MBA-III Unit-2 (Subject- Marketing Analytics)

Product Analytics

Product analytics is the practice of collecting and analyzing data related to how
users interact with a product, with the goal of improving product performance,
user experience, and overall business outcomes. It involves tracking key metrics,
identifying patterns in user behavior, and using those insights to inform product
development and decision-making.

Here are some key components of product analytics:

1. Key Metrics and KPIs (Key Performance Indicators)

 User Acquisition: How users find and start using your product.
 User Activation: The point at which users experience the core value of the
product.
 Engagement: How often and how deeply users interact with the product.
 Retention: How many users continue using the product over time?
 Churn: The rate at which users stop using the product.
 Customer Lifetime Value (CLTV): The total value a customer brings over
their entire relationship with the product.
 Conversion Rate: The percentage of users who take a specific desired
action, such as signing up, making a purchase, or completing a task.

Subject Teacher- Mr.Ajay Baghel

 MBA-III Unit-2 (Subject- Marketing Analytics)
2. Data Collection Methods

 Event Tracking: Tracking specific actions taken by users, such as clicks,

page views, or interactions with features.
 Session Recording: Recording user sessions to understand how they
navigate through the product.
 Surveys and Feedback: Collecting qualitative data from users about their
experience.
 A/B Testing: Running experiments to compare different versions of a
product to see which one performs better.

3. Analysis Techniques

 Cohort Analysis: Analyzing user behavior over time by grouping users

who share similar characteristics or experiences.
 Funnel Analysis: Understanding where users drop off in a process or flow,
such as during onboarding or checkout.
 Segmentation: Dividing users into groups based on characteristics such as
demographics, behavior, or usage patterns to understand their unique needs.
 Path Analysis: Tracking the sequence of actions users take to understand
how they move through the product.

4. Tools and Platforms

 Google Analytics: Widely used for tracking user behavior on websites.

 Mix panel: A powerful tool for tracking events, creating funnels, and
conducting A/B testing.
 Amplitude: Specializes in product analytics and user behavior tracking.
 Heap: Automates data collection and provides real-time insights into user
interactions.
 Hotjar: Offers heatmaps and session recordings to visualize user
interactions on your product.

5. Applications of Product Analytics

 Feature Prioritization: Using data to identify which features are most

important to users and should be prioritized in development.
 User Experience Improvement: Analyzing user behavior to identify pain
points or areas for improvement in the user interface.
 Personalization: Tailoring the user experience based on behavioral data,
such as offering personalized content or recommendations.
 Customer Retention Strategies: Identifying reasons for churn and
developing strategies to retain users.

Subject Teacher- Mr.Ajay Baghel

 MBA-III Unit-2 (Subject- Marketing Analytics)
 Growth Strategy: Using insights to drive growth through acquisition,
retention, and monetization.

PRICING OPTIMIZATION
Pricing optimization is the process of setting and adjusting the price of a product
or service to maximize profitability, customer acquisition, and long-term value
while staying competitive in the market. It involves leveraging data, models, and
customer insights to identify the price point that delivers the best balance of
demand and revenue.

Pricing optimization can be a complex task because it must account for various
factors such as market conditions, customer segments, competitive landscape, and
cost structures. However, with the right approach, businesses can use pricing as a
strategic lever to drive growth and profitability.

Techniques for Pricing Optimization

1. Regression Analysis
Regression models help predicts how changes in pricing might affect
demand or revenue. By analyzing historical data, businesses can determine
the price elasticity of various customer segments and identify the optimal
pricing structure.
2. Conjoint Analysis
Conjoint analysis is a statistical technique used to understand how
customers value different attributes of a product, including its price. By
Subject Teacher- Mr.Ajay Baghel
 MBA-III Unit-2 (Subject- Marketing Analytics)
conducting surveys where customers are presented with various product
combinations and prices, businesses can estimate the optimal price that
balances features, price, and customer preferences.
3. Simulations
running pricing simulations allows businesses to model various pricing
scenarios and their impact on revenue, market share, and profit. This is
particularly useful when launching new products or entering new markets.
4. Price Sensitivity Meter (PSM)
This technique is used to understand the price ranges that customers
consider too high, too low, or just right. By identifying price thresholds,
businesses can refine their pricing strategies to capture maximum value
without alienating customers.

