Although relatively new (last twenty years), the software landscape for pricing is rapidly expanding, and is gradually being implemented in large companies, with varying levels of success. In our digital world, science-based pricing and Artificial Intelligence are becoming familiar arguments in software companies’ sales brochures.
The principle is to leverage large volumes of data, in order to improve consistency of price setting (identification of anomalies, definition of rules), to refine and “individualize” the price recommendations to the sales force (micro-segmentation based on the context of each transaction), to increase sales productivity and relevance on complex quotes.
On the buyers’ side, the need to improve profitability in complex and competitive business contexts makes managers quite sensitive to these solutions. In many cases, technology will indeed become the key driver of the pricing initiative.
However, we should recognize that B2B is a vast world in which companies are very diverse, depending on their sector of activity, their business, their value proposition and product range, their sales model, etc.
Selecting the right pricing software can be tricky, and mistakes can cost you dearly: there are nowadays many pricing software packages, originally designed for specific industries, but which claim larger business territories.
The classification that we propose below is certainly questionable, somewhat simplistic, but has been reviewed with several pricing experts. It also provides a base for further discussion!
It may seem obvious that you need a « yield management » approach when you are in the airlines or travel industry and you will look for a CPQ when you sell customized equipment configurations. The choice is however less simple for a lot of B2B companies (wholesalers, chemists, manufacturers of components and spare parts, equipment rental services…).
What makes sense for a company in business of rental equipment to professionals: yield management that takes into account the level of product availability or price optimization that allows you to easily propose a relevant price for each of your millions of transactions? Wholesaler or manufacturer of electronic components, do you take the risk of a proliferation of pricing rules that will make any change in pricing policy very tedious? What is the approach that best takes into account sudden fluctuations in the cost of your raw materials?
Answering to those questions requires a very close attention to the way you want to operate and execute your business.
In summary, pricing software is very often a critical driver for success, the choice of the relevant solution is far from being trivial, and its relevance to your business and your relations with the customers is crucial. This is a first challenge.
Making the right decision, you will still face the second challenge: making it understood, adopted and appropriately used by sales and other key stakeholders.
The cemetery of unused pricing software seems to be congested nowadays.
Do you have comments or suggestions on the proposed classification for pricing software? Or do you totally disagree? Thanks for sharing with us.
Philippe Plunian, Partner at Powering
+ 33 6 80 89 68 42
Philippe Plunian specializes in the formulation and execution of customer-focused business strategies, sales & marketing transformation, sales efficiency and enhancement of pricing capabilities / execution
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