Why is Price Management Important
In order to maximise your profits and stay ahead of the competition, you have to price at the absolute optimum level. What your business needs is an accurate price management system and the modern, accurate and most efficient solution to all your pricing demands is to invest in a price management software solution.
Things change so fast these days and if you're in a competitive market, staying one step ahead of the competition is crucial. This is what price management software is all about – to safely and speedily manage all your pricing data, allowing you to focus on what matters most to your business, maximising those profits.
Here's what leading companies are saying regarding effective price management:
- "A successful implementation can increase margins by 50 basis points or more, and increase revenue by 2% to 4%." - Gartner Report.
- "Just a 1% point improvement in the average price of goods and services leads to an 8.7% increase in operating profits for a typical company." - McKinsey & Company Report.
- "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.
- "The single most important decision in evaluating a business is pricing power." - Warren Buffet (Berkshire Hathaway Inc.).
So, with the importance of effective price management firmly at the front of your mind, doesn't it seem rather negligent if you still rely on spreadsheets to manage your prices. The future profitability of your business could be in jeopardy because relying on this method for all your pricing requirements has definitely had its day.
If your sales quotes and price lists are still created manually then you really ought to be made aware that you are compromising accuracy, security, efficiency and revenue – not to mention wasting much of your sales team’s time.
Spreadsheets are always susceptible to human error – and, even more worrying, vulnerable to fraud. They are not designed for collaborative work, they are unfit for agile practices – and hard to consolidate. They are also incapable of supporting quick decision making or business continuity.
Why use price management software?
Experience Real Time Pricing
There will be no need to spend days and weeks on pricing administration. Changes to your benchmark pricing, pricing rules, promotional pricing, customer pricing and exception pricing can be made in minutes with easy to use workflows.
Accurate Pricing Decisions
It will be easier to anticipate the business impact of pricing changes with a visual financial summary. There will be clear visibility of 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 will accurately point you towards your pricing 'sweet spot'.
Execute Price Testing
The key is to optimise your pricing decisions, and get to a point where you can be sure you are achieving the highest price possible whilst still supporting revenue and profitable growth. Because you have your sales history at your fingertips, you can easily identify the areas of margin leakage and complete pricing tests to find that optimum price. Pricing software can even flag up and rank the areas of greatest opportunity.
Automatically Handle Rule Conflicts
If you have previously struggled with ensuring there were no rule conflicts, for example from any promotional activities that were running, pricing software takes away the stress, and automatically identifies conflicts that require resolving.
Allows for a Full Audit History
Pricing management software logs all the changes behind the scenes, giving you the power to question what has happened previously, and keep a record as to the rationale of individual pricing changes – not something available when using Excel.
Leave Cost Plus Pricing Behind
If you’re looking to take advantage of applying different pricing strategies across multiple product, customer and market segments, then an online pricing solution is a must. Simply by moving away from a cost plus approach, you’re already on the journey to value based selling, which statistically is proven to support business growth.
Understand Your Competition
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.
Increase Your Deal Size
Price management software allows you to quickly identify key pricing opportunities and to increase deal sizes because of cross-selling and up-selling guidance.
However good you think your current system of price management is, there are serious flaws at play if you are still using spreadsheets. Errors can seriously eat into your profits. Time delays in communicated price changes can cost you money because you have lost the opportunity to sell at the new price for the period before the new price is communicated to the sales force.
This will be especially important if you're correcting an error or reacting to a change in the market. This makes it almost imperative that you change to a price management solution that allows you to quote professionally, increase deal sizes, reduce errors and drive better pricing decisions. Price management software gives you greater control over your pricing and allows you a distinct competitive advantage. You really do owe it to your business.
The Strategy and Tactics of Pricing by Tom Nagle and John Hogan, 2016
Pricing Strategy: Tactics and Strategies for Pricing with Confidence by Warren D. Hamilton, 2014
Pricing with confidence: 10 Ways to Stop Leaving Money on the Table by Reed K. Holden and Mark Burton, 2014
Oxford Handbook of Pricing Management by Ozalp Ozer and Robert L Phillips, 2014
Pricing: The Third Business Skill: Principles of Price Management by Ernst-Jan Bouter, 2013
Pricing for Profit: How to Develop a Powerful Pricing Strategy for Your business by Peter Hill, 2013
Harvard Business Review on Pricing, 2008