Warren Buffet was not wrong when he stated "The single most important decision in evaluating a business is pricing power."
Effectively controlling your pricing does give you a definite advantage in the marketplace. However, if you are still using spreadsheets to manage your prices, a method which is outmoded, and possibly even foolhardy, the future growth and prosperity of your business could be in jeopardy.
In my blog, 6 Ways to Increase Profitability, I emphasised the importance of using pricing software to automate and speed up the pricing process to increase profitability. If you're in a competitive market place, staying one step ahead of the competition is always crucial. Pricing software safely and speedily manages all your pricing data, allowing you to focus your valuable time on sales growth and maximising profits.
Changes to your benchmark pricing, pricing rules, promotional pricing, customer pricing and exception pricing can be made in minutes. Pricing software also boosts customer satisfaction and improves efficiency.
Philip Huthwaite states in his blog, How to Get the Most out of Pricing Software, that if your business makes the decision to implement pricing software (such as BlackCurve) then “you’re well on your way to get an average 1% - 3%+ gross margin improvement.”
He writes that not only does pricing software help maintain pricing accuracy, making the whole process more efficient and effective, but it also helps identify better price points that drive overall business growth.
However, he makes two caveats:
- You need a “hearts and minds” approach to implementing pricing software, i.e. the whole of senior management needs to be on board.
- You must be confident in the quality of your data such as sales history or competitor pricing so that pricing decisions are always based on completely accurate data.
Getting your pricing right is vital to your business success.
"Pricing has a substantial and immediate effect on company profitability. Studies have shown that small variations in price can raise or lower profitability by as much as 20%". MIT Sloan Management Review.
Pricing software allows for more accurate pricing decisions, pointing you towards your pricing ‘sweet spot’. It will display where you are losing margin because items are priced too low, or where you are losing revenue because items are priced too high.
Pricing software optimises price testing to ensure that you are achieving the highest possible price whilst supporting revenue and profitable growth. Because your sales history is clear, you can quickly identify areas of margin leakage and flag up and rank areas of greatest opportunity.
If you have previously struggled with rule conflicts, perhaps from some promotional activity, pricing software automatically identifies conflicts that require resolving. Pricing Software logs all pricing changes, giving you the power to question what has happened previously and to keep a full audit record of the rationale behind individual pricing changes.
If you’re looking to apply different pricing strategies across multiple product, customer and market segments then pricing software is for you. It also promotes a move away from cost-plus pricing to value-based selling which is proven to support business growth.
With pricing software you will receive your competitors' prices as often as you need, with weekly, daily or even hourly updates. It will allow you to benchmark all your product lines against competitors and gain a clear view of competitor product assortments.
Identify Key Pricing Opportunities
Pricing Software allows you to identify key pricing opportunities and to increase deal sizes because of cross-selling and up-selling guidance. There will be no need to spend days and weeks on pricing administration because changes to your benchmark pricing, pricing rules, promotional pricing, customer pricing and exception pricing can be made in minutes.
If you are still using spreadsheets for your price management there will inevitably be serious flaws to this method - errors can seriously eat into your profits, and time delays in communicated price changes cost you money.
Pricing software allows you to quote professionally, increase deal sizes, reduce errors and drive better pricing decisions. It gives you greater control over your pricing, giving you a distinct competitive advantage. Soon you’ll be reaping the financial rewards of making the decision to invest in pricing software.