Pricing Analyst Today, Revenue Management Analyst Tomorrow

The Pricing Challenge

We have talked about this over and over again: Pricing is not just a business function—it is one of the most impactful strategic levers that directly impact profitability. Research shows that on average, a 1% improvement in pricing can result in an 11% increase in operating profits, underscoring its importance in revenue management. However, driving this level of impact through net pricing realization is not always easy or straightforward. Many mid-market companies often face challenges such as fluctuating market conditions, inconsistent pricing strategies, wide discounting variability by the sales force, and the inability to respond fast to marketplace dynamics. 

Pricing is the most impactful business lever to impact your Operating Profits. On average, a 1% price realization drives an 11% improvement in Operating Profit $.

In this context, the role of Revenue Management Analysts (RMAs, not to be confused with a Pricing Analyst) becomes critical. 

Historically, pricing and revenue management have been nascent functions for most industries outside of travel and hospitality. While travel and hospitality have long understood the value of sophisticated pricing, other industries are still catching up. Many companies continue to underinvest in pricing and revenue management functions, often not allocating resources as they do for finance or other key business areas. As a result, pricing and revenue management roles frequently hit a glass ceiling at the senior director or VP level, with very few opportunities for a Chief Pricing Officer role that reports directly to the CEO (unlike a CFO or a CMO).

The perception of a Pricing Analyst is often limited to being an execution-focused individual who implements cost-plus pricing, performs basic calculations on promotional effectiveness, or executes pricing changes dictated by the Sales team. 

However, we argue that the role needs to be much more expansive, evolving into what we term a Revenue Management Analyst. This expanded role requires expertise not only in the pricing domain but also in advanced analytics that drive improvements in sales and marketing productivity, all of which are crucial for holistic revenue growth management.

As much as AI (in particular, Generative AI) is overhyped these days, Large Language Models (LLMs) can be highly useful in transforming a good Pricing Analyst into a great Revenue Management Analyst. LLMs can nowadays assist very effectively in areas such as coding, automating repetitive tasks, uncovering new analytical methods, and augmenting domain knowledge with new information. By leveraging LLMs, analysts can develop advanced skills crucial for a more advanced and holistic Revenue Growth Analytics capability.

Our ideal Revenue Management Analysts are professionals who are at the intersection of data science, strategic pricing and commercial ops. They effectively combine their domain expertise with advanced analytics to uncover hidden opportunities and transform how businesses approach revenue and profit optimization. Our latest article goes deep into the future of the Pricing Analyst and demonstrates how companies can invest in their human capital and transform it into profit-generating Revenue Management Analysts. 

The Problem: Why Businesses Struggle with Pricing Optimization

A Crisis of Inefficiency

Pricing inefficiencies are pervasive across industries. For many businesses, pricing decisions are still based on intuition, corporate lore, or outdated methods rather than actionable insights or advanced models. This approach creates significant gaps between potential and realized revenue. 

Companies grapple with inconsistent pricing across channels, over-discounting, stockouts, and the inability to align pricing with customer price sensitivities, competitive trends or the differential value their products offer. These inefficiencies have cascading effects, from eroding profit margins (priced too aggressively) to losing market share to competitors (priced too high).

For example, consider a mid-sized manufacturing firm facing rising raw material costs. With no easy-to-use Margin Analytics to guide pricing decisions, the firm risks underpricing its products or losing customers to competitors. This scenario is not unique. In fact, only 1 out of 10 companies say that they leverage diagnostic and predictive analytics consistently to drive pricing decisions.

Only 1 out of 10 companies leverage diagnostic and predictive analytics on a consistent basis.

2023 Revenue Growth Analytics Maturity Report; Question: "Are your pricing decisions driven by robust diagnostic and predictive analytics?"

The Stakes of Inaction

The consequences of maintaining the status quo are severe. The main business risks are:

• Reduced Profitability: Poor pricing strategies can lead to net sales and profit leakage, particularly when discounts are applied inconsistently across sales teams (i.e. wide discount variability for the same product/service across similar customer segments).

• Lost Market Share: Competitors with better, insights-driven Pricing & Promotional approaches can better capture customers by offering more tailored, segmented pricing.

