Episode 43 Nov 18, 2021

Become Dynamic with a Real-Time Pricing Engine

On today’s episode, we bring back Zilliant SVP of Products & Science Pete Eppele to discuss our latest product innovation, Real-Time Pricing Engine™. Pete and host Lindsay Duran describe the history of pricing engines inside B2B companies and explain why they are being overwhelmed by the increased volume of pricing requests and demand for dynamic pricing.

Zilliant Real-Time Pricing Engine is a robust API service that can serve as a company’s pricing system of record with the ability to perform complex calculations on demand, including external data lookups and automated negotiation. Listen to hear about how this offering complements a company’s existing ERP to deliver dynamic prices and product recommendations to any commercial system.

Read the article mentioned in the episode here What is a Real-Time Pricing Engine?

Pete Eppele

Pete Eppele

If the pricing isn't in an acceptable state, it doesn't have to be immediately routed to an individual or to the deal desk. You can actually create with the Real-Time Pricing Engine, a counter-proposal. And so, with that capability, they've been able to take this massive workload and cut it down significantly. Now about 60% of those quotes that come in never require any kind of a human touch and the profitability on those quotes has continued to go up. 
- Pete Eppele, Zilliant

Episode Transcript

Pete Eppele: If the pricing isn't in an acceptable state, it doesn't have to be immediately routed to an individual or to the deal desk. You can actually create with the real-time pricing engine, a counter proposal. Send that back to the customer. And so, with that capability, they've been able to take this massive workload and cut it down significantly.

There's now about 60% of those quotes that come in, never require any kind of a human touch and the profitability on those quotes has continued to go up.

Lindsay Duran: B2B companies are facing increasingly complex business environments and disruption putting significant stress on legacy systems and methods. Taking a fresh look at how to gain strategic control of pricing and sales performance will be the differentiator between the leaders and the laggards. B2B Reimagined is a bimonthly podcast with a rotating host of [00:01:00] experts.

Each brings decades of experience using data science and technology to address B2B commercial challenges. Join us as we explore the challenges and dynamics across a unique mix of industries. Walk away from each episode with practical tactics and strategic advice to reimagine the commercial approach in your business.

Lindsay Duran: Welcome to B2B Reimagined. My name is Lindsay Duran and I'll be your host for this episode. I'm joined today by another returning guest, Pete Eppele, Zilliant’s Senior Vice President of Products and Science. Pete, welcome back to B2B Reimagined.

Pete Eppele: Thanks for having me, Lindsay.

Lindsay Duran: We're thrilled to have you back and before we dive into our topic for today, why don't you tell us something that we can't learn from your LinkedIn profile?

What's one surprising or interesting fact about you?

Pete Eppele: Good question. Something that people are often surprised by is the fact that I actually went to music [00:02:00] school before studying math and computers and been a bass player for 35 years now. Not to age myself too much. And actually, just bought a brand new Fender jazz bass last week.

So that was the first time I had bought anything in 25 years and love playing it. So that's something a little bit unusual about me and certainly I haven't posted that on my LinkedIn profile.

Lindsay Duran: Pete, we've been working together for almost 10 years now, and I've still yet to hear you play a musical instrument.

So hopefully you can correct that for me here sometime in the next year.

Pete Eppele: I'd love to do it.

Lindsay Duran: Excellent. We like to bring you on to talk about the latest Zilliant product innovations. And the last time you were here, we were talking about next generation price optimization. The topic today, I think, is also very pressing and perhaps even more important for companies.

We're talking about the concept of a real-time pricing engine and how it solves some ubiquitous and, I'll say, architecturally challenging [00:03:00] commercial problems for B2B companies. So, Pete, as you very well know, and many of our listeners know, that pricing engines are not new. They're used by companies big and small to execute pricing logic and calculate the correct customer price at the time of quote or order.

Can you elaborate for us on how a traditional pricing engine works and where it resides for most companies?

