Episode 65 Oct 20, 2022

The Quickest Way to Proactively Manage Customer Price Agreements

Senior Vice President of Products & Science Pete Eppele is back to go in depth on the chronic undermanagement of customer price agreements. Although often more than 50% of a B2B company’s revenue is transacted via customer price agreements, this important price type tends to lack the attention it deserves.

When using manual tools to manage agreement prices and legacy ERPs to house agreement records, companies fall prey to “set-and-forget” pricing and, usually, preventable margin loss. Zilliant’s newest Quick Start package – Quick Start for Agreement Management – empowers sales reps to proactively manage agreements in as few as four weeks.

Quick Start for Agreement Management Datasheet

Product Video

Featuring
Pete Eppele

Pete Eppele

For so many companies now, they're saying, 'We've invested so much in technologies that help us sell or help us present our products online, but we haven't made that equivalent investment in systems that help me manage the very complex commercial relationships that I have with customers across my base.'
- Pete Eppele, Zilliant

Episode Transcript

Pete Eppele: A lot of times what we hear with the strategy is that they want to rocket up with their prices as they have inflationary pressures that are happening, and so trying to pass those costs through. Certainly everybody has been tested recently in terms of their ability to execute. I was speaking at a conference recently and asked how many people in the audience had increased prices at least three times in the last 18 months, and every hand went up. So those muscles are getting exercised in a way that they certainly haven't in recent years.

Barrett Thompson: Hello everyone. My name is Barrett Thompson, and I'll be your host for today's episode of B2B Reimagined. Joining me today is my friend, Pete Eppele, the senior vice president of products and science at Zilliant. Pete, welcome to the podcast.

Pete Eppele: Thanks Barrett. It's great to be here.

Barrett Thompson: Pete, it's not your first time, of course, in fact, you've been in the guest chair as recently as May, but you've also been in the host chair recently in episode 59.

You did a great job interviewing our friends at DataXstream. So I just hope you're not coming for my job.

Pete Eppele: No way, Barrett. I appreciated the opportunity to do that, but it helped me understand that you are the master host and I'm more than happy to leave those duties in your [00:02:00] capable hands.

Barrett Thompson: Well, let's get right into it then, for those who may not have met Pete before or listened to the prior episode. Pete, would you just give us a brief overview of your background and role at Zilliant?

Pete Eppele: Yeah, sure will. So I have been at Zilliant for 21 years now, a good long time. And my responsibilities are product, organization, the partner organization, and the science group as well.

So I have a broad span of capabilities across the gamut in terms of driving roadmap and strategy, and ultimately the quantitative capabilities underlying them.

Barrett Thompson: Thank you Pete, and I appreciate all that you bring to Zilliant’s mission, and I'm really excited to hear from you on today's topic because we are discussing a truly disruptive innovation that Zilliant just announced, which is our new Quick Start program for agreement management. So looking forward to getting into what that is, why we're doing it now, and how that delivers incredible value for customers faster than any other deal management approach on the market. So just to kick things off, Pete, give us a sense of how [00:03:00] prevalent customer price agreements really are in B2B pricing.

How often would that mode come up, give or take?

Pete Eppele: Great question, Barrett. And just for clarification, because sometimes people will use different terminology when we're talking about agreements. In this case, we're talking about a price policy or price that you would set and establish for a customer that would last over a period of time.

Very common business practice, especially with the larger customers, as an example. But with the businesses that we talk to, we typically see business conducted in that way where you have some sort of a customer agreement or a customer specific price, it's often 50% or more, maybe even upwards of 80% of the revenue in a business.

So it's a huge amount. The commercial implications of managing that set of business are huge.

Barrett Thompson: Yes at those levels, that's revenue that we need to pay attention to in the business. That's going to be critical if we're thinking about our overall B2B performance. Based on what you've seen[00:04:00] Pete, what are some of the challenges that people find in managing these agreements across the business?

Pete Eppele: There are a number of different challenges. I mean, ultimately there's just, in some cases there's a volume challenge and a lot of times that there will be hundreds of thousands of customer specific price points out there in the system that gets set up over time and just continue to accumulate.

Sometimes people refer to that as set and forget pricing, where I may establish a price and that price could remain in place for years, frankly, especially vulnerable if the price that you're setting is a net price and it's not set to adjust as markets and input costs and that kind of thing change. So, but that may have been okay.

If you roll the clock back pre Covid, it might have been okay to be the net price agreement with not much inflation. You don't have a tremendous amount of margin leakage. As inflation, as volatility are really front and center for us right now. The idea that I've got these price agreements that may not expire, they may be in net price, they could [00:05:00] be a big source of margin leakage.

