The Risk in Managing Business-Critical Pricing with Spreadsheets

Pricing is the moment of the truth. It is the time to capture the value of all your previous development and marketing efforts in the form of profits. Ideally, you would use the best tools available to capture these profits.

But often this in not the case, as many companies still rely primarily on spreadsheets for managing pricing and are consequently taking a big risk. For example, one company’s sales team had been working on a $200M offer in an Excel spreadsheet. The spreadsheet grew to more than 55MB in size and crashed the night before the submission to the customer. After hours of panic and the help of the IT team, they managed to recover most of it, but exposed themselves to being potentially disqualified from the deal.

Other companies are losing out on efficiency. Another business was managing pricing solely within Excel. They performed four pricing updates each year, where they required reference data from different sources. It took 10-15 people about two and half months to maintain their prices and load them into their ERP system. Just when they finish loading the most recent updates, they need to start on the next round.

Seven Reasons Why Spreadsheets are Not the Right Tool for Pricing

  1. Core underlying data (like costs, competitor information, exchange rates, indexes, etc.) can change frequently and significantly. How can you ensure that you always have the most current and accurate data to make the best pricing decisions?
  2. Typically your data is scattered in different locations and contains different formulae. How can you ensure that these formulae will play nice when merged and you are not losing valuable data points?
  3. Customized spreadsheets are run on institutional knowledge. What happens when the creators move up or move on?
  4. Most spreadsheets apps have limitations in the number of lines they can manage. How can you ensure scalability scalable when the business grows or if you need to get more granular?
  5. Spreadsheets do not have advanced built-in analytics. How can you make sure that your pricing managers take the most profitable decisions if they cannot access analytical insights?
  6. Version control: Unless you are hosting your proprietary pricing data on Google Docs (unlikely), how can you ensure you are using the most recent workbook?
  7. Spreadsheet apps such as Excel do not have an automated interface with your ERP system. How can you make sure that the final, approved version of your spreadsheet is uploaded error-free?

Spreadsheets are — for all of the above reasons – too limiting to manage core business functions such as pricing. If you want to be responsible and take the best decisions for your business you should look at dedicated, purpose-built pricing tools to ensure you’ll capture the value that you and your products deserve.

Let us know how you manage pricing within your business.

About the Author

Hans-Peter Klug

Hans-Peter Klug is a strategic consultant with PROS, where he specializes in delivering big data, sales and pricing solutions to customers.

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