• Customer Dissatisfaction: Unpredictable (e.g.: too many random price changes in B2B settings) or misaligned pricing (e.g. too high margin on fast-moving products, low margin on infrequent sellers) can erode trust and loyalty, driving customers to seek alternatives.

These challenges are compounded by common misconceptions. Many mid-market organizations believe that advanced analytics are too complex, unnecessary or too costly to implement. However, this mindset leaves businesses vulnerable in an era where pricing agility and advanced, insights-driven decision-making are critical for survival.

 With "stretch" growth objectives, most organizations struggle with finding hidden pockets of value.

Leveraging Advanced Pricing Analytics for Profitable Growth

Highly specialized Revenue Growth Analytics and Management firms like Revology Analytics offer a comprehensive approach to pricing optimization, powered by strategic domain expertise, advanced analytics, AI, and Machine Learning. Our advanced Revenue Growth Analytics solutions are designed to address the specific challenges of distribution, manufacturing, and retail businesses, enabling them to set prices dynamically, maximize profitability, and gain a competitive edge.

By integrating real-time or near real-time data, predictive modeling, and RGM domain expertise, our tailored RGM strategies and advanced analytics tools empower mid-market companies to overcome the inefficiencies of traditional methods. 

As highlighted in our whitepaper, "Overcoming Growth Headwinds: AI/ML-Driven Strategies for Revenue Optimization in Distribution," successful revenue growth requires addressing systemic issues—like price realization gaps, customer churn, and data fragmentation—with a robust foundation built on advanced analytics.

Step 1: Data Collection and Integration

Building advanced Pricing and RGM capabilities begins with robust, well-structured data. Revology Analytics aggregates and integrates diverse datasets, including:

• Internal Data: Sales history, customer behavior, CRM data, demand forecasts, customer engagement records (emails, customer service transcriptions, etc.).

• External Data: Market trends, competitor pricing, online product reviews.

This comprehensive view ensures that pricing decisions are informed by a 360-degree perspective of the customer journey and the market landscape.

Step 2: Advanced Data Analysis

Once the data is collected, we apply our proven ML algorithms to identify patterns and trends that inform pricing decisions. Key capabilities include:

• Pricing Elasticity Analysis: Understanding how changes in price for our products and those of competitors affect demand for specific products. We model the same for Promotions, Marketing investments and Merchandising support for industries where it makes sense (e.g.: CPG).

• Customer Segmentation: Identifying customer groups based on purchasing behavior and willingness to pay is as critical in B2B as it is in B2C. 

• Market Forecasting: Predicting future demand and market conditions with high accuracy.

These insights form the foundation of a dynamic pricing strategy tailored to each company’s unique needs.

Step 3: Strategy Development

Revology Analytics collaborates closely with Pricing, Finance and Marketing teams to develop customized pricing strategies. This involves:

• Setting optimal price points for different customer segments and market conditions.

• Setting new or optimizing existing price pack architectures if needed. 

• Quantifying the differential value of your products vs. competition to inform long-range pricing strategy.

• Designing promotional strategies that maximize ROI while minimizing revenue dilution.

• Establishing competitive pricing frameworks that respond to market dynamics in real-time, using automated methods to eliminate the need for human price execution.

Step 4: Seamless Implementation

Implementing a pricing strategy across multiple sales channels can be complex, but our data engineering team simplifies this process. Real-time integration through data engineering “recipes” with existing systems ensures that pricing adjustments are deployed quickly and consistently across all touchpoints, from e-commerce platforms to in-store point-of-sale systems.

The Business Analyst of Tomorrow

The role of Revenue Management Analyst is evolving rapidly. As noted in our article, "The Business Analyst of Tomorrow," today’s data scientists are transforming into advanced business analysts who bring a unique mix of technical skills and domain expertise. This evolution is critical for companies that want to leverage pricing as a central growth lever. RMAs need to master not only pricing and sales analytics but also communication and stakeholder management. Despite all the advanced analytics and AI/ML - at least for B2B companies, we are still dependent on an expert, seasoned sales team to execute our pricing strategies, and building mutual trust is paramount.