Pete Eppele: Sure. It's a great question because pricing is certainly something that's changed a lot over the years. The initial premise behind pricing and pricing engines, typically where the idea that they were part of an ERP system and an order management system, the very simplest incarnation of it typically had a single price.

Maybe it'd be a list price that you would assume to have for a product. Evolution might've introduced things like standard discounts, as an example, but certainly, the initial price engines that were out there didn't necessarily contemplate how much pricing was going to change and how dynamic it was going to become over [00:04:00] time.

Lindsay Duran: So where would you say that pricing engines, the legacy pricing engines that companies have had in place now for 20 plus years, have fallen short, especially in the midst of an explosion in digital channels and digital sales.

Pete Eppele: Yeah, there's a couple of different areas. The first one I would comment on is scale, especially with e-commerce.

What we see fairly regularly is the fact that pricing engines are getting overwhelmed with the number of requests. And if you think about, for instance, a website or webpage, where you might be asking to show 50 products at a time. And there's multiple users on it, for instance. That kind of scale is not necessarily what most pricing engines were built for.

And customers represent a 10-fold or more increase in terms of the volume in the system, simply isn't ready to handle all that new volume. So that's one. The other one is flexibility and the ability to change. As time has gone on and pricing has become a more [00:05:00] actively managed concept in organizations, what's really interesting is that price engine is very commonly the choke point, in that somebody might have a great idea about something new that they want to do in pricing. They do data analysis. They support it. But then when it comes time to actually change the price engine, to be able to implement that new strategy, that could be a major IT project.

And sometimes it's very unclear in terms of how those changes are made. There might be one or two people in the organization. So that lack of flexibility certainly is another area that falls short. And then just the complimentary tools to do analysis and to set the prices and the engine more intelligently is certainly a lacking piece.

I think those engines essentially, we're built to take the prices in and deliver them to transactions, but not be a decisioning system or help in that way.

Lindsay Duran: You've talked about the rise of digital specifically. How is that taxing pricing teams? What is complicating pricing in a digital [00:06:00] world today?

Pete Eppele: Yeah. One of the big complications is that a lot of pricing teams, especially on the B2B side, are accustomed to having sales reps\ negotiate pricing. And there might be some type of a buffer, if you will, between the customer and the price or the cost of a product.

And with e-commerce increasingly, that buffer is leaving, or it isn't there. Companies want to have the ability to show a price online that's a reasonable, a good price, it doesn't scare the customer off. For instance, that can be a challenge. We're sure. In that case, that's one of the areas. And as we mentioned before, just simply scale and the ability to scale is another one.

And then a third I might mention too, is the fact that as you're getting online and you're incorporating e-commerce in your mix, your competitors are as well. And another challenge that we see from the side of the pricers is that they want to be able to respond more quickly to competitors and competitor price changes, especially on key items.

Lindsay Duran: Now, what you're talking about is really that drive to be more [00:07:00] dynamic in the way that you price in a B2B context, which is extraordinarily challenging. If it's just difficult to update or change your prices, let alone have a technology bottleneck that makes it difficult to get those prices out into your e-commerce channel or digital channel.

It seems to me that B2C companies have clearly figured this out many years ago. And going back to the dot com era and certainly airlines and hotels do this quite well for consumer pricing. What are the factors that make it more difficult for B2B companies to execute on this?

Pete Eppele: That's a good question.

B2C typically does lead the way and B2B follows. And like you said, it's for a number of reasons. There's complexity often in the B2B environment that just doesn't exist in B2C for instance, with B2C, you're typically, you or I, or anybody else that would go to a site might see the same price for a product. But in [00:08:00] B2B it could be very different.

If I'm a known customer, I might already have a pre-negotiated price for that product, as an example. That would be one example. But if I'm a new customer, if I'm not logged in, I might see something else. And, oh my gosh, I hope that price that I see when I'm not logged in, isn't lower than the price that I'm paying, for instance.

And so, we have that complexity. We also have just the multi-channel nature of it, which is as a customer, I may go out onto the website, look at a price and then call into a sales rep or service desk or something like that. And so that pricing experience, regardless of where I connect with the company needs to be consistent.

