Companies usually have questions related to their pricing: How should products be priced? How does pricing affect customer purchasing behavior? How will prices impact sales and revenue forecasts?
To address these, pricing analysts use data-driven insights to back up their answers. A pricing analyst is responsible for leveraging data and statistical methods in the creation of pricing strategies that will maximize profits. Primarily, they design and maintain product price lists based on an analysis of market trends.
Here are also some ways a pricing analyst contributes to their organization:
The role of pricing analyst generally fits under the data analyst umbrella, but there are key differences in skills and scope that make this role unique. We took a closer look at the pricing analysis role to answer the following:
A pricing analyst is responsible for researching and analyzing the costs and pricing of the goods that a business produces. Analysts then make recommendations to the management team regarding current and future pricing strategies.
Job functions of a pricing analyst include:
How do analysts accomplish these tasks? Mathematics and statistics play an important role in pricing analysis. For starters, a pricing analyst looks at industry databases, catalogs, and other industry sources to track pricing trends and consumer habits. Analysts are also interested in profit margins and must know how product positioning, marketing, and manufacturing costs can all work their way into the final price.
Ultimately, a pricing analyst’s core responsibility is maximizing profitability. A successful pricing analyst can help a company hit the sweet spot: balancing prices and demand so as to capture market share and keep profits high.
Pricing analysts need to be business-savvy and have a good understanding of economics, statistics, and other areas of business administration. They also need to be strategic thinkers who can look at all aspects of the marketplace, including the customers, competitors, and suppliers.
The specific skills required of a pricing analyst will vary from position to position, but many employers seek candidates with the following skills:
Analytical skills: Pricing analysts must be able to gather data from a number of sources, process it appropriately, and apply useful metrics to make sense of it. They must be able to understand trends in large sets of data and use that analysis to answer questions or solve problems.
Broad Fields of Study: Core competencies include product/business sense, statistics and probability, economics, and consumer psychology.
Communication skills: Pricing analysts work with different levels of management within their organization, as well as with vendors and customers. They must be able to write reports that clearly explain pricing structures or strategies, as well as present complex information in an accessible manner during meetings or presentations.
Critical-thinking skills: To successfully analyze data and make recommendations regarding pricing strategies, pricing analysts must be able to assess various scenarios and determine which is most likely to achieve the desired outcome for the organization. They need to use logic and reasoning when evaluating alternatives; for instance, if several options are available for introducing a new product or service.
Data Visualization tools: Core competencies include data visualization tools like Tableau and Power BI and presenting tools like PowerPoint.
Number-Crunching Software Skills: Core competencies include pricing analytics tools, SQL, Microsoft Excel, and database management tools.
Pricing analysts and data analysts have almost everything in common. The few differences that exist are typically minor and tend to reflect a company’s particular needs. For example, a pricing analyst might be expected to have more experience with specific pricing analytics software, while a data analyst tends to require more general analytics software knowledge.
Similarly, a pricing analyst needs to know more about financial instruments and pricing psychology. Things like seasonality, trends, and forecasting are more specific skills that a pricing analyst needs compared to data analysts with a more general skill set.
In essence, pricing analysts are a specific kind of data analyst that specializes in analyzing pricing for companies. A pricing analyst is more likely to focus on a narrowly defined problem (such as how to price a specific product or service), while a data analyst would work on general tools that could then be applied to many different problems within a company.
Some job functions that are unique to pricing analysts include:
Some job functions that are unique to pricing analysts include:
1. Customer Behavior Analysis - Like data analysts, pricing analysts perform quantitative and qualitative analysis to monitor KPIs and assess market share and margins. They also need the ability to understand how price affects consumer behavior. Pricing analysts should know what drives customer behavior, how customers value a product, and how this can be used to develop a marketing strategy.
2. Forecasting and Probability Modeling - Pricing analysts focus on demand forecasting and probability modeling as it relates to pricing. Therefore, their analysis is laser-focused on identifying revenue and margin opportunities.
3. Marketing Strategy - Although data analysts work cross-functionally, pricing analysts are usually more firmly embedded within marketing and sales teams. They work closely with marketing/sales to develop competitive pricing strategies through generating insights that drive growth.
4. Market/Industry Analysis - Pricing analysts must have a strong command of the business landscape and understand how sales cycles and consumer trends affect sales. A pricing analyst can perform deep competitive analysis to quantify the differential value of your product and help to define the unique selling propositions for sales and marketing.
5. Anomaly Detection - Pricing analysts have the keen ability to spot anomalies in data, especially in relation to how these anomalies relate to pricing and consumer behavior.
A job in pricing analytics can be highly rewarding. Pricing analysts have a real-world impact on revenue and have the opportunity to work on interesting problems and perform interesting analyses.
Ultimately, if you’re considering a career as a data analyst or a pricing analyst, here’s one thing to consider: Social science plays a big role in pricing. Pricing analysts must be passionate about consumer psychology and be excited to analyze problems like “What effect does a 50% Off Discount vs. a Buy One, Get One Free Deal have on sales?”
To be successful as a pricing analyst, you should:
The educational requirements for pricing analysts vary depending on the employer. Most employers prefer candidates that have a bachelor’s degree in finance, economics, or business administration, but some may accept candidates with degrees in other fields if they have relevant work experience.
Pricing analysts should also have excellent computer and communication skills. They should be proficient in various coding languages like SQL and Microsoft Excel, as well as statistical analysis software like R or Python. Pricing analysts must also be able to communicate effectively with coworkers and clients.