Understanding Revenue Growth Challenges

Distributors and manufacturers often face key challenges that hinder their ability to drive revenue growth effectively. These challenges are not unique to specific sectors but are prevalent across various industries, affecting companies of all sizes. A strong Revenue Management Analyst, equipped with domain expertise and advanced analytics acumen, can help address many of these challenges, including:

• Gaps in Price Realization: Price realization refers to a company's ability to capture net revenue growth through pricing actions, including list price, discount, or promotion optimization. A decentralized sales process often results in unplanned discounts and concessions, significantly reducing profit margins. An RMA can implement robust pricing analytics and elasticity models to ensure pricing actions align with profitability goals and market conditions, minimizing revenue leakage.

• Customer Churn: Customer churn, the rate at which customers stop doing business with a company, can significantly impact profitability. Without predictive analytics to identify early warning signs, businesses often miss opportunities to intervene and retain valuable customers. A strong RMA can utilize predictive churn modeling to proactively address customer dissatisfaction, implementing retention tactics such as personalized communication, loyalty programs, and exclusive offers to prevent churn.

• Missed Cross-Selling and Up-Selling Opportunities: Existing customers represent a significant opportunity for revenue growth, yet many businesses fail to effectively cross-sell or up-sell. An RMA can leverage machine learning models to identify customer behavior patterns and product affinities, enabling targeted cross-sell and up-sell efforts that increase average order value and enhance customer satisfaction.

• Data Challenges: Effective revenue management requires high-quality data, but many businesses struggle with data cleanliness, volume, and accessibility. RMAs can address these issues by leading efforts to clean and standardize data, integrating disparate data sources, and developing data-driven tools to support pricing and promotional decisions. 

Limited Analytical Resources: Many organizations lack the specialized expertise to analyze complex datasets effectively. A skilled RMA can bridge this gap, acting as both an analyst and a strategic advisor. They can utilize advanced analytics platforms to extract meaningful insights, optimize pricing, and help tailor commercial strategies with Sales and Marketing leaders, ensuring that the company maximizes its data assets.

By integrating various internal and external data points, you can build highly effective Machine Learning models that predict which customers are at risk of churning in the next 30, 60, or 90 days. A strong RMA can build capabilities like this for your company.

Overcoming Setbacks

Adopting advanced Revenue Growth Analytics is not without challenges. Businesses may face resistance from stakeholders who are accustomed to traditional methods or concerns about the complexity of integration. Many organizations struggle with the "last mile" of analytics implementation, where tools and processes are not adopted effectively by frontline employees and decision-makers. In fact, most analytics transformation efforts fail to deliver a positive ROI for the enterprise because they fall short in making analytics accessible and actionable for end users.

We address these issues by providing:

• Comprehensive Training: Our fundamental belief is that in-sourced RGM capabilities build long-term, sustainable results for companies. We don’t believe in one-and-done PowerPoint exercises—our focus is to in-source critical Revenue Growth Analytics and Management capabilities that live on with the client and become “theirs” to own. We also offer RGM training that is customized to align with the company's overall strategic objectives, focusing on how Pricing Analytics and advanced Customer Analytics support real business outcomes.

• Dedicated Support: Offering hands-on guidance throughout the implementation process. This includes embedding our Revenue Growth Management expert resources within business units to foster collaboration and drive adoption.

• Proven ROI: Demonstrating measurable results to build confidence in the solution. By aligning RGM Analytics initiatives with key business metrics and ensuring continuous engagement with stakeholders, we help organizations see tangible improvements in revenues, profitability, and operational efficiency around Pricing. 

Drawing from experience leading advanced analytics teams, we know that analytics transformation requires a clear, time-bound strategy that aligns with corporate objectives. 

Whether focusing on operational optimization, enhancing customer experience, or driving direct revenues, the key is prioritizing analytics initiatives based on their potential impact and alignment with the company’s broader goals. Overcoming setbacks requires focusing on strategic alignment, ensuring frontline adoption, and simplifying analytics solutions to make them accessible and actionable. This is no different when building advanced Revenue Growth Analytics and Management capabilities for clients.

Effective communication and structured change management are essential to bridge the gap between Pricing/Revenue Growth Management teams and commercial decision-makers, ultimately ensuring that Pricing & RGM investments in analytics yield real, quantifiable value.

Successful transformation hinges on treating Pricing and RGM as a core enabler of business strategy, not as an isolated domain or technical capability. 

