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Aug 6, 2020
by Jon Higbie

This article first appeared on SalesTechStar.

 

In B2B sales, pricing remains the last bastion of guesswork. Whereas supply chains, shipment, delivery, and procurement have all been modernized via digital transformation, pricing has yet to fully realize its potential in most organizations.

The reason? It can vary widely from company to company.

 

Typically, it’s a combination of complexity, ownership and perceived data barriers. In this article, we will walk through each challenge and provide some tips for how to resolve them.

Pricing Challenge No. 1: Pricing is Complicated

As a company grows larger, so do the many ways in which price is expressed: from internal pricing teams setting price lists to customer-facing teams quoting and negotiating price to the increasing prevalence of eCommerce and self-service portals. Ensuring that pricing is aligned to P&L goals, meets customer expectations and accounts for all the factors that drive price for each unique selling circumstance (competitive factors, product hierarchy, customer size, order size, regional factors, costs and much more), and is consistent across all channels is complicated. A go-to work around is giving customer-facing representatives the autonomy to discount pricing at will for their customers; however, this strategy often backfires and leads to an inadvertent over-discounting.

 

Pricing Tip No. 1: Give Customer-Facing Reps the “Why” Behind Each Price Point

Price optimization is the ideal solution to the inherent complexity in pricing, as it generates a unique price for each selling scenario. Give sales reps confidence in those prices with embedded visual analytics that provide contextual analysis for each price. For example, showing that similar customers have paid the recommended price with no impact on volume can give reps the reinforcement they need to quote prices that hold the line on margin.

 

Pricing Challenge No. 2: Everyone (and no one) Owns Pricing

A dedicated pricing team is more of an atypical phenomenon than you might expect. Certainly, executives will own margin and revenue performance and determine strategy accordingly. However, the day-to-day dynamics of price setting and negotiation do not fully reflect those strategies. Marketing may own price list setting and determine how product value impacts a high-level price lists, sales may own deal desk management to push customers’ pricing exception requests through the queue, and perhaps finance owns customer-specific P&L analysis for special deals. The outcome when pricing is not centralized, however, is that it is difficult to ensure that P&L objectives are achieved with each unique price while keeping prices consistent across channels and aligned to market conditions in real time.

 

Pricing Tip No. 2: Dedicate a Pricing Function & Arm it Appropriately

Determine where the pricing function makes most sense to sit within your organization and carve out a role for one person or team to own pricing. Modern price management software can give this person or team the familiar functionality of spreadsheets with the power to aggregate and process large amounts of data. By doing so, they can streamline cumbersome pricing processes to control price management tasks and the flexibility to make surgical price moves.

 

Pricing Challenge No. 3: Perceived Data Barrier for Pricing and Tangential Commercial Challenges

Most companies are reticent to adopt advanced pricing strategies because they believe that their data is too dirty, too sparse, or they do not have enough data. Their existing datasets are more than sufficient to utilize various price optimization, data science and artificial intelligence techniques. Order history and transaction data hold a wealth of knowledge on which customers purchased which products, at what price and at what volumes.

 

Pricing Tip No. 3: Stop Waiting for Data Perfection and Reimagine What’s Possible

As Voltaire said, and has be proven through history, “Perfect is the enemy of the good.” Order history and transaction data are often the cleanest source of data available and all you need to get started with an advanced pricing project. Tap into this rich data set to set smarter pricing. Leading machine learning platforms are also available that can help you easily tackle a host of tangential commercial challenges and easily operationalize those in the business. Imagine utilizing natural language processing to auto-match customer product IDs to your company’s SKUs for faster order processing. Or, recommending pricing for distressed inventory. Or, predicting the likelihood of getting a deal-specific discount from a supplier.

 

Conclusion

Pricing has long been underutilized within companies due to the key challenges of complexity, ownership, and perceived data barriers. By embracing advanced pricing techniques, dedicating a pricing resource, and abandoning the notion that data must be perfect, company leaders stand to reimagine what’s possible in their business while outperforming the market in terms of both revenue and margin.

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