Strategic pricing is at the foundation of the new basics of pricing – proactively developing a structure (such as a price segmentation and defined pricing rules) where the best possible outcome of margin and revenue – as defined by the company’s business objectives – occurs as a natural result of the structure.
According to Gartner, a successful pricing project can increase margins by 50 basis points or more and increase revenue by 2 to 4 percent. Pricing solutions can provide the foundation for successful pricing projects and help companies to optimize pricing through price revisions and product lifecycles.
Many companies have relied on spreadsheets for spare parts pricing. However, with growing data volumes and analytic sophistication, companies still relying on spreadsheets are missing out on revenue.
Spreadsheets cannot scale to the size needed for Big Data analysis. And, although spreadsheets are highly flexible when creating user-specific models, flexibility comes at a cost in the form of poor performance.
Ninety percent of the world’s data has been created in the last two years, according to Aureus Analytics. With forecasts predicting that the world’s data volume will grow by 50 times by 2020, Excel (and other spreadsheets) will have difficulty keeping pace.
Spreadsheets require frequent recalculation of incoming data and extensive manual effort just to update and export data for price revision and day-to-day pricing of new items. In addition, approval workflows are difficult to manage in spreadsheets. Pricing solutions interact with the user to support the daily business tasks with notifications and support approval workflows. The automation of price distribution improves productivity.
Spreadsheets lack data integration, requiring an inordinate amount of time just to consolidate data, and there is no assurance that two different people are looking at the same data. Further compounding this, spreadsheets do not have the functionality to enforce governance of the approval process. Spreadsheets are also highly sensitive for introducing formula errors.
Centralized data is critical for process efficiency, especially in larger organizations. Pricing solutions enable simultaneous work by users and maintain datasets needed to set correct prices and store and enable auditing of the pricing history. This centralization, along with governance, enables analysts to employ sophisticated pricing methodology that drives revenue and profit.
The depth of analysis and availability to produce charts is limited when using spreadsheets. Pricing solutions are designed to work with a series of advanced methods, including value- and market-based pricing, and can perform analysis, execution and evaluation. In addition, pricing solutions allow pricing-specific product segmentation to support differentiated pricing rules. These optimized pricing tools ultimately result in strategies to grow market share and increase profit.
Finally, cloud-based price management solutions offer the flexibility and scalability to attain insights from pricing data. In addition, since many companies do not have advanced Excel experts, cloud pricing analytics solutions are preferred by CIOs.
Want to learn more? Contact Us to discuss how to optimize your pricing processes and increase profitability.