Benefits of Pricing & Revenue Management through Analytics

1. Maximized Revenue
by using data to understand price elasticity, demand patterns, and customer
behavior, businesses can optimize pricing to maximize revenue per unit
sold.
2. Increased Profitability
Revenue management strategies, such as overbooking and dynamic pricing,
help businesses maximize the utilization of their resources (e.g., hotel
rooms, flight seats), thereby improving profit margins.
3. Better Forecasting and Planning
Analytics enables businesses to predict future demand and adjust pricing
and inventory management strategies accordingly. This leads to better
resource allocation and planning.
4. Improved Customer Experience
Personalized pricing and tailored offers (such as segmentation or bundling)
can create a more relevant and satisfying experience for customers, leading
to higher conversion rates and customer loyalty.
5. Competitive Advantage
Real-time pricing and competitor monitoring allow businesses to stay
competitive in fast-changing markets by adjusting prices quickly based on
competitor actions or market conditions.

Tools for Pricing & Revenue Management Analytics

 PROS: Offers AI-powered pricing and revenue optimization tools,

commonly used in industries like airlines and hospitality.

Subject Teacher- Mr.Ajay Baghel

 MBA-III Unit-2 (Subject- Marketing Analytics)
 Vendavo: Specializes in pricing optimization for B2B businesses,
providing analytics-driven solutions to manage pricing and maximize
margins.
 Pricefx: A cloud-based pricing platform that uses advanced analytics to
optimize pricing, provide dynamic pricing, and manage price rules.
 Zilliant: Provides revenue management and pricing solutions that use
predictive analytics and AI to optimize pricing strategies.
 Dynamic Yield: An AI-based personalization platform that helps optimize
pricing in real-time for e-commerce businesses.
 Airlines & Hotels: Software like Duetto for hotels and Sabre Revenue
Management for airlines are industry-specific tools that optimize pricing
and revenue based on historical data and market conditions.

Conclusion

Pricing and revenue management through analytics enable businesses to make

data-driven decisions that optimize pricing, boost revenue, and increase
profitability. By using predictive analytics, optimization algorithms, and machine
learning, companies can dynamically adjust their pricing strategies in real-time to
respond to changing market conditions and customer demand. This approach is
particularly effective in industries where prices are variable, such as travel,
hospitality, and e-commerce, allowing businesses to unlock the full potential of
their pricing strategies.

PRICING APPROACHES OR PRICING OPTIMIZATION

Strategic pricing involves setting and adjusting a product’s price in a way that
aligns with the company’s broader business objectives, such as growth,
profitability, market share, or customer loyalty. The approach is not purely about
maximizing short-term revenue but instead considers long-term positioning, value,
competitive dynamics, and market conditions.

The most common pricing approaches and strategies:

1. Cost-Based Pricing

Approach: Prices are set based on the costs of production (e.g., materials, labor)
plus a fixed margin or markup. This is one of the simplest pricing methods.

 Advantages:
o Easy to implement.

Subject Teacher- Mr.Ajay Baghel

 MBA-III Unit-2 (Subject- Marketing Analytics)
o Ensures that costs are covered and a predictable profit margin is
achieved.
 Disadvantages:
o Ignores customer willingness to pay.
o Doesn’t account for competitive pricing or market demand.

Example: If the production cost of a product is $50 and the desired markup is
40%, the price would be $70.

2. Value-Based Pricing

Approach: Prices are set based on the perceived value to the customer rather than
the cost to produce the product. This approach requires an understanding of
customer needs, preferences, and the competitive landscape.

 Advantages:
o Potential to command higher prices if the perceived value is high.
o Customer-focused, increasing satisfaction and loyalty.
 Disadvantages:
o Requires detailed customer insights and segmentation.
o Harder to implement for some industries without significant market
research.

Example: Luxury goods or premium software solutions often use value-based

pricing, where customers are willing to pay more based on perceived exclusivity,
quality, or features.

Subject Teacher- Mr.Ajay Baghel

 MBA-III Unit-2 (Subject- Marketing Analytics)
3. Competition-Based Pricing

Approach: Pricing is set based on competitors' prices for similar products or

services. This strategy is common in markets where products are commoditized or
highly comparable.

 Advantages:
o Quick and simple to adopt.
o Helps stay competitive in price-sensitive markets.
 Disadvantages:
o Can lead to price wars, reducing overall market profitability.
o Ignores the company’s cost structure or unique value proposition.

Example: Retailers may price products based on what competitors charge, or set
prices slightly below or above competitors depending on their position (e.g.,
"good value" vs. "premium").

