As a managing partner at Simon-Kucher & Partners, Wei Ke specializes in what he calls “the sunny side of consulting” — pricing, marketing, and sales — as opposed to the darker arts of cost-cutting and operational efficiencies. “We’re working only on commercial strategies, like how you optimize revenue; understand a client’s needs; and develop the right pricing, marketing, and sales strategy to meet those needs,” Ke says. “We’re behind the pricing strategies of some of the largest companies.”
Simon-Kucher’s clients are in a wide range of industries, and Ke was hired nine years ago to start a financial services practice for the firm in North America. “I thought it was a very good entrepreneurial opportunity,” he says. Previously, he had worked for a boutique consulting firm.
With clients from every industry, Ke says that data analytics play a big role in determining pricing strategy. However, he says, “there’s a different kind of data set that will be generated for a client that uses a bank in their day-to-day interactions versus a client that goes to Walmart or Amazon repeatedly. So it’s different kinds of data, but we do a lot of data analysis to derive the pricing strategy.” A bank, for instance, might hire Simon-Kucher when launching new products such as checking accounts, mortgages, or credit cards. “Typically, we would help banks figure out what kinds of features they need to package and bundle into new products, and how much to charge,” he says.
According to Ke, there are a few pricing strategies that are relevant to companies, regardless of industry. For example:
1. Allow value to determine price. “Whether you’re dealing with a retail customer or a company, you want to understand what people value and under what circumstances,” says Ke. The same product, he says, may be valued differently according to how it’s used.
2. Determine pricing well before launching a new product. If you wait until the launch stage, it may be too late, says Ke. “A recent study showed that if you wait until the last minute to come up with a pricing strategy for a new product, the likelihood of not attaining the revenue target is extremely high,” says Ke. It’s best to think about pricing as you’re developing the product.
3. Consider different versions and price points for your product. A product with good, better, and best versions will typically sell better than a product with a single version, says Ke. “Psychologically, there’s a tendency toward picking the middle one,” says Ke. “And if you know that there is a particular bias toward the middle option, then that option will have a higher margin compared to the others.” The psychology applies to both B2C and B2B transactions, he says.
Ke enjoys sharing his expertise on pricing through a variety of activities outside of his job. He teaches a course on pricing at his alma mater, Columbia University, where he combines his understanding of the economics behind, say, Uber’s surge pricing model, with his own experience analyzing pricing and consumer perceptions and behavior.
Ke is a member of Forbes Finance Council and frequently contributes articles. “It’s a great platform to share knowledge with relevant members in the financial services industry,” Ke says. “That’s my main focus for business development at Simon-Kucher and we think that Forbes Councils posts allow us to reach a more targeted audience. We’re broadcasting how Simon-Kucher thinks, and hopefully, when readers have a real problem, they’ll remember us.”
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