A key step to increasing profits for financial services companies is to optimize prices based on customer sensitivity and demand. SAP Price Optimization, an application in the SAP for Banking solution portfolio, offers both software and professional services that enable you to understand, quantify, and predict customer reactions to price changes – so you can develop a set of optimized prices that maximize profits and target volumes.

A New Approach to Pricing

SAP Price Optimization takes a different approach to pricing than typically taken by banks by identifying "the price at which a customer is willing to buy" – and using that information to optimize business performance. It evaluates customer behavior and how customer buying patterns are affected by price tier, competition, and change. The SAP Price Optimization application helps you understand demand elasticity – so you can optimize prices for maximized profits at targeted volumes, reflecting the unique brand of your company within the competitive landscape of each region.

Optimization: The Value of Knowing the Optimal Price for Each Product

By quantifying price elasticity using the patented engine within SAP Price Optimization, you can gauge a range of profit/volume combinations on an "Efficient Pricing Frontier" for your bank. The Efficient Pricing Frontier, displayed as a curve in our Web-based user interface, provides you with optimized rates for the many product combinations you offer. This representation of the best rates at which customers will buy your products is one of the most powerful features of the application. It provides your institution with flexible strategy development, and the ability to respond quickly to market and competitive conditions and sell your products in greater volume at higher margins.

The SAP Price Optimization application in SAP for Banking provides you with crucial process support for your business strategies, thanks to integrated tools for financial accounting, cost controlling, risk management, asset-liability management, and profitability analysis. This application can also help banks address legal compliance challenges. With this support, you can streamline the handling of portfolio and market data, improve the speed and quality of both internal and external reporting, and more easily comply with changing regulatory requirements such as international accounting and financial reporting standards and Basel II.