Answer to Question #212117 in English for Monkie

Question

Write the investigation about the inconsistencies in the revenue and the pricing items

Answer 1

Report Investigation

Inconsistency in the revenue and pricing items

Purpose of the investigation is to obtain all the relevant causes of inconsistency in the revenue and pricing items to:

1.To allow us come up with a way of resolving the common pricing mistakes and knows the causes of revenue inconsistency.

Section of the investigating officer

The officers are asked to consider and take note on the inconsistency of revenue and pricing items.

Conduct of the investigation

causes and how to correct them

1. Setting the wrong initial price is a “one-time” decision that relates to a company’s pricing methodology and its target margins. Most typical pricing methodologies are flawed because they do not start by understanding the most important variables in setting price.

It is a mistake to abdicate one of the most important (and potentially lucrative) decisions to a competitor.

• Customer-based pricing: based on specific guidance from customers
• Note: This methodology also often is wrongly called market pricing.

Customers are focused on paying the lowest possible price. Customers will volunteer unrealistically low price guidance, especially in advance of a negotiation.

• Historical-based pricing: based on prior prices for similar products

Historical-based pricing is relatively arbitrary and often only continues the pricing mistakes of the past.

• Cost plus pricing: based on a markup over costs

The mechanics of cost-plus pricing often are flawed in one or more of the following ways:

• Using old cost standards
• Not correctly assigning some costs to individual products
• Ignoring some costs
• Setting low margin target

2. Not effectively managing day-to-day pricing decisions is a dynamic problem that relates to negotiations with individual customers. Day-to-day pricing decisions often are flawed for one or more of the following reasons:

• inadequate value proposition
• no pricing rules
• no accountability
• insufficient or flawed data
• flawed incentives

Companies must establish the appropriate processes and polices to effectively manage day-to-day pricing decisions.

3. Allowing a disconnect between strategy and pricing is a common problem that goes unaddressed and leaves significant money on the table. Typically, strategy-pricing disconnects result when the company:

• competes on price instead of focusing on the value they create for customers,
• does not revamp operations to earn an attractive return at market prices

In conclusion, pricing is an incredibly powerful lever that typically is underutilized by companies. The most common pricing mistakes are either targeting the wrong customers or simply pricing too low. To correct these mistakes, take the following actions:

• Utilize a value-based pricing methodology to set the right initial price.
• Establish (and enforce) effective policies for managing day-to-day pricing decisions.