#TBT: 3 Tips to Significantly Improve the Pricing Process
By Zilliant
Aug 19, 2021
Table of Contents
Enjoy this throwback post with some minor updates from February 2019, one of the most popular Zilliant blogs to date:
The domino effect of external pressures such as COVID-19, inflation, tariffs, and disruptive competitors are making significant waves in the manufacturing/distribution game.This impact is felt most keenly by pricing analysts who not only have to adjust prices, but also have to figure out how price changes align with what’s been incorporated in existing customer agreements.
If you are like most organizations, all your prices are managed in spreadsheets.As the number and size of spreadsheets increases, the speed and accuracy of making price changes tends to decrease. As a result, the pricing function is too often regarded as a “back office” activity whose focus is chasing numbers rather than being viewed as a strategic partner in winning and retaining customers.
Thankfully, there are a few key methods for pricing managers to improve their pricing process and ensure they’re not left juggling spreadsheets full of incomplete data or spending too much time on the execution of number-crunching tasks instead of aligning to business strategies and implementing the right price changes to support them.
1. Consolidate and Centrally Organize Pricing Data
Where is the most updated pricing data?
One of the biggest problems that pricing managers face is dealing with highly dispersed & disorganized data. Often, price adjustments begin with locating and sifting through massive amounts of pricing data living across multiple spreadsheets, spread across local hard drives throughout the company. Who has the most updated version of the pricing data?Where is the new cost file, and why did its format change? Is this the latest version of my customer agreements? Locating and validating key input data becomes a painstaking process taking weeks or months.Without one central location of “pricing truth”, it’s nearly impossible for pricing analysts to execute price changes quickly, accurately, and in alignment with their deeper pricing strategies.
When pricing managers consolidate their data into one centralized platform, they can efficiently coordinate a roll-out of any price changes.The time saved by saying ‘goodbye’ to spreadsheets pays huge dividends by giving price managers more time to consider the big picture and conduct a comprehensive view of the pricing actions needed to maximize revenues and profits.
Once data is centralized and organized, the next leverage point is to define pricing methods and set up corresponding pricing formulas which calculate price adjustments consistently and accurately for the situation at hand. Your corporate library of pricing “plays” is much easier to establish and apply when there’s a central place that work gets done.The use of automation in these tasks removes the tedious work of going row by row in spreadsheets and hoping you can prevent errors from creeping in.
2. Gauge the Potential Impact of Price Changes Before Rolling Them Out
How much could a price change impact KPIs?
As a strategic partner to commercial and financial stakeholders in your company, they need you to gauge the impact of price changes on major KPIs such as margin rate/dollars before rolling those changes out.By linking price adjustments to top level KPIs prior to making changes live, stakeholders will see the projected outcome of pricing decisions, and provide you feedback to make adjustments when necessary.Pricing analysts can then share the potential impact of external market factors and internal factors with their executive team, often in real-time with interactive modeling tools, leading to better, more collaborative, pricing decisions.
3. Automate and Diminish the Mountain of Exception Requests/Communicate with Sales
How quickly can price updates be rolled into Customer Agreements?
Once pricing managers update prices, another daunting task they face is updating existing customer agreements with those price changes.Tools that automate the agreement update process exist now, and through them a pricing analyst can launch a campaign and schedule price changes to be rolled-out to agreement lines at scale.
When sales has confidence in pricing and is aware of the strategic thinking behind the price changes, the pricing team elevates their ability to achieve buy-in from sales when they review these updates to their agreements.
As reps work to adjust agreement prices with their clients, they are better equipped to explain the reasoning behind the changes and maintain a healthy customer relationship without resorting to unnecessary discounts or triggering a flood of requests for price exceptions.
Communication is key, and price managers should communicate frequently with sales about the “how” and “why” behind pricing strategies, so they can earn the trust of reps, who in turn can earn the trust of end customers.
The Bottom Line
To keep up with an ever-changing landscape, it’s imperative that organizations find the right price management tool to centralize such massive amounts of pricing data and comprehensively and accurately recommend price changes.
Armed with the ability to analyze massive amounts of internal and external data points as well as the ability to simulate the impact of certain pricing adjustments on underlying KPIs and margin goals of the business, price managers can then spend less time on executing tedious tasks, and more time focusing on strategy and interdepartmental communication.
Read more:
An Introduction to Price Management
