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WHAT EXPERTS ARE SAYING ABOUT PRICING AND PROFITABILITY MANAGEMENT



“In today’s turbulent market, pricing has taken on a new level of importance.

Consumer lending executives need to ensure they are appropriately pricing for profit and risk. Deposits executives need to price appropriately to achieve funding targets without 'giving away the farm.'

These goals can only be successfully achieved by using an understanding of customer response to pricing — a key insight that is missing from most pricing decisions today.”

 Kathleen Khirallah
 Managing Director and  Practice Leader of the  Banking Practice
 TowerGroup

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Although pricing is one of the most effective ways to impact performance, it is dramatically underutilized by most banks and finance companies today. With unprecedented turmoil in the marketplace, executives are trying to optimize both sides of the balance sheet — loan originations and deposit balances — to maximize net interest margins and meet their funding goals.

During this time, pricing as a discipline has increased in importance, elevating it from a tactical function to a strategic lever that can foster ongoing learning and improvement. Smart executives have begun investing in best-in-class pricing and profitability management to break through the current market conditions and prepare themselves for the future.

What’s Missing from Most Pricing Practices and Processes?
Most banks and finance companies use one or a combination of the following approaches to guide pricing decisions and determine buy rates and fees:

Approach Explanation Drawbacks
Cost or Risk-based pricing Rates and fees are set
based on cost (costs of funds plus risk and a fixed margin)
This approach ignores competitive
pricing
and different price responses of various customer segments


Market-based
pricing

Rates and fees are set based
on competitor prices
Disregards the value the customer places on the brand and the product and the profitability of the loan
Anecdote-based pricing Prices are set based on instinct
and rule-of-thumb
Disregards the current environment and competitive realities


These approaches fail to take into account a critical factor: the dealer's and/or customer's price response.
Best-in-class pricing and profitability management replaces these ad-hoc approaches with advanced analytics, innovative technology and tailored business practices and processes.

The Nomis Solutions Pricing and Profitability Management Suite
The Nomis Solutions Pricing and Profitability Management Suite capitalizes on Nomis Solutions’ domain expertise within retail banking and auto finance. The following integrated solutions comprise the Pricing and Profitability Suite:

Contact us today to learn how we can help you achieve similar results.