• The Pricing Cube is the foundation for
•
•
•
organizing transaction data for purposes of
comparative indexing analysis
Every customer is assigned to a market
segment and customer size; every product/
service is assigned to a product/service
family
Every product/service is profiled for price
sensitivity, at the segment level or at the
customer-specific basket level
The Pricing Cube provides a foundation for
setting pricing standards in complex
environments
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4. SPA Pricing Cube
(Sample Values)
Product
Sensitivity
Rating
Market Segments
Customer Size
Customer
Type 1
Customer
Type 2
Customer
Type 3
0.920
0.960
Customer
Type 4
0.900
0.980
Large
0.950
0.970
1.010
1.0400
Medium
1.000
1.030
1.070
1.050
1.080
1.120
1.070
1.100
1.150
1.03
1.07
D
1.12
1.170
Tiny
B
1.105
Small
1.00
C
Huge
A
1.200
The Pricing Cube Structures Strategic Pricing Standards Around Market
Segments, Customer Sizes, and Product/Service Sensitivity
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5. Fundamental Pricing Opportunities
•
Complex companies have missed opportunities to manage
pricing in two key dimensions
•
•
•
•
Many customers are getting lower prices than they should
Low-sensitivity products are not generating price premiums
The combination is typically worth 2 to 4 margin points
2 margin points = $200,000 per year per $10 million in affected
revenue
One Customer's SKU Pricing
Customer Size vs Index
1.50
1.40
Customer Index
1.30
1.20
1.10
1.00
0.90
0.80
Small Customers Getting Low Prices
0.70
Customer's Price Index
per SKU
1.50
1.40
1.30
1.20
1.10
1.00
0.90
0.80
Low-Sensitivity SKUs Getting
Low Prices
0.70
0.60
0.60
0.50
0.50
-
50,000
100,000
150,000
200,000
Customer's 12-Month Sales Volume
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
250,000
Customer's 12-Month Sales Per SKU
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6. SPA Pricing Cube Versioning
•
The SPA Pricing Cubes are versioned to use advanced analytics
to generate increasing gains; we recommend starting with Silver
Silver Cube
Type 1
Type 2
Type 3
Gold Cube
Type 1
Type 4
Type 2
Type 3
Platinum Cube
Type 1
Type 4
H
H
L
Type 3
Type 4
H
L
Type 2
L
M
Estimated 1.0x (2% Gain)
M
Estimated 1.5x (3% Gain)
M
S
S
S
T
T
Estimated 2.0x (4% Gain)
T
Silver
Gold
Platinum
• Basic Architecture
• Intermediate Architecture
• Advanced Architecture
• Data Services: Basic
Sensitivity Ratings
• Data Services: Dynamic
Sensitivity Ratings (more
C/D revenue)
• Data Services: Dynamic Sensitivity
Ratings, Type- and CustomerSpecific
• Pricing Structure:
Differential Type-Size
Values; and Dynamic
Slopes and Premiums
• Pricing Structure: Dynamic TypeSize Values and Dynamic Slopes
and Premiums; Customer-Specific
Sensitivity, Behavioral Scoring and
Cost-to-Serve
• Pricing Structure: Basic
Type-Size Values; and
Constant Slopes and
Premiums
• Good Impact:
Estimated 1.0x (2% Gain)
• Better Impact:
Estimated 1.5x (3% Gain)
• Highest Impact:
Estimated 2.0x (4% Gain)
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