And that's certainly a challenge that B2C companies typically aren't facing.

Lindsay Duran: Pete, with all this complexity and the challenges that B2B companies face really comes an opportunity. And I know that customers I've spoken with are eager to capitalize on the unique data that they're able to get from their e-comm [00:09:00] site; data that wasn't previously available to them.

What are some ways that a real-time pricing engine can help make that a reality?

Pete Eppele: Yeah, there's certainly additional information that you can get. As you're learning more about their customers, what products they're looking at, which products they're not converting on, as an example, a real-time pricing engine can help turn that into maybe additional strategies to try to get conversion rates to go higher.

So, there's information that you get about customers and their self-selection that a lot of times has gone through sales reps, and you really haven't had a record of that. So, you have the ability then to be able to take that information into account as you deliver a price, for instance, to a customer. And just that close connection through an e-commerce site with the customer, there's all manner of things that you can do even potentially beyond the idea of just pure price, but the idea of offering up or making customers aware of items that maybe they bought before haven't been buying. Not just price, but also the product offer that you put in front of somebody can become much more dynamic the real-[00:10:00] time price engine.

Lindsay Duran: I think that's such a great point. And one thing that I know that is top of mind for many of the companies we work with, and frankly, for most businesses dealing in an actual goods, is just an inventory shortage. And one way that you can help combat that is simply by offering substitute products for items that you actually have in stock and offering a relevant price for those items.

And being able to personalize that experience on your e-commerce site for customers, I think is really key to doing that and helping everyone, whether this supply chain disruption that we're all facing at the moment. Moving on to really what I think is the second impetus for change, the challenges of housing a pricing engine within an ERP system.

Why is it increasingly becoming more difficult to have all of your complex pricing logic in your ERP?

Pete Eppele: It's a great question. Those systems, again, are [00:11:00] not necessarily a huge focus from the perspective of the innovation, the traditional and the legacy systems, frankly. And so, they're not necessarily keeping up and adapting with the times as much as a vendor like ourselves, that's focused specifically on providing that capability. And then there are additional complexities that you have in that as you bring on new channels, maybe a CPQ system, maybe an e-commerce system, those might have their own price engines in isolation, and you get this sometimes a very complex mix of multiple price engines that you need to be able to try to synchronize together. As an example, again, if there's one source for the truth and a real-time price engine that has the scale to be able to handle all those requests, regardless of what channel or what source they're coming from, it's a much simpler kind of a scenario to be in and really can help companies get to that next level of price agility.

Lindsay Duran: So, Pete, how does a real-time pricing engine and a [00:12:00] pricing management tool that can act as the system of record for that pricing logic offload some of this responsibility and work in concert with the ERP?

Pete Eppele: Yeah, a great question Because I think when people think about their pricing engine, their pricing logic, it's typically something that's complex.

It's evolved over years and years, frankly, can feel like a little bit of a black box or something that might be concerning to touch or, difficult to unwind. And based on that, I think, one of the things that's very interesting and valuable about the idea of real-time price engine, it's not necessarily an all or nothing proposition. That you don't necessarily have to replace everything to get any kind of benefit. We have examples of customers that we've worked with that have just offloaded a portion of their pricing logic to the real-time price engine so that they don't have to make big major changes to it so they can retain what they've been doing, but add some additional capabilities [00:13:00] on, like for instance, showing reps start target and floor guidance when they add a line to a quote.

Lindsay Duran: That’s great, Pete. Can you give us a few other real-world use cases where you've seen a real-time pricing engine really transform a company's pricing function and frankly, their commerce function overall?

Pete Eppele: Yeah, for sure. Just building that, the example that I gave before, we've had customers with SAP that want to be able to provide that star targeted floor. Like I said, and it was a huge proposition for them.

