Price management: the road ahead to pricing excellence
As companies grow, their list(s) of products and services increase in size and complexity. It becomes increasingly difficult to manage product pricing, identify upsell opportunities and prevent margin erosion.
On top of this, sales reps aren’t given up-to-date pricing information on their products, leading to lost opportunities and slower quote times. The first game-changer in this segment was configure, price, quote (CPQ) tools but current adopters of CPQ still lack standardization and automation of their price management practices. This results in inconsistent pricing driven by gut feel and tribal knowledge, low visibility into root causes of margin leakage and poor insight into the financial impact of price strategy.
What is price management
Attempting price management and optimization through internally developed spreadsheets and database tools is no longer feasible from a business standpoint. The increasing sophistication and capacity of the analytic, data, and application tools used for Price optimization and management (PO&M) are increasing the granularity of the analysis, execution and refinement of pricing across diverse markets and product lines. Growing volumes of data, and the availability advanced analytic and visualization tools are available now to enable the parallel analysis of product and price data, as well as market segment insight based on sales, customer, inventory data as well as competitive information.
Price management use cases
Currently a key trend unfolding is drawing upon the capabilities from the domains of both CPQ and price optimization to achieve pricing excellence, that is, acquiring competitive advantage from superior capabilities in price setting, optimization, execution, administration, and or course, price analysis and refinement. Here are some use cases to show how the value of a CPQ solution is enriched by capabilities traditionally associated with price optimization.
- Segmentation methodologies to support pricing of complex configured and bundled offerings
- Offer configuration and quote guidelines tailored to specific segments, their value drivers and sensitivities
- Track the performance of offers and current strategies deployed
- Measure market performance to identify opportunities for driving continuous improvements in the pricing & quoting process
Neglecting innovation in price management can reduce growth by 50% in comparison with the companies which deploy price management tools through CPQ.
It's more than a single point
The worst mistake of all is to approach deals as a single point transaction. Organizations must look at the road ahead and focus on the long term engagement goal which translates financially to customer lifetime value. If you’re leading with price to close deals, you are undercutting repeat, renewal, and expansion business value. The solution here is however straightforward, all we have to do is to learn from our past. Most companies maintain comprehensive data about transaction history, customer segmentation and a customer’s willingness to pay. The next step is to use this data to create tailor made pricing for your clients. Leaders like Conga are now moving towards advanced analytics and AI to enhance price optimization.
Benefits of robust price management
Benefits of robust price management innovation and functionality in CPQ include:
- Blending data science-driven offer and pricing guidance with CPQ, all within your existing CRM environment, turns the odds back in the sales team favor. They are now armed with the information and tools to better negotiate winning deals and drive 2–4 percent of incremental sales and up to 15 percent of incremental profits.
- Data science-driven cross sell automates the identification and maintenance of product relationships for accurate, relevant and sustainable cross sell recommendations.
- Data science-driven pricing guidance provides the sales team with instant recommendations that enable them to win the business and increase profits.
- Guided selling and cross sell recommendations ensure the sales team can quickly create accurate, tailored quotes.
- Deliver accurate and relevant cross sell recommendations to your sales team with this automated, sustainable capability.
Price management that leads to pricing excellence via CPQ solutions from leaders like Conga is a look into the future. While you go about realizing a customer’s lifetime value, the customer gets an opportunity at getting a fair price on comfortable terms.