4. Penetration Pricing

Approach: This involves setting a low initial price to quickly gain market share,
then gradually increasing the price over time once a customer base is established.

 Advantages:
o Effective for entering new markets and building customer loyalty.
o Can generate significant sales volume early on.
 Disadvantages:
o Risk of creating price expectations that are difficult to increase later.
o Low initial margins may affect profitability in the short term.

Example: Streaming services (like Netflix) and mobile apps often use penetration
pricing to attract users, offering lower prices or free trials before raising
subscription costs.

5. Price Skimming

Approach: A high initial price is set for a new or innovative product, and
gradually reduced over time as competitors enter the market or as the product
becomes less novel.

Subject Teacher- Mr.Ajay Baghel

 MBA-III Unit-2 (Subject- Marketing Analytics)
 Advantages:
o High margins at the launch phase.
o Allows businesses to recover development costs quickly.
 Disadvantages:
o May alienate price-sensitive customers initially.
o Competitive products can drive the price down over time.

Example: Technology products (like smart phones or gaming consoles) often use
price skimming, where the product is priced high at launch and then lowered after
a few months.

6. Psychological Pricing

Approach: This strategy uses psychological triggers to make a price more

attractive to customers, even though the price may not be significantly different.

 Techniques:
o Charm pricing: Pricing products at $9.99 instead of $10.
o Anchoring: Showing a higher "original" price next to a discounted
price to make the deal seem more attractive.
o Bundle Pricing: Offering a package of products for a price that’s
perceived as a better deal than purchasing each item individually.
 Advantages:
o Can increase conversion rates without lowering the actual price.
o Plays on consumer perception of value.
 Disadvantages:
o Can appear manipulative if overused or poorly executed.

Example: Retailers often a use charm pricing to make a price appear lower than it
is or show a “discounted” price to create urgency.

7. Premium Pricing

Approach: Offering a basic version of a product or service for free while

charging for premium features or advanced functionalities.

 Advantages:
o Attracts a large user base quickly.
o Enables businesses to upsell premium versions once users are
hooked.
 Disadvantages:
o Monetization depends on converting free users to paid ones.
Subject Teacher- Mr.Ajay Baghel
 MBA-III Unit-2 (Subject- Marketing Analytics)
o Can create reliance on a small subset of users who are willing to pay.

Example: Software like Spotify or Dropbox offers free versions with limited
features, while charging for premium versions with additional benefits.

8. Dynamic Pricing

Approach: Prices are constantly adjusted based on real-time factors such as

demand, competition, customer segment, or even weather conditions.

 Advantages:
o Maximizes revenue based on demand fluctuations.
o Can increase profitability by targeting different customer segments.
 Disadvantages:
o Can alienate customers if prices fluctuate too frequently or
unpredictably.
o Requires real-time data and analytics to be effective.

Example: Airlines, hotels, and ride-sharing services use dynamic pricing to adjust
prices based on real-time demand.

9. Geographical Pricing

Approach: Prices are adjusted based on geographic location, considering factors

such as local economic conditions, competition, and transportation costs.

 Advantages:
o Allows companies to optimize pricing for different markets.
o Accounts for differences in customer willingness to pay across
regions.
 Disadvantages:
o Complicated to implement and manage across multiple markets.
o Potential for customer dissatisfaction if price disparities are
significant.

Example: Multinational companies like Apple or Coca-Cola often adjust prices

based on regional economic conditions, taxes, and tariffs.

Subject Teacher- Mr.Ajay Baghel

 MBA-III Unit-2 (Subject- Marketing Analytics)

PRICING MANAGEMENT AND TACTICAL PRICING

Pricing Management refers to the strategic, analytical, and operational processes
used to set, adjust, and monitor prices across products or services in line with
organizational goals. It encompasses both long-term strategic pricing and short-
term tactical pricing decisions.

Tactical Pricing, on the other hand, involves short-term actions taken to respond
to immediate market conditions, such as competitive pressures, inventory needs,
or promotional campaigns. It is dynamic, responsive, and often data-driven to
achieve quick wins or resolve specific challenges.

Pricing Management
Pricing management ensures that pricing strategies align with the overall business
objectives, such as profitability, market share, customer retention, or brand
positioning.