If you’re interested in a career in the field, here are some steps to take to become a pricing analyst:
You may want to also consider a master’s degree. This is especially important if you’re making a dramatic career change. A Master of Business Administration (MBA) offers the most opportunities for employment in pricing analytics, but pursuing degrees in statistics, finance, accounting, or marketing will also make you competitive.
Data analytics is one of the fastest-growing fields, and as businesses accelerate their digital transformations, they are increasingly on the lookout for talented professionals that can turn data into insights. In particular, demand for pricing analytics professionals is most common in these industries:
Three industries that we could gain insight from are SaaS Products, Insurance & Banking, and Retail. Each utilizes pricing analysts in different ways.
SaaS Products: Software as a Service providers are built around digital products with, typically, monthly or annual subscriptions, and customers are constantly receiving updates and improvements.
The model offers the possibility of changing the prices on demand so that teams can experiment with A/B testing pricing methods, as well as the freedom to partner with affiliate groups or specific discounts.
The possibility of experimenting with so many options in real time provides plenty of opportunities for testing alternative strategies for pricing analysts.
Insurance & Banking: Both industries have an added layer of complexity because the final pricing also depends on calculated risk and expected costs. Pricing analysts aren’t usually required to perform risk analytics, many companies have specialized professionals for that, but pricing in finance and insurance does still have a role to play.
That work can range from calculating costs to having a good understanding of your peers’ work and the ability to communicate that internally.
Retail: The retail industry usually sells a wide variety of product offerings to different customer segments simultaneously. This opens a rich spectrum of pricing possibilities. For example, a retailer could pair a product discount in order to attract customers with an increase in the price of a complementary good to piggy-back off the discounted item’s demand.
In this industry, pricing strategies may have lots of layers of complexity - looking at products individually is insufficient; you must understand the relations between them. Therefore, some retail companies hire data scientists for pricing strategies and invest in complex machine learning models for finding customer trends and recognizing patterns in their behavior.
The average salary for a pricing analyst is $75,000, with salaries usually falling in a range between $60,000 and $93,000 .
Breaking it down by years of experience, the salaries for a pricing analyst are (glassdoor.com):
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Breaking it down by industry, we see:
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See other salaries for other data analytics-oriented roles.
At Interview Query, we’ve received real questions posed to our users across industries and experience levels. The questions presented here are just a sample of the ones in our database.
This question aims to evaluate your ability to keep the business competitive and profitable by taking a dynamic approach and adjusting your strategy to the latest trends.
It also evaluates your analytical skills and ability to apply data to pricing decisions.
This question tries to assess your proactiveness and ability to iterate and get better constantly. In your answer, provide examples of how you make periodic adjustments to achieve better results.
Despite the fact that you are expected to make data-driven decisions, it is frequent in business situations to lack part of the information. In fact, you will likely never have every piece of information that you’d like.
Making informed and relevant assumptions by gathering the contextual information you need, and documenting the assumptions you made to keep track of possible sources of mistakes in the future, is a valuable skill
It also serves as a proxy to evaluate your ability to think critically, understand the business and make decisions under pressure.
This question evaluates several things. One is your knowledge of the tools and how they can be applied in different business contexts. Another is your own experience using these tools in the past and how you used them to generate value - to demonstrate you have this experience, you need to give answers with a high level of detail.
This question also evaluates your communication skills. As a pricing analyst, you will be responsible for explaining technical observations to non-technical stakeholders - and this question is an opportunity to showcase your communication skills by providing clear answers.
This question is similar to the previous one. It is asking about your experience and ability to think critically.
There’s a difference between knowing how to use a tool and knowing how to solve a problem. In a dynamic business world, It’s important to find proactive individuals who are able to drive business value by offering
Competitor behavior is crucial to determine a pricing strategy.
Besides pricing, this analysis lets you understand market trends, customer preferences and industry best practice, alongside identifying new business opportunities.
In your answer, explain what you usually look for and why.
Two types of data you might look for include: benchmarking performance to identify areas of strength and weaknesses. Gathering information on new products, services or markets that the business can target.
A holistic approach should be taken when it comes to pricing, weighing both upsides and downsides. A one-dimensional approach might only consider revenue and not take worthwhile risks. Pricing decisions have a large impact on the long-term health of a company, and pricing analysts should consider costs and benefits before making changes.
When on the job, you’ll face several tradeoff decisions because each pricing strategy (and each experiment) will have a cost and a risk, along with expected benefits.
As a pricing analyst, you’ll be dealing with maximizing profitability and ROI, so showcasing your understanding of how pricing impacts budgeting marks you as an attractive candidate.
It also helps ensure that your pricing decisions are not made in isolation but are part of a broader financial strategy for the company.
Let’s say you’re an apartment building manager setting unit prices for a new apartment building complex. What considerations would you make in setting monthly rent prices for the apartment and how would you calculate the optimal rent price from those considerations?
Remember that you are seeking to maximize profitability, not just revenue - so being in touch with the costs of different strategies, and being able to work with sales, market, and product teams, ensures you’ll be able to look at the problem holistically and offer the best solution possible.
You should also take into account that budgeting is a proxy for your level of responsibility in previous jobs. So if you can showcase experience with budgeting in previous jobs & teams, this question is a good time to mention it.
Your project manager comes to you and asks you to run a two-week-long A/B test to test an increase in pricing.
How would you approach designing this test? How would you determine whether the increase in pricing is a good business decision?
Let’s say you work at Lyft or Uber.
How would you evaluate the potential impact of decreasing fees for riders and drivers across the app for growth prospects?