Digital commerce is a whole new race. And it’s going to get a lot harder from here on out with uncoordinated, manual processes that leave money on the table and lead to lost profits. Further, the compounding effects of diminishing profits inhibit your ability to re-invest in innovation that differentiates your products. So, what’s the key to a winning pricing strategy in the digital age? Power up with AI with this pricing article and strategy plan to boost pricing performance and innovative pricing strategies.
4 Do’s and Don’ts of Pricing Strategy
Smart competitors today are moving past manual processes, best guesses and layers of approvals that contribute to ineffective pricing and delay quoting. When 53% of the buying decision is based on the sales experience, businesses can’t afford pricing processes that are doing more harm than good. If you’re ready to drive performance, follow these tips about the do’s and don’ts of pricing strategies.
Pricing Strategy Pressure
DON’T Succumb to Pricing Pressure.
According to Simon-Kucher & Partners, 82% of businesses polled in this pricing article complain of increasing price pressure. This is due to stronger competition with low-cost providers, customers’ greater negotiating power and a higher level of price transparency due to increasing digitalization.
DO learn what drive variation in willingness-to-pay.
But rather than succumb to pricing pressure, it’s important to understand what types of customers and buying conditions drive different perceptions of value in your product set. When you understand this, you can leverage pricing strategies to ensure you have the market-rational price for every interaction. Fighting the traditions of over-discounting and gut instinct in this way can help you recover 100-300 basis points in margin.
Refining Pricing Strategies
DON’T Just Set It and Forget It.
According to a Hanover Research study, 54% of vendors say that price and competition are the reason they lose deals. Digitization has increased price transparency across both B2C and B2B markets, making it harder than ever to maintain competitive pricing.
DO continually refine pricing strategies and recommendations.
With the volume of information that you need to account for in your pricing accelerating so rapidly, it’s virtually impossible to make accurate and timely adjustments with manual processes. The only way to do this is with automation and machine learning, so that every price recommendation reflects the latest market and sales information.
DON’T Use Traditional Manual Pricing Methods.
Traditional sales cycles rack up a large portion of time just trying to get approvals. But businesses lose sales when it takes too long to return quotes. A vendor that is slow to quote may just miss the race altogether. That was the case for a large enterprise technology company, whose processes were so complicated, confusing and slow that many partners were passing on quoting their products altogether.
DO deliver pre-approved prices to partners and sales.
Furthermore, a deep-dive review of their pricing showed there was a lot more variance in realized pricing than they anticipated, along with many unprofitable deals. Once this company implemented data-driven pricing, with auto-approval of routine deals, they accelerated quote turnaround time, which resulted in 12,000 new partners, a 111% increase in quotes, $1 billion in incremental revenue and a 200 basis point margin improvement.
Pricing Optimization Strategies
DON’T Sacrifice Margins With Reactive Pricing.
Weak pricing strategies sabotage profitability. In fact, a study by Simon-Kucher & Partners' pricing article found that the estimated cost of price weakness is 70 basis points. Rather than reactive, knee-jerk pricing that can lead to over-discounting, smarter pricing enables businesses to remove the guesswork and understand their true revenue and growth potential.
DO gain a competitive advantage through the power of AI.
By optimizing pricing with the power of AI, businesses are empowered to gain competitive advantage by maximizing their profit potential.
PROS Pricing Optimization
Learn how to leverage AI to optimize your pricing strategies for every unique sales situation and move in sync with changing buyer behavior and market conditions.Get precise control and maximize margins with Al-powered price optimization and CPQ software.
About the AuthorMore Content by Valerie Howard