For instance, if they had to potentially add hundreds of thousands of new records to the SAP system, it wasn't necessarily going to scale like we talked about before. So having that ability to call out externally is one of them. Another one that I'll cite too, is it's an interesting use case where the pricing engine is connected in with a quoting solution. In this particular case, the customer is getting about 50,000 quotes per week from their distributor [00:14:00] network. And those quotes are for custom projects, custom products. Their business practice had been historically to have a deal desk review all of that. But as you could imagine it's an overwhelming workload.

It doesn't necessarily - isn't conducive to being able to get a pricing quote back out to a customer quickly. And so, with the real-time pricing engine, they're now able to do, in an automated way that doesn't require human touch, is to be able to take in a price quote, evaluate the quality of the pricing on it, because those come in as price requests, and they can either approve or not the request. And even have taken it with the real-time pricing engine to the next level of, if the pricing isn't an acceptable state, it doesn't have to be immediately routed to an individual or to the deal desk. You can actually create, with the real-time pricing engine account, a proposal, send that back to the customer. And so, with that capability, they've been able to take this massive workload and cut it down [00:15:00] significantly. There's now about 60% of those quotes that come in, never require any kind of a human touch. And the profitability on those quotes has continued to go up and stay at an increased level.

Lindsay Duran: That's really incredible, Pete. What an absolute game changer. Not only for the customer experience of being able to get a quote returned quickly, but gone are the days of waiting three, four days for a response to a quote. Businesses just move so much faster than that. But also, for the company itself, in terms of being able to reduce the amount of manual effort and allow employees to really focus on larger, more strategic deals, where their efforts are better spent. So that's really quite incredible. So, at Zilliant, we've had this capability and the ability to enable this capability for a number of years. We have a formal announcement coming up. When can we expect [00:16:00] to hear more about the formal release of our real-time pricing engine solution?

Pete Eppele: Yeah, we'll be talking more about that next quarter in the first quarter of 2022. Like you said, these technologies have been available for a long period of time. And what we've really done is we've seen demand for this solution increase in the marketplace. We've made just more investment in simplifying the management of pricing logic and making a seamless connection so that, as you define new prices or new pricing approaches in our price manager product, they become immediately available through real-time price engine.

Even with this mature technology, there's just been a lot of good investment in terms of really simplifying that capability for an IT to be able to change their pricing logic or their structure in a simple and familiar way. And also, we are working to help companies with some features and capabilities that connect us so that we're better able to be able to help people, if there are pieces that they want to move maybe out of SAP or their [00:17:00] ERP system into the pricing engine, making that easier and more streamlined.

Lindsay Duran: Great. Thanks so much, Pete. Before we wrap up this episode, do you have any parting thoughts or words of wisdom for our listeners going into 2022?

Pete Eppele: We touched on a concept before that maybe I'll reiterate, which is - this doesn't necessarily need to be an all or nothing proposition. But I think it's a good thing for people to think about: Is my price execution system is that engine really the weakest link for me in terms of taking the next step and unlocking the potential of price optimization?

And as you take a look at that, if you think about things like it's hard to do a project it's hard to make changes and updates to it, that might be laying out a great opportunity to be able to start to think about: How do we get a more dynamic capability in place so that I can ultimately take my pricing to the next level to where people want to get to being more data-driven, more dynamic?

Lindsay Duran: Excellent. Pete, I want to thank you again for [00:18:00] taking the time to join us for this episode and sharing your perspective with us.

Pete Eppele: Thanks so much, Lindsay. It was a pleasure.

Lindsay Duran: And I want to thank each of our podcast listeners for being with us today. Be sure to check out the link to our recent in-depth article:

‘What is a Real-Time Pricing Engine?” in the show notes for more information. And stay tuned for further learning opportunities on the subject. At Zilliant, we're committed to your success. And if you would like to discuss how we may be able to address challenges in your business, please don't hesitate to reach out to us on zilliant.com.

If you're enjoying the content, and I hope you are, please rate and review the show as it helps us to continue to put out great free content. Have a great day. And we hope you join us for the next episode of B2B Reimagined.

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