It could also be difficult from a management perspective just to know when you're able to change things. When were things put in place, when are you able to change? And having access to all that at the ready can be a challenge.

Barrett Thompson: Pete, I'm hearing the same when I talk to customers, keeping those prices from getting stale, knowing when I can take action and what action to take, just visibility to that is often the basic challenge, even before you start asking what's a better price to insert into that agreement.

What have you seen in terms of when you think about managing the profitability of a business in a volatile environment as we all find ourselves in, or an inflationary time. What do you see companies doing today in an attempt to manage that and keep the prices updated as the world is changing around them?

Pete Eppele: What a great question. What a timely question. Now, I mean in terms of what people are doing, a lot of times what we hear with the strategy is that they want to rocket up with their prices as they have inflationary pressures that are happening. And so trying to pass those costs [00:06:00] through very often, quickly, which means for a lot of companies, what they might call a peanut butter spread approach to updating their prices and moving their prices up is common. Sometimes we'll see companies that will put in surcharges, as an example, temporarily to offset some of the costs that they may see or supply chain disruptions that they see.

But certainly everybody has been tested recently in terms of their ability to execute. I was speaking at a conference recently and asked how many people in the audience had increased prices at least three times in the last 18 months, and every hand went up. So those muscles are getting exercised in a way that they certainly haven't in recent years.

Barrett Thompson: Pete, I often see, and it's true generally in pricing, I speculate it's true here for agreement management that one of the mechanical tools that gets applied so many times is to attack this problem with spreadsheets. And I wonder if you've seen that as well, and could you comment on the effectiveness of that approach?

Pete Eppele: Yeah, I've definitely seen the spreadsheet [00:07:00] approach and frankly, I mean, I think, like we mentioned before, the idea of being able to do, make those kinds of changes at scale, make those kinds of changes more surgically and have integrated data to help support decisions. How long has this price been in place?

How much is the customer buying? Are they at market pricing? Are they below? Are they above market right now? Having that kind of information at the ready just isn't really possible when you work in that spreadsheet environment. And so what you're left to do then very often is try to access maybe through multiple systems, swivel chairs, pull together the information that you can, that may just be for one agreement and you've got a whole stack after that you probably need to be thinking about it.

Barrett Thompson: Pete it's complicated what you described a lot of balls to juggle in the air, and I've even had a few people confide to me that just finding the right spreadsheet is actually problematic.

They say, “I don't have a copy of it. It's on PC of the sales rep perhaps that's managing that account.” So as simple as that seems, the spreadsheets are difficult. Just finding the right [00:08:00] one. Then doing the operations that you said. Then pulling in the supporting data you need to make a better decision, and then trying to push that back into the ERP.

So there might be several people on the team who spend 60 days keying all that back in again hoping they don't mistype something as they go. I have a lot of empathy for people who are struggling with that process today. Well it seems that indeed, this is an area that's ripe for innovation. So why don't we pivot now and let you give a sense to the audience.

How is it that this new Quick Start package for agreement management is going to make such a difference?

Pete Eppele: So the Quick Start package for agreements, it's ultimately packaged solution to streamline that process of setting up, of renewing, just overall managing your customer specific pricing. And it's really purpose built.

It's interesting because the way the world of technology and digital transformations there are solutions, like maybe quoting and CPQ solutions out there in the marketplace that do what they do well. What is [00:09:00] really unique and interesting about Deal Manager, it was specifically built for this problem space and this process of managing customer prices that are in place over a period of time.

So it, it allows you to do some very unique things out of the box. One of those things, for instance, is to be able to set pricing at multiple levels of product and that the case there is you might want to set item pricing, or you may want to set standard discount for a product category as an example.

Those kinds of things are supported just directly out of the box. And again, really just bringing back best practices that we've seen from across different organizations and how they want to manage. It also supports things like if you are working in spreadsheets today, as an example, you could import those spreadsheets and those agreements into the solution.

Start working with them in a commercial grade system where you can get the advantages that we talked about before, where it might be insight into price recommendations, and benchmarks of how good or much improvement could you make to a particular deal. Capability sets too [00:10:00] Barrett, like just editing individual lines, mass updating lines.

So if we want to do things like, Hey, we've got some lines on this agreement that are below floor, I want to bring 'em up to the floor value. You have the ability to do things like that set those expiration dates that we talked about that are sometimes lacking. And then last, and not least too, it puts together an approval process and gives you the ability to set up rules in governance so that, for instance, if you have pricing as you're working on existing deals or working on new deals and you have pricing that's below floor and acceptable value, you have the ability to route that for approval as you choose as well.

Barrett Thompson: You mean that’s routed through the system. I'm not gonna just attach something to an email and ship it off like I did last month?

