Often the most difficult step to take in improving your pricing strategy and performance is to admit you have a problem. If we are hitting our number, pricing isn’t really the biggest concern, is it? The worry is more about building pipe to maintain momentum. What is overlooked is how an automated, data science approach to pricing can not only reduce sales friction but also drive revenue and profit growth.
At the PROS Outperform conference in Orlando last winter, Sunoco pricing director Neil Duffy talked about the uphill battle he fought with executive management concerning pricing. Duffy was pitching a move to automated price optimization in an effort to squeeze more margin in the hyper-competitive, volatile energy business. His boss thought of pricing as more of an art and that intuition and institutional knowledge were more effective in protecting margin than science. Eventually Duffy won the battle – with a pricing efficiency argument – but was also able to produce an almost $13M margin gain with price optimization software in the project’s first live year.
However, winning hearts and minds in the C-suite is far from the final step in the battle. The next big step in selecting a pricing optimization solution is evaluating vendors to make the right choice for your organization. Pricing technology comes in many flavors and there are substantial capabilities differences. Not every solution can offer a perfect combination of automation and data science to maximize return on investment. Some may specialize in enforcing price execution, but are less adept at informing price strategy or cannot provide the deep micro-segmentation necessary to really get the most out of your transactional sales data. Another important consideration is how optimized prices are delivered to actual users in the field. Developing optimized pricing is naturally less effective when there is not an easy, elegant, and trackable way to deliver it to reps in the field.
The third crucial step is user adoption, which can be tricky, especially if you have a highly autonomous sales organization or territorial pricers. Adoption and change management are worthy of an entirely separate conversation. For steps one and two, however, may I suggest a perusal of The Buyer’s Guide to Price Optimization. The guide features a pricing optimization sample RFP, sample vendor demo questions, slide suggestions to help woo over key internal stakeholders, and more. The guide is in no way authoritative and naturally cannot address all the unique requirements of all organizations out there evaluating price optimization technology. What it does offer are important considerations you should be thinking about as you embark on your pricing improvement journey.