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Combating Inflation: Master the Complexity of Pricing to Maximize Your Profits

Updated: Sep 13, 2023

The rewards of mastering pricing

When businesses master pricing, it’s a bonanza for the entire organization. Great pricing capabilities empower all the key stakeholders throughout the organization. Businesses suddenly have greater control over developing strategies for success and executing those strategies across sales channels, business units, and regions.

There’s no other lever that can maximize profits better than great pricing. And that’s impossible to do without cutting-edge pricing software.

Today’s complex pricing challenge

Pricing has gotten so complex that it now affects all key stakeholders in an organization. But, the right tool can get them all on the same page to maximize your business goals swiftly and efficiently.

Executive team

A 1% increase in price will drive an 8.7% increase in operating profits. This is the biggest lever any organization can pull. Without pricing analytics, leaders who are about to miss their budget might approach the pricing team with marching orders to implement a price increase across all products. But that can lead to catastrophic results like insulting some customers and moving products that are already above market into a danger zone.

Pricing software gives leaders what they need: visibility of margin gains and losses for products and customers so they can understand where to focus company resources, investments, and expenses to optimize overall profitability.

Sales team

Pricing software enables sales teams to stay alert, monitoring things like customer attribution versus customer acquisition and volume versus mix and overall rate.

For example, if sales leaders see buying behaviors changing, they can quickly call a specific customer to inquire why they have increased buying from a particular product category, leading to a conversation about how they can mutually benefit from this change in business. They can also view analytics that help them assess how their top customers are performing, how their sales teams are negotiating larger deals and contracts, and how to compare customers to peers. This is also a valuable tool for coaching new sales reps.

Innovative pricing software also gives sales teams the ability to receive AI-driven prices in the configure, price, quote (CPQ) solution, enabling them to drive sales efficiency and improve win rates by shortening the time to quote. Instead of looking across spreadsheets and disparate data to determine appropriate prices, salespeople can access real-time price guidance to quickly deliver quotes to prospects, which dramatically increases their chance of winning the deal.

Pricing team

Despite the pressure to get pricing right, the reality is that pricing teams are drowning in spreadsheets. Finding answers requires digging into mountains of data with extremely complex formulas. It’s impossible to keep up with all the variables that go into pricing, let alone capture evolving market dynamics. That’s why many companies end up executing blanket price cuts or price increases.

However, with innovative pricing software, pricing analysts can open a dashboard to see the details of a price list. They can see everything they want to know about an item, such as the last price paid, cost, freight, and other variables used to set the price. And since other teams like finance, sales, and leadership also have access to these analytics, this eliminates a lot of business intelligence (BI) and reporting work, enabling them to be more strategic and work more efficiently across teams.

Having a pricing solution enables analysts to proactively manage strategies, quickly respond to competitive pressures, and have automatic, recommended price changes based on cost, commodities, and other influences.

Finance team

With pricing software in place, finance teams have the critical real-time pricing information they need at their fingertips so they can forecast, plan, and build their budgets accordingly.

IT team

The most innovative pricing software delivers systems that are cloud-first. Their modern, flexible architectures are designed for scalability and reusability, which prepare businesses to deliver intelligent and personalized experiences.

For example, eCommerce integration enables updates in pricing to be reflected on a company’s website. The pricing integration helps position the organization to handle increased volumes as more customers prefer self-serve websites. As omnichannel selling continues to grow, integrations with pricing software providers enable organizations to harmonize prices across channels and capture new opportunities for revenue.

The need for dynamic pricing and the risk of stale pricing

To be successful in a far more complex business environment, you must not only manage a bewildering number of pricing points but also deliver the right price, at the right time, in the right channel, for every sales engagement. Only the most cutting-edge software can keep up.

The pricing output from any human—even the best and brightest consultant—is only applicable at the time you receive it; in other words, it’s one-time pricing, not dynamic pricing. Every time there’s a change to costs, taxes, competitor prices, you name it, you must re-engage the consultant to update your pricing. Every time you want to expand into a new sales channel, you must re-engage the consultant to deliver appropriate pricing for that channel. It quickly becomes one long, very expensive series of engagements.

This approach of relying on price execution spreadsheets also leaves potentially billions of dollars in profit on the table.

Spreadsheets can’t meet the needed level of pricing precision

It’s impossible to effectively manage pricing in a table, and here’s an example.

Let’s say you have 15,000 customers and 25,000 SKUs serving two sales channels: a sales rep selling direct to customers and an online channel. That comes to 7.5 million different price points that you need to address every day if you’re going to effectively manage pricing.

Not only do they end up with a behemoth of a spreadsheet that a team of consultants has to maintain (because no one at the company knows how to execute it), but they’re only keeping their pricing semi-active, which means they’re leaving serious money on the table over the life of these products.

No business can afford to ignore price management

Whether you are part of a big manufacturer or a small business, all organizations are facing similar challenges like cost fluctuations, rebate complexity, and deviations in margin leakage. Even the smallest distributor still has millions of price points to consider. For example, if you only have 1,000 SKUs and 5,000 customers, that’s still 5 million price combinations that you need to manage every day.

What’s more, all businesses today have the same challenges of providing a fast and efficient experience that customers demand. Most buyers expect the same buying experience they receive in the B2C world, and that requires real-time pricing across multiple channels like eCommerce.

Your pricing journey toward maturity and more profits

A pricing platform can help you move through the stages of pricing maturity, no matter where you are in your journey. That’s important because every incremental improvement can create tremendous advantages and help you become more competitive.

PROS specializes in providing pricing optimization and revenue management software solutions for businesses. Their pricing software is designed to help companies analyze vast amounts of data, make informed pricing decisions, and ultimately optimize their pricing strategies to maximize revenue and profitability. An ROI Analysis shows that PROS pricing software typically pays for itself within a few months. Here are a few statistics from the study:

  • The time to value is less than 3 months and sometimes in as little as 2 weeks.

  • The time to payout is less than 6 months and sometimes in just weeks or days.

  • The average margin improvement is +200 basis points and as high as +500 basis points.

  • The average revenue lift is 8% or as high as 100%.

In a Forrester Consulting Total Economic ImpactTM study, PROS solutions delivered 400% ROI.

Pricing Reality Check

Businesses need to deliver personalized buying experiences for shoppers across all channels, with pricing science that understands every buyer’s willingness to pay. The only way to accomplish this necessary business tactic is via pricing software, and PROS pricing is the leader in the market. Click here to learn more!

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