Pete Eppele: That's exactly right. That's exactly right.

Barrett Thompson: Very welcome change. Pete, you mentioned a pulling in of recommendations into the agreement pricing and repricing process. Are there some price quality KPIs or other things like that, that you can overlay in this agreement process to help people see when they're tending toward a good price or a not good price, and by how [00:11:00] much?

Pete Eppele: Yeah, there definitely are. One of the things that could be very interesting as you start to put a deal management solution in place, like you said with integrating analytics or integrating recommendations, is that it opens up the possibility to be able to score each and every line and a deal based on what the fair market price is in that circumstance or in that situation.

So things will be different if I'm a relatively small customer buying it item versus if I'm a larger customer in a very competitive dynamic, buying that item, the same price might score differently. I might be getting a great price with the big customer who's in the competitive space, but that same price isn't great with the smaller customer.

And what Deal Manager allows you to do is to be able to integrate that guidance and those considerations of what is a good price, what is maybe not a great price in a particular circumstance, and give you that real time feedback right there as you're a rep, or as you're a decision maker to help you make a better deal in that moment and/or like we said, if you wanted to [00:12:00] trigger approvals or workflows in that case to be able to do that as well.

Barrett Thompson: I think that's so powerful. Pricing as much as it is today and intended to be a data driven discipline. When I look at what is happening in practice, I think there's fair amount of subjectivity even on the front line. And when you ask 100 or 500 sellers to pick a price that looks good, their definition, their understanding of good is going to be so different.

And so having an objective scoring, I'm really drawn to that, having a way to define that score and measure that. And sort of put it out there in an objective way, I think is helpful both for the person setting the price. Also for the approvers that you mentioned, there are another set of eyes to look at the deal, but they may not have any more information about what a good price looks like in the context of that order mix and that customer, et cetera.

But the scoring could potentially know that.

Pete Eppele: It's absolutely the case Barrett, and it could help you when you're setting up new business. It could also help you when you have the ability to create those scores and evaluate all your [00:13:00] existing business and score your existing business, which is a, can be a huge heavy lift for customers to try to execute. But when you can do that, then you can get very interesting and nuanced in your strategies where if a customer is generally speaking below market, across their portfolio of products that they buy from you, from pricing perspective, you can. And we have customers that will be more aggressive in terms of moving their price up when they have inflation or cost or some other kind of air cover, if you will, toward being able to raise price.

And in the same way, if a customer is already generally priced high, you may not move them as much, but you know the point being that when you have the ability through automated analytics and mass that allow you to get that picture, you're spending your time thinking about strategy you want to execute rather than necessarily trying to sort of cobble data together from multiple systems and draw those pictures individually.

Barrett Thompson: Yeah. It shifts where your focus goes in a virtuous way right away from the mechanics and into the strategy of what would a good [00:14:00] price be for me in the market in this. Earlier in our conversation, you mentioned the survey you took of a group that most of them had at least three or more price changes they had made in a year, whereas typically they might have made just one a year.

I think is more common, let's say. I'm imagining a lot of hours plowed into the change process itself when you're doing it the Excel spreadsheet way, the manual way, et cetera. So what I'm seeing here, and I want to give you a chance to call out if you think it's so, is that there could be a massive time savings, a massive savings of energy in the organization to automate their process and bring their process onto a commercial grad tool like the Quick sSart. Is that what you're seeing?

Pete Eppele: Yeah. That's absolutely what we're seeing because to the point, while inflation is the flavor of the day, that is driving people to change prices. I mean, we very quickly, in the next six months, who knows what we're gonna see. We could start to see a bit of deflation, customers asking for price concessions and that kind of thing.

And so when it's taking [00:15:00] so long to execute these moves, and I, we really think that volatility is something that's going to continue to be part of what we're dealing with all the time. The ability to react and respond more quickly with this, like we were saying before with what could be 50, 60, 70% of your revenue is incredibly important.

And I think for so many companies and so many people now, they're reaching that tipping point of essentially saying, “We've invested so much in technologies that help us sell or help us present our products online, but we haven't made that equivalent investment in systems that help me manage my, the commercial, the very complex and very voluminous in cases, commercial relationships that I have with customers across my base.”

This is a great opportunity to get started with that Quick Start and start to get those more robust and more purpose built systems in place for managing those relationships.

Barrett Thompson: Pete, I'm also interested in whether there are other market dynamics or trends, B2B trends that you've [00:16:00] seen, which Quick Start for agreement management might address and that could be trends in the way customers buy.

It could be trends in the way B2B companies are shifting, or the way they're staffing the sales function. Just anything else beyond what we've talked about so far.

