Episode 54 May 09, 2022

Moving Beyond Legacy Pricing Systems

In this episode of B2B Reimagined, Zilliant Senior Vice President of Products & Science Pete Eppele joins us to discuss the steps companies need to take to attain real-time pricing capabilities with a better pricing system of management and how companies are likely to think about pricing systems of record in the future.

Listeners will learn about an advanced, yet attainable vision for real-time pricing capabilities and an immediate opportunity to drive more value from their pricing practices. Read the whitepaper discussed in the episode here Legacy Pricing is Harming B2B: Do This Instead

Pete Eppele

Pete Eppele

You don't have to take it all down in one bite. There are opportunities to be able to start with high-impact areas of your business, whether it's managing your global and country price lists, whether it's being able to do a faster turn on the update to your various customer agreements. There are many ways to get started that are high value that don't require big changes to your system of record.
- Pete Eppele, Zilliant

Episode Transcript

Pete Eppele: I think the idea of separating system of management system of record, you don't have to take it all down in one bite, so to speak. And there are opportunities to be able to start with high-impact areas of your business, whether it's managing your global and country price lists, whether it's being able to do a faster turn on the update to your various customer agreements that you have on.

There's many ways to get started that are high value that don't require big changes to system of record.

Lindsay Duran: Hello and welcome to B2B Reimagined. My name is Lindsay Duran, and I'll be your host for this episode. I'm joined once again by Pete Eppele, senior vice president of products and science. Pete, you're getting to be a regular on the podcast. Welcome back.

Pete Eppele: It's great to be here.

Lindsay Duran: Yeah. Why don't you tell us a little bit about your background and role for those that may have not heard your previous episodes?

Pete Eppele: Sure. Sure. My role is VP of products and science, and I've been with the company for just over 20 years now, driving product roadmap, as well as the data science vision for the company. So it's been a great run, obviously seen [00:02:00] tremendous amount of evolution of product and change in the industry, but frankly never, honestly, never in a more exciting than we are now with everything that's happened around digitization and inflation and everything else going on out in the world.

Lindsay Duran: Before we get started and dive in. Why don't you tell us something that's surprising or interesting about yourself? Something that people can't learn from your LinkedIn profile?

Pete Eppele: The one thing, I'll talk about my kids instead of myself for a second, but I've got twins that were born prematurely and they're affected a little bit differently by it, but one of them has these incredible sort of almost savant.

And I know people say this, but kind of savant skills as it relates to dates and the calendar. So I get a text the other day from him and it said, it says 28 years from tomorrow. And I'm just reading it right off my phone; 20 years from tomorrow, America will be a hundred thousand days old on Tuesday, April 19th, 2050.

And this is just the kind of thing that you get from him, it's like, first of all, just knowing that April 19th, 2050 is going to be a Tuesday is child's play for him. Like that's right [00:03:00] off the top. But like the hundred thousand days thing blows me away and of course, my question is, did you figure that out in your head and the answer is yes. Like no paper, no, nothing. I mean, it’s just his head. His mind just works that way. So it's just interesting to see that when you got somebody sort of in the family that you're exposed to and pulling out fun facts like that, it's always interesting.

Lindsay Duran: That is extremely impressive. I can barely remember what day of the week it is most days.

So I might need to call him up when I need some help with that. That's excellent. Thanks for sharing that. Last time you joined us, it was to discuss the launch of our real-time pricing engine. This time we're going to build on that topic a bit more, but take a step back and look at legacy pricing engines, commonly found inside B2B companies.

Specifically, I want to ask you about pricing systems of record. And pricing systems of management, what they are, where they fall short, especially in the digital age and what can be done to [00:04:00] modernize pricing approaches in a minimally disruptive way. So Pete let's first start off by defining the terms here.

What exactly do we mean when we refer to a company’s pricing system of record. And what is the most common?

Pete Eppele: So when we talk about a pricing system of record, we're talking about the system that is housing and delivering the final price that a customer is going to pay in any sort of an order situation.

