Part 3: Pricing for Survival or Pricing for Success?
Taking the Right Approach In 2022
As key enablers to business success, pricing and sales teams often find that their efforts are slowed down by inefficient, lagging processes and manual tasks. A great deal of time is lost in manual updating prices across spreadsheets and siloed systems, the cumbersome coordination of price changes with partner stakeholders, and even chasing down managerial approvals. These operations usually lead to decreased productivity, human errors, margin leakage, and missed sales opportunities.
On the other hand, for data-driven decisions and higher business efficiency, about one-third of pricing leaders are starting to acknowledge they need to immediately prioritize obtaining an advanced and integrated pricing technology. These businesses recognize that pricing technology is necessary for automation, visibility, and agility in price strategies management. This is especially valid now that the shift to digital is accelerating and buyers are increasing the share of wallet they spend through eCommerce and self-service channels.
In this final part of our blog post series on pricing, we will talk about key pricing innovations and why they are important to businesses looking to expand successfully in the digital medium. We’ll explain how with the help of advanced pricing algorithms and business rules, overlaid with AI, pricing leaders can build even the most complex dynamic price strategies, fit for any industry and business challenge, and optimized to every buyer’s unique demands.
Consideration #5 – Getting Guidance on Building the Right Pricing Strategies, Not Just Cost-Plus
To create and enforce best pricing practices across your entire business, which will allow you to achieve maximum profitability and revenues, you need to be able to manage and optimize dynamic pricing in a centralized, efficient and successful way. But the market is constantly changing and unless you can adapt to these changes quickly, your business might fall behind. And lagging prices often contribute to a market share loss and customer dissatisfaction.
With advanced pricing capabilities pricing leaders can take action and establish a common understanding on their price waterfall and establish a shared pricing language within their teams and across the business. It is not uncommon for pricing analysts within the same team to devise different price calculation algorithms and results when they build the logic behind their pricing strategies, or when they analyze the potential impact of those strategies on the business, which makes a common language that much more important. Unless pricing professionals in the same team share a pricing language and have a universal approach to building and analyzing pricing strategies efficiency, there won’t be consistency in price strategies and efficiency in sales operations. This could lead to a misaligned team and lost sales opportunities. Without a common ground, for example, pricing experts may end up taking an individualistic approach and consider different, inconsistent variables when looking to propose a margin increase to a specific price list, which could result in varied business outcomes and lack of clarity around next steps.
To deploy intended price strategies at scale with algorithmic consistency, pricing teams need advanced pricing solutions. Such pricing software allows for dynamic pricing strategies management through a comprehensible structure, enabling all team members to navigate a variety of pricing logic and business rules quickly and with ease, even for the most complex pricing scenarios. This means that when you must define and readjust your pricing strategies you won’t lose any extra time and effort in doing so. The result will be higher efficiency for the team.
If you want to be more successful in dynamic pricing management, look for these pricing solutions that provide users with complete guidance on formula building, like function suggestions, descriptions, and error warnings, to help them quickly and precisely build even the most complex pricing formulas, fit for any business challenge. The overall benefit for the business is flexibility and effectiveness in pricing.
Consideration #6 - Access the Latest and Most Advanced Pricing Capabilities
If you need dynamic and market-responsive pricing, you absolutely must explore advanced pricing software that incorporates AI into your business strategies. Neither spreadsheets nor ERP systems can analyze diverse buying trends and preferences, or multiple different variables like costs changes, evolving competitor strategies, and channel performance, and use all that information to determine within seconds what the most competitive product prices would look like for every customer. Trying to quickly calculate all those variables using only a spreadsheet or an ERP system sounds so complex, right?
The accelerated shift to digital interactions and eCommerce caused by the effects of the coronavirus requires businesses to think of new and innovative ways around how to proactively engage with their customers and remain relevant to the market. Throughout the year, the trend of B2B buyers turning to digital channels to research and evaluate the products and services their business needs in order to make more informed decisions for their purchases has increased and shows no sign of stopping. A 2020 McKinsey report on B2B buying trends shows that the preference for self-service research and evaluation for B2B decision-makers has exponentially increased between 90 and 120% in the past year alone.
Digital growth and profitability mean businesses need to change their perception of eCommerce as only a siloed, transactional sales channel, and instead start thinking of it as a new customer engagement instrument. When leveraged with the power of a comprehensive pricing software solution, eCommerce (along with other self-serve, digital channels), can help reduce the business’ costs-to-serve and expand their customer reach and profitability to create highly personalized buying experiences.
The dynamics of this digital buying journey show that universal price lists are simply not working anymore, and organizations need to look for powerful pricing capabilities that can adjust quickly to market changes and unique buyer demands. Real-time pricing calculations across eCommerce and other self-serve channels are an essential part of a frictionless and harmonized omnichannel customer experience. And to make that happen you need prices that are available 24 hours a day, 7 days a week, and 365 days a year and that are scalable to demand peak inflections and delivered within milliseconds across your commerce platforms. Without them, you won’t be able to meet buyers demands for market-relevant pricing that is personalized to their unique needs.
Forward-thinking pricing professionals need the power to predict the demand response to any price change. In today’s digital B2B marketplace, AI price optimization technology enables organizations to proactively price based upon customers’ historical buying behavior and willingness-to-pay, thus driving highly personalized experiences for buyers. With AI-driven insights into the tradeoffs between price demand and profitability, businesses can maximize their revenue potential and power the entire omnichannel go-to-market landscape while eliminating frictions for buyers.
Discounting is an important aspect in commercial activities, often driving growth and customer retention for the business. To improve the effectiveness of sales, some B2B companies use rebates as part of their pricing strategies. However, they face a lot of administrative workload, because unlike applying a discount for each purchase, with rebates a seller must recalculate the price for the buyer when the total quantity purchased reaches the specified volume or amount in the contract. This often requires annual recalculations with back date invoicing. Since rebate accruals are often managed in another system, having access to this information and analyzing it is important to understand how profitable each customer is to the business. That’s why most organizations need to rely extensively on the price waterfall analysis.
But there are ways to avoid the complexities of rebate administration and price on actual rather than promised volumes. To gain a competitive edge in sales and reduce negotiations, you can apply a more advanced tiered pricing program that will help you meet the needs of every customer you serve much more efficiently. Some of the leading pricing solutions allow users to easily set and adjust price tiers based on every customer’s volume preferences, and in such way incentivize buyers to incrementally increase their purchasing quantities. Pricing leaders have complete visibility and flexibility on the volume or revenue-based tier structures, and can extend those capabilities to sales quotes and agreements, providing customers with more personalized purchasing. A well-designed scaled pricing model will help you manage the willingness-to-pay of every customer, maximizing your revenue from them. It aligns more effectively to the needs of your buyers, helping your business reduce customer churn. You will easily know how much your customers are purchasing from you and at what price, increasing not only buyers’ satisfaction but also deal win-rates and profitability for the business.
Consideration #7– Quick Time-To-Value for the Business
You need a tool that you can implement quickly, without a lot of customization required, that can grow with you as your business needs grows. If the implementation is too complicated or the timeframe too long, look at what you can do to move more quickly with a simpler implementation. Add layers of complexity and capabilities as you go.
To learn more about what successful digital transformation looks like and how with the adoption of the right pricing capabilities you will empower your team to achieve quick and tangible business results, download our eBook “Pricing for Survival or Pricing for Success” here.