Transforming Businesses with Advanced Revenue Growth Management

The impact of advanced pricing RGM capabilities is profound, delivering benefits that extend across the organization. Businesses that adopt Revology Analytics’ in-sourced capabilities report:

• Profit Growth: Up to a 15% increase in gross profits and 10% improvement in Operating Profits within the first year.

• Operational Efficiency: A 20-50% reduction in pricing errors through automation of pricing execution. 

• Increased Promotional and Marketing ROI: Our clients have reported substantial increases of 5% to 10% in gross profit and impressive improvements of 5% to 20% in marketing ROI.

• Enhanced Decision-Making: Improved collaboration between sales, marketing, and finance teams.

The above capabilities are also within reach for a strong Revenue Management Analyst with robust domain skills and advanced analytics acumen. Such an individual could lead similar initiatives, driving impactful changes through advanced Pricing and RGM capabilities for their companies.

One Revology Analytics client, a national distributor, faced significant liquidity challenges due to unproductive inventory tied up in discontinued or inactive items. By partnering with Revology Analytics, they implemented a dynamic Markdown Pricing solution. This solution helped improve inventory liquidity by 30% and increased Gross Profit by 5% annually. The automated clearance process also saved 80+ hours of work each week for six pricing analysts and managers, while eliminating hundreds of hours of price negotiations for the 200-member sales team.

Another example involves a $1.5B Consumer Packaged Goods (CPG) manufacturer struggling with profitability and market share losses despite increasing promotional spending. Revology Analytics developed an in-house Promotion Effectiveness and Optimization platform for the company. This platform allowed for robust, insights-driven conversations with retail buyers and improved the Trade Investment ROI from 80% to 92%. The company's Gross Profit increased by 8% overall and by 13% for anchor brands, while market share grew by 6% in unit volume and 4% in dollar value within one year.

Dynamic pricing does not have to be complicated. As this example illustrates with distributor markdown pricing, in phase 1, you can focus on automating a certain set of clearance pricing rules that pricing teams would otherwise calculate and implement manually. These “rule-based pricing automation” capabilities typically deliver ~ 80-90% of the total value realization relative to true AI–driven dynamic pricing.

Why Choose Revology Analytics?

You Get the "A" Team Every Time

• Partner-Level Experience, Dedicated Attention: Our clients receive dedicated attention from partner-level experts with extensive experience.

• Focused Engagements: We limit ourselves to a handful of projects simultaneously, ensuring that each client benefits from our undivided focus and expertise.

Operator Mindset

• No Conflicts of Interest: We are free of conflicts of interest; we don't upsell unnecessary extras or tie you into long-term dependencies.

• Rational Investment: Our goal is to keep your investment—both in fees and team bandwidth—focused on delivering tangible results.

Flexibility

• Respect for Your Bandwidth: Having managed P&Ls and teams ourselves, we understand operational realities and respect your team's capacity.

• Focus on Enablement: We bring your team along every step of the way, ensuring lasting impact and internal capability development.

Advanced Analytics Edge

• Tailored Solutions, Not Pre-Packaged: We offer customized solutions that address your real needs, avoiding one-size-fits-all approaches.

• Hands-On Expertise: Our partners are directly involved with the data—they write and read the code—ensuring that insights are both technically sound and strategically relevant.

Middle-Market Focus & Expertise

• Deep Industry Experience: With extensive experience across industries like retail, distribution, manufacturing, and SaaS, we've seen nearly every scenario and pain point.

• Learned Best Practices: As industry leaders, we've acquired best practices (and understand failures), and we bring that knowledge to help you navigate your unique challenges.

ROI Advantage

• Adaptive Approach: We meet clients where they are, scaling our team and adjusting investments only when needed.

• Going the Extra Mile: We're willing to go where larger consulting firms do not, offering the flexibility that mid-sized companies require.

Our solutions are ideal for companies that:

• Struggle with inconsistent or outdated pricing methods.

• They cannot systematically prevent churn or be proactive about up-sell and cross-sell activities. 

• They have difficulty quantifying the return on their promotional and marketing investments.

• Are ready to invest in advanced price analytics to drive sustainable grow

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Ready to transform your Pricing & RGM capabilities?

Schedule a consultation with Revology Analytics today and discover how our advanced Revenue Growth Analytics & Management solutions can unlock your company’s full revenue potential.