So whether it could be a list price, it could be a customer specific price when I order a given product. But it's the system that is responsible for delivering the price that the customer pays. In terms of what are the most common type? I mean, these are such core fundamental systems to a business it's mostly found in the ERP system, maybe an SAP, perhaps Infor, as an example, it might be called an order management system, but it's that place where orders are ultimately being managed and entered.

That typically is a [00:05:00] system of record for pricing.

Lindsay Duran: I'll ask you the same question regarding pricing systems of management. What are they and what is most common?

Pete Eppele: Yeah. I mean, an interesting concept with a system of management because system of records typically are our systems that are very good or have focused primarily on making sure that you're calculating the correct price it's accurate, but they haven't necessarily provided the accompanying tools to help decision support and drive better decisions and run scenarios as an example about what if I change my prices?

What impact might that have? And so that's where the idea of a system of management comes in, which is to say while certain systems might be more tuned to executing price, you need that ability to be able to make changes and understand the impact of those changes. And I mean, the reality, I think the de facto standard of systems of management, especially as it relates to pricing has been Excel for companies because there aren't necessarily, or haven't historically been a lot of great options.

[00:06:00] People typically will maybe extract prices, put them in Excel, do some work on them, run through some scenarios and then push them back into the system of record. Once they've decided on the pricing.

Lindsay Duran: In our most recent white paper, we took the position that these legacy systems are really not helping companies.

And in fact, they're thwarting their ability to price in a way that's now required by the digital age, expected by customers. Can you talk a little bit about why you feel so strongly about that.

Pete Eppele: Yeah. I mean, I think these systems typically were put in place with a different set of assumptions about how commerce worked and how things worked.

And what I mean by that for instance is a lot of times the assumption is there's going to be an interaction between a sales rep and a customer. It won't be a hands-off online interaction for instance. There'll be a negotiation. And so very often the pricing systems were built essentially to say, I'll be getting a [00:07:00] request from a sales rep, not necessarily to say for instance, that an eCommerce site might want to be able to display 50 or a hundred or a thousand prices in the course of a couple minutes of a session in an interaction with a customer.

And so because of that fundamental shift in the assumptions around pricing essentially, it can be a holding back of what people can do because as you move forward, you want to be able to deliver potentially a price directly to a customer. You want to maybe be able to experiment with different pricing strategies, but those systems are sort of established in a certain way and are very often complex and expensive to change.

Lindsay Duran: So essentially it's forcing companies to dumb down their pricing approach in many ways. And in the white paper, we actually talk about it more in the context of companies tending to strip down their price ambitions to fit into rigid ERP capabilities. Have you seen this?

Pete Eppele: Yeah, we sure have, there are so many companies that want to be able to do things like make [00:08:00] quick adjustments, if they're long on inventory or short on inventory.

And I think the way that they've maybe accepted that they would do that is through humans and through manual processes. So, “Hey, let's tell our salespeople or maybe our deal desk that we're low on inventory. So hold a higher price.” And part of the reason for that is you don't have the ability to make those adjustments quickly and in an agile way in your systems.

And so you sort of rely on the human factor, which is obviously sort of a hit or miss. I think companies have done a good job of it, but ideally your pricing strategy should be able to change to be more fluid. Inventory or cost changes or anything else that's going on in your environment rather than having to kind of depend on always trying to communicate things out to people and seeing what sticks.

Lindsay Duran: And it's certainly a daunting thought. I think for anyone that's ever been through an ERP project and ERP transformation to think about modifying or significantly customizing your ERP, [00:09:00] to be able to more effectively support how you would like to price and be more dynamic in the way that you price. I can imagine that.

The prospect of doing this ERP overhaul really gives companies pause. And so they find themselves essentially not able to price in the way that they'd like because of that, that ERP task and rigidity that we talked about. How does Zillian’ts Real-Time Pricing Engine provide an alternative solution?

Pete Eppele: You really nailed it, Lindsay.

