Is it Time for Pricing Reform?

How does a business know that it is a candidate for price optimization to improve business performance? Here are some guidelines to get you started


Easing Pricing Reform Into the Company

In most cases, it is not recommended to take a big bang approach since the short-term risks are too high and the time to results is too long to encourage and embolden buyers to embark on such a project.

Gathered from years of pricing projects, one best practice is the importance of maintaining focus and progressing through well-staged and bounded steps (whether it be the most typical of starting with determining what is really the problem via a combination of analytics and diagnostics, or starting by attacking a specific issue such as price management or giving the deal desk all the information they need in one place and in an easily-accessible format). It is not necessary to boil the ocean and try to re-engineer every aspect of the pricing process at once. Greater success occurs by executing a focused and rapid assessment, identifying the low-hanging fruit and starting with that. This approach allows companies to quickly see results and build momentum for pricing initiatives across the organization.

The best starting point for each company will be determined by a unique combination of their most pressing requirements and current capabilities. The next step in succession will be determined again by these factors, in combination with leveraging the new data and capabilities acquired in the first step.

As noted earlier, in many cases pricing analytics is the most logical starting point for companies seeking pricing reform. Many companies do not even have a clear picture of where their biggest pricing problems are, or a way to measure the ultimate financial impact on their business. In this case, analytics provides them greater understanding of their own pricing behavior in a well-bounded project, and then delivers insight that they can leverage going forward. In addition, customers should start with and begin to use the data they already have, as that information can rapidly gain value as more data is collected and good data is sorted from bad.

Some companies, however, choose to start with analytics. In some cases, significant pricing expertise already exists within the company, and the best starting point is in bringing their existing expertise into action with a project based on price setting or execution. In other cases, companies know that their existing pricing guidelines are not being followed, so they look to improve their execution infrastructure before moving on to using more sophisticated pricing methods.

The Pricing Optimization Process

To drive successful pricing initiatives, companies need to pick their best starting point (as noted above), and then build a sequential plan to address all of their pricing issues. An effective approach for companies today combines software, services, and technical and process expertise into cohesive steps designed to accelerate results and minimize risk. By leveraging complete, encapsulated solutions that include software, services and expertise to solve common pricing challenges, companies can swiftly break down price analysis, optimization or execution projects into discrete and quickly deployable steps — demystifying the entire pricing process and transforming pricing from an art into a science.

Companies should consider the following characteristics when evaluating pricing solutions that fit their pricing reform goals:

  • The solution reflects the project structure that many companies have eventually arrived at after much discussion and analysis, basically designed so the company can learn from others' experiences so as not to repeat their mistakes

  • The solution provides a common framework for determining a company's specific and most immediate needs

  • The solution starts where existing data and systems investments can best be leveraged, and where the organization is most aligned to change

  • The solution focuses change on one part of the organization at a time to minimize rollout complexity
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