Key Components of Pricing Management

1. Pricing Strategy Development

o Define long-term goals for pricing (e.g., cost-plus, value-based,
penetration, or premium strategies).
o Align pricing with brand positioning and target customer segments.
2. Price Setting
o Determine base prices and tiers for products/services based on cost,
competition, and value.
o Account for factors like price elasticity, geographic pricing, and
customer willingness to pay.
Subject Teacher- Mr.Ajay Baghel
 MBA-III Unit-2 (Subject- Marketing Analytics)
3. Price Optimization
o Use data analytics and algorithms to find the optimal price point that
balances profitability, demand, and competitive positioning.
4. Price Execution
o Implement pricing strategies across sales channels, ensuring
consistency in price communication (online, in-store, B2B, etc.).
o Manage discounts, bundles, and promotions effectively to avoid
eroding perceived value.
5. Performance Monitoring
o Track pricing effectiveness through key performance indicators
(KPIs) such as profit margins, market share, customer acquisition
rates, and revenue growth.
6. Competitive Analysis
o Continuously monitor competitor pricing to adjust strategies
dynamically in response to market conditions.

TACTICAL PRICING
Tactical pricing focuses on short-term pricing decisions aimed at addressing
specific business needs, opportunities, or challenges. These decisions are often
made in response to factors like seasonality, competition, inventory levels, or
promotional campaigns.

Subject Teacher- Mr.Ajay Baghel

 MBA-III Unit-2 (Subject- Marketing Analytics)
Key Tactical Pricing Techniques

1. Promotional Pricing
o Offering temporary discounts or special deals to boost sales volume
or attract new customers.
Examples: Flash sales, seasonal discounts, "Buy One, Get One Free"
(BOGO) offers.
2. Dynamic Pricing
o Adjusting prices in real-time based on supply, demand, competition,
and customer behavior.
Examples: Airlines, ride-sharing services, and e-commerce platforms
frequently use dynamic pricing to maximize revenue during peak
demand.
3. Loss Leader Pricing
o Selling a product at a loss to attract customers and drive sales of
other higher-margin items.
Example: Grocery stores often sell staples like milk or bread at a loss
to draw customers in.
4. Geographical Pricing
o Adjusting prices based on region or location to reflect local market
conditions, costs, or customer preferences.
Example: A tech company offering lower subscription rates in
emerging markets.
5. Inventory-Driven Pricing
o Adjusting prices to manage excess inventory or capitalize on scarcity.
Examples: Clearance sales to move outdated products or premium
pricing for limited-edition items.
6. Volume Discounts
o Offering lower prices for bulk purchases to encourage larger orders.
Example: A supplier providing tiered discounts based on the number
of units ordered.
7. Price Matching
o Matching or beating competitors’ prices to capture market share.
Example: Retailers like Best Buy and Walmart often promise to
match competitors' prices.
8. Psychological Pricing
o Using pricing tactics like charm pricing (e.g., $9.99 instead of
$10.00) to appeal to customer perceptions.

Subject Teacher- Mr.Ajay Baghel

 MBA-III Unit-2 (Subject- Marketing Analytics)
Comparison: Pricing Management vs. Tactical Pricing

Aspect Pricing Management Tactical Pricing

Focus Long-term goals and strategy. Short-term, immediate actions.

Align prices with brand,

Respond to specific market conditions
Objective profitability, and market
or opportunities.
positioning.

Timeframe Months to years. Days to weeks.

Approach Proactive and planned. Reactive and dynamic.

Implementing a value-based
Flash sales, price matching, or
Examples pricing strategy, price
adjusting prices to clear inventory.
optimization.

Real-time monitoring tools,

Pricing software, analytics, and
Tools competitor analysis, and discount
long-term forecasting tools.
management platforms.

Tools for Pricing Management and Tactical Pricing

For Pricing Management

1. Price Optimization Platforms:

o Vendavo, Zilliant, Pricefx: Used for long-term price setting and
optimization.
2. Business Intelligence Tools:
o Tableau, Looker: Analyze historical data and monitor KPIs.
3. Revenue Management Software:
o PROS, Duetto: Optimize pricing based on demand forecasts.

For Tactical Pricing

1. Competitor Price Monitoring Tools:

o Prisync, Kompyte: Provide real-time insights into competitors’
prices.
2. Dynamic Pricing Tools:
Subject Teacher- Mr.Ajay Baghel
 MBA-III Unit-2 (Subject- Marketing Analytics)
o Dynamic Yield, Feedvisor: Automatically adjust prices in response
to demand.
3. Promotion Management Tools:
o Retail Pro, TradeGecko: Manage discounts, bundles, and seasonal
promotions.

Subject Teacher- Mr.Ajay Baghel