And that the systems can be difficult to modify. And a lot of times it comes from, there's not many people that maybe really understand the system, how to modify it. There's been complexity built up in the system over years and one of the nice things about the real time price engine is the fact that it gives you an opportunity in a much simpler way to be able to infuse new factors and sort of new concepts or new pricing methods [00:10:00] into an existing system of record for instance. And just to give you an example of things, we've had a number of customers that we've worked with that have wanted to give better guidance to their salesforce at the time of quote. And it was potentially daunting to them. The idea of adding all kinds of new price points into the system, et cetera.

What we were able to do was just have their pricing system of record call out to the real time pricing. To be able to get that information. So if there's essentially like a start target and floor guidance envelope for a sales organization, rather than making massive changes to the system of record of the ERP, there's now just a much more streamlined way to do that with a call-out to the real-time price.

Lindsay Duran: As a follow on to that. Pete, we often hear that configure price quote tools or eCommerce tools also have some form of a price engine. Can you talk a little bit about those and maybe why those aren't necessarily the solution [00:11:00] to solving this broader pricing challenge of companies wanting to be more dynamic and flexible?

Pete Eppele: Yeah, it's a great point. Is that the ERP, the CPQ, eCommerce. They typically will have their own pricing functions, have their own pricing capabilities. But one of the challenges is that most companies that we work with don't really want to replicate that logic because all the systems may work a little bit differently.

And what we're ultimately trying to do is create a consistent price experience for all of our customers, regardless of which channel they're engaging us through or which method they're engaging us through. So that really kind of pushes the concept. You do want to have one system of record that is able to deliver pricing in an omni-channel or an across application, across technology way.

And so that starts to then put additional strain. So a typical scenario might be that companies call out to their ERP system from CPQ or from eCommerce so that they have that one source, but then the [00:12:00] call volume for pricing just can become overwhelming. And those are times and instances where we see the real value of the real-time pricing engine and the fact that it's able to scale, not only are you able to implement better and different and more flexible price strategies, but you're also just able to scale to the volume of requests that come in from these multiple channels.

Lindsay Duran: I think what you just described there is the holy grail of what CIOs might think about when they're looking at their architecture and how they can really best support the business in terms of delivering out the right price at the right time, that's contextually relevant into the right system and not running into any latency or data issues or conflicts as it relates to different channels, but kind of shifting gears to what is probably the most actionable thing for companies at the moment. And that's really the fact that they're still using Excel as their pricing system of management. What do you think are the [00:13:00] consequences of managing prices via spreadsheets in this day and age?

Pete Eppele: There are a number of them that we see. I mean, what at the simple level is just the idea of simple calculation errors, et cetera, are things that have always plagued the Excel based solutions.

But you know, where we see companies get very challenged is in the idea as the environment changes and just take inflation as an example. You see costs changing. You want to be able to understand how to roll those costs through you want to understand financial impact. Now, what you're talking about is bringing multiple data sources together.

So I might have a cost feed. I might have transactional data that I want to be able to look at in arrears to understand what the impact is. Maybe I have data feeds like competitive information that it's available somewhere. With an Excel-based solution, it's very cumbersome to track and bring all of that data together in a way that makes it usable.

And then you can start to define and build out your strategy. And then even, I mean, it gets to that sort of next level of being able to automate a [00:14:00] strategy. I think where we see people working with Excel, they're spending a lot of time, just wrangling data, trying to pull it together and focusing on low value tasks rather than actual management of the prices.

Lindsay Duran: How do you recommend B2B companies get started addressing this legacy system of management / system of record conundrum?

Pete Eppele: Yeah, it's a great question. I think if you're a company that's traditionally looked at and used Excel to manage pricing, I think there's questions to ask yourself in terms of how able am I to keep up with inflationary changes?

How often am I updating customer prices? And what's driving my sources of margin leakage there. And as the technology has advanced the amount of time that it actually takes to kind of go from an Excel based solution to a Zilliant based system of management for these is I think a lot less than people would think.

I mean, literally within weeks. And then on the upper end months, people are able to start [00:15:00] moving to a much more robust way to be able to bring these data elements together, update pricing, do scenarios, understand impacts. And then from the system of management, integrate those price decisions back into the system of record.

