No one would argue the fact that B2B buying experiences are being highly influenced by B2C experiences. In fact, recent research has indicated that eCommerce will be the primary sales channel by 2023 for three out of five B2B vendors. But, with this shift to selling through online channels come challenges, like how to accommodate pricing strategies that address self-serve buying expectations, how to maintain competitive pricing on digital channels, and how to coordinate those prices across all sales channels.
Harmonizing pricing across contracted business, partner channels, and eCommerce experiences is not for the faint of heart, but technology can provide a way forward. That’s why we’re seeing more and more advisory and analyst firms direct companies that are making the shift to digital selling to price optimization technology providers. One such example is The Constellation Shortlist Price on Optimization Solutions. After evaluating more than 37 solutions through client inquiries, partner conversations, customer references, vendor selection projects, market share, and internal research, Constellation named eight price optimization vendors to The Constellation ShortList, which covers both B2B and B2C price optimization.
The Seven Key Criteria Price Optimization Vendors Must Deliver On
So, what does it take to make the Constellation ShortList on Price Optimization Solutions? According to Constellation, here are the key criteria price optimization vendors need to provide to accommodate the forward-looking needs of B2B sellers:
Provide Advanced Analytics
For many organizations, visibility into pricing across aggregate and granular levels can be a challenge. Often, organizations run analysis for financial reporting needs, but this analysis is only completed at aggregate levels on an infrequent basis. As a result, teams tasked with making pricing decisions on a day-to-day basis are forced to make decisions based on incomplete or limited information.
What pricing teams really need is the ability to see pricing and sales trends at aggregate and granular levels. Visualizing this data through charts purpose - built for pricing users - such as pricing waterfall charts – help teams proactively manage their pricing strategy.
Manage Price Lists
The most popular, and most limiting, approach to managing price lists tends to be management through spreadsheets – spreadsheets that typically reside in siloes, are static and often are based on outdated information. What’s more, these spreadsheets can be difficult to maintain.
What pricing teams need is the ability to manage multiple price lists without drowning in error checking and formula resolution. Vendors should offer capabilities, like PROS Control’s Master Price List, that give pricing managers visibility into relevant cross-sections across multiple price lists.
Support Multiple Pricing Models
Most successful sellers are increasing the number of channels and partners they leverage to reach their customers. While this offers greater accessibility of a vendor’s products and services, harmonizing pricing across an intricate network of distributors, resellers, and partners can be incredibly challenging.
This is where price optimization solutions, like PROS Control and PROS Guidance, can help by enabling both the support of multiple pricing models and the interdependency of pricing strategies that allow pricing teams to intentionally coordinate prices across channels.
Prescribe Pricing Segmentation
Many organizations rely on their sales teams for the market experience to determine appropriate pricing for their customers. While this approach typically entails pricing guardrails, more often than not, the result is “gut-instinct” pricing, which often accelerates price erosion.
Price segmentation models help to make sense of why some customers have higher sensitivities to pricing and others have greater willingness to pay. Leveraging price segmentation helps organizations to protect price attainment while still delivering on market relevant pricing.
While some organizations leverage data scientists to help them build complex pricing segmentation models based on intense statistical analysis, solutions, like PROS guidance, are also available to provide price segmentation prescription through an intuitive and interactive workflow.
Create Pricing Optimization Models
Leveraging price segmentation is an effective way to optimize pricing for revenue and profitability. Organizations sometimes seek outside support to help them build their price optimization model, but what is often delivered is a black box of price recommendations that lacks transparency into the supporting data behind every recommendation.
Look for a solution, like PROS Guidance, that provides transparency into the supporting information behind each dynamically delivered price recommendation. This transparency into the supporting information helps to drive fast adoption of price recommendations which accelerates revenue leakage recovery.
Another key feature to look for in a solution that creates pricing optimization models is an easy-to-use, interactive workflow that allows pricing teams to analyze and review different approaches to their price segmentation model. While the system provides a prescribed segmentation based upon historical analysis, often teams want to be able to consider forward-looking strategies to inform their approach to pricing. The solution should allow pricing teams to easily modify the price segmentation design to analyze, evaluate, and deploy varied approaches allowing them to stay in control of the model and update the pricing model when business events (like mergers, acquisitions, reorganizations) predicate doing so. These capabilities, all of which are found in PROS Guidance, ensure the longevity and adaptability of the solution.
Deliver Dynamic Pricing
With B2B buyers expecting B2C self-serve buying experiences, they have no patience for outdated, inconsistent, or uncompetitive pricing. In fact, recent Hanover research showed that half of B2B buyers are unwilling to wait more than two hours for a price quote, and that more than half of buyers would pay a premium to have instant pricing information.
While vendors are struggling to fight the pricing pressure that results from the increased price transparency of digital selling, they need to simultaneously ensure that they are capturing the market share that is moving to these channels.
The most effective way to balance the struggle of protecting price attainment with delivering competitive pricing is to dynamically calculate pricing so that every price considers current conditions and market information. Look for a real-time pricing engine, like the one in PROS Control, to get the performance and scalability you need to effectively price for buyers shifting to digital channels.
Apply Machine Learning and Artificial Intelligence to Identify, Learn, and Predict New Models
Many organizations have determined that price optimization is one of the most effective ways to get started with artificial intelligence. Research from Simon-Kucher and Partners shows that price optimization implementations are the most effective digital initiatives for affecting topline growth, and businesses often achieve such stellar results (1-5% revenue growth) that successful price optimization initiatives often drive funding for subsequent digital initiatives.
Look for solutions, like PROS Guidance, that leverage artificial intelligence to continuously learn from sales transactions and update the segmentation model to provide the most precise price recommendations to help vendors effectively deliver dynamic, market-relevant pricing.
Get the Constellation ShortList to Learn More
I hope this perspective on the key criteria to look for in a price optimization solution has been helpful. If you’re seeking more information on the Constellation ShortList on Price Optimization Solutions, click here to download the report.