The ROI of Price & Quote Management

By Philip Huthwaite on July 24, 2014

So… you have identified a business need for a solution that manages your pricing and quotation process. However, you now need to present a solid and compelling case to your employer in regards to the Return-on-Investment (ROI).

This article aims to provide an overview of where your investment will be spent and the key areas where you will see an ROI.

 

ROI

 

The Investment

Implementing a SaaS solution usually incurs these costs:

1. SUBSCRIPTION:

This is the most fundamental cost of SaaS solutions, as SaaS works on a pay-as-you-go basis. Different vendors have different pricing models, but typically, organisations are usually charged per month, per account, or per volume of storage and computational load.

 

2. SUPPORT AND MAINTENANCE:

Vendors can charge these fees separately or bundle them with subscription fees.

 

3. DATA MIGRATION:

When adopting a new software system, organisations usually need to transfer data from the old system to the new one. Depending on the format and complexity of the data, organisations might need to convert, consolidate, or reorganise them.

 

4. CONFIGURATION AND INTEGRATION:

Depending on the requirement of the organisation, the SaaS vendor may perform some customisation on the core software by adding or removing certain functions. There is also a fee to make the new SaaS solution compatible with the organisation’s existing systems.

 

5. TRAINING:

After the SaaS system is implemented, it is always important to provide training to the employees who will work with the system. Depending on the complexity of the software, there can be many training forms, from formally holding a webinar or in-person course, to simply providing instructional documentation. The more intuitive the software is, the lower the cost of training.

 

6. OTHER MISCELLANEOUS COSTS: 

There can be consulting costs and some hardware costs involved if your organisation needs more than the standard SaaS package provided by the vendor. If you carefully consult the supplier, you can easily identify these costs up-front and avoid running into any hidden fees after you have committed to the project.

 

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The Return

Quantifying the benefits of a SaaS Pricing & Quotation Management System, generally stem from these sources:

 

1. IMPROVED EMPLOYEE PRODUCTIVITY

A SaaS pricing and quoting system can help free up labour resources to allow them to focus on pricing decisions and more value-add activities, rather than the manual grind of working through spreadsheets, ensuring that all employees have access to the latest pricing information, or formatting quotations manually e.g. on Microsoft Word.

If you calculate the amount of time that was originally wasted on non-revenue generating activities, but can now be saved thanks to the new pricing system, you will be able to estimate the equivalent monetary value for those time-savings. Our research with existing clients indicates that as much as 50% of a Pricing Manager’s time is spent communicating them to the Sales Force.

 

2. IMPROVED DATA ACCURACY

Has your organisation ever suffered any lost sales or product returns because sales people did not receive accurate and timely information when they were in a negotiation processes? Did such incidents happen because product data is stored in different places, accessed by different people, and there is no way to automatically sync product updates across different systems? Or did they happen because someone mistakenly sent out a wrong price list to the sales staff?

There can be many cases where inaccurate information was passed around, either due to system error or human mistake. With the proposed SaaS solution, such inconsistencies will be minimised thanks to the system’s ability to centralise data, automate updating processes, and keep track of all the accounts.

The returns you can generate here are basically the potential value of losses that you can avoid thanks to the new system.  Gartner estimates that businesses can improve their bottom line by as much as 10% through ensuring products are priced correctly.

 

3. IMPROVED SALES EFFECTIVENESS

Without an automated quoting system, it usually takes a lot of time for sales people to determine the price and wait for quote approval. And if they cannot give a timely response to the buyers, they might end up losing the deal. As a result, the sales staff may want to over-discount products and push for a larger volume order instead of working hard to win the deal.

Such tactics erode your companies pricing power and will hurt the company in the long-run. If the SaaS solution you propose can greatly improve win rates and increase overall profitability for the organisation, the business gains can be large.

 

4. REDUCED CAPITAL INVESTMENT

In case you are considering between a SaaS solution and an on-premises solution, with both offering the same functions, the return you get from SaaS solution is the amount of money saved in avoiding capital and operational costs. According to Forrester Research, SaaS solutions can deliver better ROI in both short-term and long-term compared to on-premises solution.

Related article: SaaS delivers quick and long-term ROI, Forrester says.

 

Conclusion

There are many factors to consider when implementing a Price Management System. The research is clear – if implemented correctly, it is the most efficient method of improving profitability.

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