Lindsay Duran: This is such a timely discussion because just last week you were on stage at the Professional Pricing Society Spring Conference, and you shared some real world examples of companies successfully adopting price management software and our real-time pricing engine. Can you share one or two of those stories with our podcast listeners?

Pete Eppele: Sure. Sure. Yeah, that was as always by the Professional Pricing Society, it was a great event. And some of the examples that we share, there are a couple, but I've talked to over and over about inflation. We got an example of a distributor, tens of thousands of cost changes per month. And one of the things that they were able to do with improved system of management is being able to automate the [00:16:00] changes, those cost updates necessitate across a broad customer base.

So that's a critical capability, it’s something that they spend a lot of time on manually. And by being able to relieve some of the burden of the manual work of passing those updates through, they've gotten onto more sophisticated concepts, like understanding which customers have taken price, which ones have not. And then factoring that into decisions down the road and using that as a piece of information to drive their pricing strategy. So that's a very powerful example. We've got another one where we've got companies that are starting to online sell. They have competitors that are continually changing price. And so what they're able to do is take scraped competitive data that they get multiple times per day and have automated the process of determining which competitive moves they want to respond to and which ones they don't want to respond to. So again, that's an Excel-based solution. You're spending so much time just trying to wrangle that competitive data in, go through an analysis process, but being able to just do that all [00:17:00] in an automated way has really been game changing for them.

And then another one that I would call out is a company that has a deal desk function that evaluates tens of thousands of deals every week. That come in from the distributor network. This is a manufacturer specifically, and that's been a very high touch process for them historically, but basically by being able to infuse a number of different components into the mix, more pricing intelligence, real time price engine capabilities.

What they've been able to do is reduce the number of deals that they have to look at it. So only about now 40, where it had been upwards of 80, 90% of their deals that required human touch. Now only about 40% of their deals end up getting a review. And part of what's enabled them to do that is that when they get an incoming bid, rather than just routing it directly to somebody, what they're able to do with the real-time price engine is evaluate the bid, determine if they want to accept it or not. And if they don't want to accept it, they can even take a [00:18:00] next step of providing a counter offer, which is essentially what that deal desk function had been doing. But they've identified a way through that combination of sort of optimization and real-time price engine to be able to automate that process.

And so for them, it's a huge benefit in the fact that they've got more control over deal pricing, they're able to serve their customers better and faster and increase win rates because of that. I mean, it's, there's some really very interesting stories.

Lindsay Duran: I think those are such powerful and compelling examples. And I would imagine that so many of our listeners on this podcast can relate to some of those challenges and how just using technology is really transforming how they price, how they sell across the board. So thanks for sharing. Do you have any parting thoughts to leave with our audience today?

Pete Eppele: I think it can seem daunting in terms of some of these challenges that we've talked about.

I think the idea of sort of separating system of management and system of record, you don't have to bite it all and take it [00:19:00] all down in one bite, so to speak. And there are opportunities to be able to start with high-impact areas of your business, whether it's managing your global and country price lists, whether it's being able to do a faster turn on the update to your various customer agreements that you have out there. There's many ways to get started that are high value, that don't require big changes to system of record, et cetera. Those are things that you could certainly build toward, but I think the encouragement for people in terms of a parting thought is looking for that opportunity, that high value opportunity to be able to start to move in that direction of a more robust system of management so that you can get better control over your profitability so that you can get better control essentially over that pricing future that you're trying to get to.

Lindsay Duran: I really want to thank you for taking the time to join us for this episode. And I hope you'll come back again.

Pete Eppele: Absolutely thank you Lindsay.

Lindsay Duran: And I want to thank each of our podcast listeners for being with us. Be sure to check out the link to the white paper discussed in this episode in the [00:20:00] show notes for more information, and certainly stay tuned for further learning opportunities. If you'd like you can reach out to us at zilliant.com to learn more about how we may be able to help you address pricing and sales challenges in your business.

If you're enjoying the podcast, please take a moment to rate and review the show as it helps us to continue to put out great free content. We hope you'll join us for the next episode of B2B Reimagined, have a great day.

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