The Next Generation of Pricing Science
By Zilliant
Apr 26, 2022
Table of Contents
For the past two decades, Zilliant has set the standard for price optimization in B2B. Read about how Zilliant's Next-Generation Price IQ® powers a unique approach to B2B price optimization and elevates pricing and data science teams in an organization.
Optimized Prices in Four Steps
For the past two decades, Zilliant has set the standard for price optimization in B2B. Over the years, our methods have evolved while the underlying technology powering Zilliant Price IQ® has improved. But four components remain constant, as they represent the backbone of Zilliant’s unique approach to price optimization:segmentation, price elasticity, goal-seeking optimization, and pricing constraints.
1. Segmentation
A segmentation model uncovers the variables that explain historical pricing behaviors exhibited in a company’s order or quote history. There are many critical factors that drive each unique price point: market conditions, product value, product hierarchy, customer spend, order size, discounts, regional dynamics, competitive factors, cost factors, margin targets, company growth goals and more. While it’s well-known that price segmentation is the key to capturing the maximum amount of margin dollars available on the market, the common approach is DIY. The result is a segmentation model that is too broadly defined, based on only a few pricing criteria instead of many, and ultimately doesn’t accurately reflect the level of granularity that exists in the market. Zilliant’s approach to segmentation reveals the factors that statistically influence price in your business and creates thousands – and in some cases tens of thousands – of unique micro pricing segments.
2. Price Elasticity
Price elasticity measurement enables a company to predict the volume change as a result of changing prices. Zilliant is the only price optimization software provider with the ability to measure price elasticity within B2B organizations, which is a much more complex task than in B2C. Price IQ measures the price elasticity within each microsegment to predict how win rate and volume will be impacted when prices change. This puts you in control to set pricing objectives that maximize profit or revenue, or anywhere in between.
3. Goal-Seeking Optimization
Once price elasticity is measured in each segment, we commence to optimize prices. Zilliant uses a convex optimization to determine which price will achieve our customers’ overall profit or revenue goals. The goal-seeking step in the process determines how a mix of price increases and decreases will achieve the various margin and revenue goals of your business.
4.Enforce Rational Price Relationships
Since pricing rules are complex and often multidimensional, Price IQ uses a mathematical solver to enforce all a customer’s pricing rules simultaneously. For example, good-better-best product recommendations and small-medium-large order sizes, while simultaneously ensuring business rules such as minimum margin caps. This is not possible using spreadsheets and simple formulas, or rule-based optimization approaches because pricing rules compound and break as complexity grows.
With each run of the price optimization process, Price IQ computes the optimal set of prices based on your revenue or margin goals, subject to the price relationship and/or business rules you’d like to enforce.
Next-Generation Price IQ does it all..
…Faster
We’ve improved upon our market-leading solution with faster optimization times, first and foremost. With our latest evolution, we’ve improved performance by 10x, meaning the aforementioned complex mathematical components deliver optimized prices in a fraction of the time that any comparable solution on the market can.
…Clearer
A black box belongs in the airplane cockpit, not the pricing console. Next-Generation Price IQis the first crystal box price optimization solution, grantingvisibility into exactly how and why the engine produced each price. Pricing and data science teams can quickly drill into each optimized price, view the associated transactions with inline analytics, make adjustments, and see how price changes will impact revenue and profit. Prices optimized with Next-Generation Price IQ are easily explainable and defensible, ensuring their acceptance by salespeople and customers alike.
…Easier
Within a simple user interface, pricing teams can visualize inline analytics to quickly discern price adoption trends, price history, profit driver analysis, and annual revenue growth, among others. They can also set up multiple scenarios containing goal-seeking strategies and set different price alignment rules in just a few clicks. Data scientists can also easily plug their own models into Next-Generation Price IQ, preventing rework while allowing them to put previous data science investments to good use.
Why it Matters for Pricing and Data Science Teams
The time is now for pricing analysts and data scientists to distinguish themselves as mission-critical and elemental to revenue and margin performance in B2B. Dynamic and transparent prices are a company’s best salve in the face of inflationary cost increases, changing omnichannel buyer expectations and the rest of the nonstop seismic shifts occurring in the market. And it’s increasingly clear that a company’s pricing is only as strong as the science behind it. In many cases, the only thing holding these teams back from their rightful seat at the corporate strategy table is a legacy toolset that lacks the flexibility, intelligence, and speed necessary to consistently execute the right pricing strategies.
Together, pricing and science departments can move the needle like few other functional areas can in modern business. Next-Generation Price IQ provides the canvas for these teams to paint their margin-maximizing masterpiece.