Pete Eppele: Yeah. One dynamic that we haven't mentioned so far is just a move to online and I think everybody's experiencing some degree of eCommerce or in an increase in multi-channel where we're looking to have to create a consistent pricing experience for customers.

And that's, again, one of the dynamics I think that we've seen in companies that we work with actually is moving them towards more customer specific pricing because the customer wants to be able to have a frictionless buying experience. In order to do that, I probably, in many cases, I have to have a price set up, a price established that I know I'm going to get.

Because if I don't get that price, maybe I'm kicking out an exception process, maybe that gets in the way of my order flow. And so that very often can mean that you're spending more time setting up new [00:17:00] pricing and establishing those price points. And then of course, then you have the corresponding maintenance that we talked about before, because that percentage of business that moves on customer specific agreements continues to increase.

Barrett Thompson: And with this Quick Start and the platform on which it sits, what I hear you saying is I can take those customer specific prices, push those all the way through to the eCommerce system, and let the customer go ahead and complete their transaction right there. They don't have to call for price or do any of that nonsense.

Pete Eppele: That's correct. When you think about this, the platform in totality, this agreement management Quick Start that we talk about, gives you that capability to set up those prices and then those prices can be through the Real-Time Pricing Engine be delivered through any channel that you'd have in the business.

Barrett Thompson: That's huge. I can confirm that as we've heard quite a few people say that their customer specific prices today are locked. Let's say in the ERP, and they can't get at them. They can't modify them, nor can they serve them up to other consumption points that they would like to have through their various channels.

So I think that's a big breakthrough. Pete, [00:18:00] how would it be to be business tangibly benefit from this approach?

Pete Eppele: Yeah, I think the first and most obvious benefit is an increase in profitability. Ultimately by less leakage, within agreements, better decisions, especially when you write new business. Getting a price right as you're writing new business is so critically important because it can be a challenge to try to move price through the relationship or through lifetime of that agreement.

That's an absolute huge one. I think consistency and fairness. I mean, we've had people make jokes to us that we're a three bid business. Like if you call three of our sales reps, you'll get three different prices for a product. And so the idea of being able to deliver price more consistently by having guidance that's preset and integrated and built into your decision making.

Your price set up tool can be another benefit, and then just speed and responsiveness where you're able to more quickly get back to a customer with pricing is so, so critically important, especially now.

Barrett Thompson: Who do you believe would be a good [00:19:00] candidate for the agreement management solution?

Pete Eppele: I think that as you look at your business, if you have a significant amount of revenue that's on agreements now, I would say that you're a good candidate.

And what does significant amount mean? Certainly 50% would be in that range. Higher for sure would be the case. That's definitely a critical piece. The other thing too, is just how when you look at. The capabilities that you have right now. I think also think about how easy is it for me to understand what agreements I have in place and be able to change them and update them as I see volatility or changes in my environment.

And if that's a challenge, I think a good idea to consider a system and more digitized and structured system for capturing that price information so that you have the ability to get your arms around it.

Barrett Thompson: Do you have any parting thoughts or advice for our audience today, Pete?

Pete Eppele: What I would say just sort of in closing is I think that we're all pretty well convinced that the hard trends that we see out in the world are that we're going to be continuing [00:20:00] to look, provide a more frictionless commercial experience for our customers, and pricing really lives at the heart of that. So the ability to have the tools and the capabilities that you need in place to be able to execute good commerce in a more frictionless way is really key. And we, as we've mentioned here on the podcast today, where we've settled for Excel and email and maybe swivel chairs to be the way that we go about this. There are alternatives and those alternatives can be up and running quickly, and I would definitely encourage people to look at opportunities and options to get started and then obviously you can evolve there, but you can very quickly start to see some significant benefit now based on solutions like this agreement management Quick Starts that's able to get up and running in four weeks.

Barrett Thompson: Pete, I agree with your perspective there and I thinking making wise choices at this juncture for many B2B companies is going to determine who are the leaders and who are the laggards in their industries over the next one or two years. Pete, I want to thank you again for taking time to have this [00:21:00] conversation with us today and for sharing this real paradigm shift that is the Quick Start for agreement management.

Pete Eppele: Absolutely Barrett. Appreciate the opportunity.

Barrett Thompson: I want to thank each of our podcast listeners for being with us today. Also, please be sure to check out the links in the show notes for more information on the Quick Start for agreement management, we have resources for you there that you'll want to take and share with others.

Also, stay tuned for further learning opportunities. We're committed to your success at Zilliant, and if you need any assistance, please reach out to us. Would you do me a favor and rate and review the show today in your podcast application as it helps us to continue to put out great free content? Until next time, have a great day.

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