Price Waterfall

The price waterfall is a way of describing the progression of prices from published list price to the final price paid by a customer.

The Price Waterfall is at the heart of any pricing organization. It is an effective tool to identify margin leakages and creates visibility from a reference list price down to the pocket margin, including discounts, rebates, and other cost elements. On top of that, the visual representation of your cost allocations makes comparison with your peers very easy.

We have seen that quick wins usually lie in effective pricing execution. Examples of opportunities in this area include raising product/service value perception, introducing price corridors, optimizing product mix and minimizing margin leakages through effective discounting.

By analyzing the price waterfall, marketers can determine where product value is being lost. This can be especially important in businesses that allow the sales channel to reduce prices in order to secure customers. The price waterfall can help focus attention on deciding whether these discounts make sense for the business.

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