Improving Margins Through Globally Consistent Pricing Practices
A global provider of process monitoring solutions, products and services with $2 billion in annual revenue used fragmented and decentralized pricing practices that resulted in delayed price changes, easily circumvented approval processes and underperforming margins.
Because price lists were maintained on hundreds of spreadsheets, pricing teams across the globe had no visibility into the results of their efforts and lacked defined variables to use in determining prices.
Because of this, the manufacturer had a few key pricing objectives:
- Develop pricing methodologies based on factors such as global pricing team targets, market profitability factors, and currency risk factors that could be continuously monitored and tracked.
- Create a multilevel approval workflow to ensure that all submitted prices are reviewed and approved by two levels of authority.
- Deliver all prices (40,000 products across 85 geographies) to corresponding destination ERP systems in a complex IT environment.
PROS was selected in 2008 to recommend, implement and deliver a price management solution in preparation for the company’s 2009 global price-setting process. The manufacturer identified three objectives for success:
- PROS powerful functionality and ease of operation delivered significant value in record time.
- Pricing method formulas recommended new prices with input from product managers, data on market conditions and currency fluctuations so that prices would be calculated according to the company’s strategic goals.
- PROS configured an automated workflow to meet the manufacturer’s requirement of two levels of price approval, helping stop profit leakages and keep prices current with the market.
Price lists provided vital information to users, including predefined margin, cost, and intra-company pricing benchmarks, which contributed to rapid adoption of the new pricing system. Pricing leaders were also given full visibility into the age of all prices so they could easily identify when adjustments were needed. Finally, the flexible architecture of PROS pricing solutions and standard pricing output simplified the process of integrating all pricing information with multiple ERPs.
With PROS, the manufacturer realized several significant outcomes:
- Delivered value in the first month, achieving a 40% time-to-market improvement.
- Met a deadline for pricing an entire catalog of 40,000 prices the in the first quarter of 2009.
- Increased accuracy, consistency and repeatability of pricing processes to keep global price lists current and instantly available to all users.
- Drew strong support from teams across the entire enterprise.
The PROS solution identified $5-6 million in pricing improvements in the first 28 days of implementation.
Three weeks after PROS went live, the manufacturer completed its global price-setting process – a substantial improvement over the three- to five-month process initially expected. Through PROS rapid implementation, the manufacturer identified price lists that were out of sync with the market and adjusted them according to strategically designed pricing methods.
Today, product line managers, who are responsible for pricing tens of thousands of items, can effectively use PROS to capture time-sensitive profit opportunities and successfully implement competitive pricing for each and every item.