What is a Pricing Engine
Pricing decisions impact heavily on every part of your business – FACT!
A price engine, also known as a pricing solution, or price management and optimisation software, enables you to implement your pricing decisions automatically, based on pre-defined or learned logic. The result will be higher sales and improved profitability.
Sounds too good to be true? Au contraire. Optimising your prices is one of the most vital factors available to you to drive incremental sales and increase your profits – that's another FACT!
So, what do you do next? Well, if you are intent on maintaining and growing margins, pricing and profitability management needs to be right up there on your "to- do list". It will act as a powerful lever for growth across the whole of your business - just a few points improvement in price realisation, driven by a strategic approach and better execution, can translate into enhanced profitability all round. You could not do better than invest in the benefits of a Pricing Engine.
What are the benefits of a Price Engine?
1. Pricing software enables real time pricing
There will be no need to spend days and weeks on pricing administration. Changes to your benchmark pricing, pricing rules, promotional pricing, customer pricing and exception pricing can be made in minutes with easy to use workflows. A pricing solution saves you time and money.
2. Pricing software allows for better pricing decisions
A price engine makes it easier to anticipate the business impact of pricing changes with a visual financial summary. There will be clear visibility of where you are losing margin because items are priced too low, or where you are losing revenue because items are priced too high.
3. Pricing software allows for price optimisation
The key is to optimise your pricing decisions, and get to a point where you can be sure you are achieving the highest price possible whilst still supporting revenue and profit growth. Because you have your sales history at your fingertips, a pricing solution means you can easily identify the areas of margin leakage. A pricing engine can even flag up and rank the areas of greatest opportunity.
4. Pricing software ensures rule conflicts are handled automatically
If you have previously struggled with ensuring there were no rule conflicts, for example from any promotional activities that were running, a price engine takes away the stress, and automatically identifies conflicts that require resolving.
5. Pricing software allows a full audit history
Spreadsheets provide just a snapshot of what is happening. A price engine logs all the changes behind the scenes, giving you the power to question what has happened previously, and keep a record as to the rationale of individual pricing changes.
6. Pricing software enables a move away from cost-plus pricing
If you’re looking to implemment Price Segmentation then an online price engine is a must. Simply by moving away from a cost-plus approach, you’re already on the journey to value based selling, which statistically is proven to support profitable growth.
7. Pricing software allows focus on key pricing opportunities
A price engine allows you to quickly identify key pricing opportunities and to increase deal sizes by flagging up opportunities for cross-selling, up-selling and bundling, and to determine:
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The right price points to maximize sales and profits
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How often you should price promote and at what depth to achieve your sales and profit targets
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The impact of competitive pricing on your brands and your pricing on competitive brands
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The effect of any price increases/decreases and discounts
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The impact of price promotion on your brand equity
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How you should price against specific consumer segments and create price tiers to optimize sales and share in specific markets
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How to develop strategies that maximize short and long term brand growth objectives
8. A Price Engine Promotes Selling Value
In order to improve analytical capabilities, your price engine develops a “pricing dashboard” to detect margin leakages, respond more quickly to pricing opportunities, and execute your pricing strategy more consistently. This allows you a clear perspective on which products, customers, salespeople or channel partners create the most value and which customers and products erode value – i.e. are losing you money.
The dashboard allows you to determine how value is created and delivered, enabling you to link what you are selling with the benefits that are delivered to your customers - and subsequently set prices to capture a share of that value
Conclusion
A pricing engine allows you to quickly identify key pricing opportunities and to increase deal sizes because of cross-selling, up-selling and bundling opportunities, which leads to healthy increases in sales and margin enhancements.
You should achieve a return on investment within three to six months of purchasing your pricing software merely by identifying and pursuing “low-hanging fruit” - but a price engine is an investment for the long haul too.
This sales engine creates structured, repeated and supported pricing processes for sustained performance. It develops the sales-ready content and selling tools that enable your salesforce to have effective, value-based conversations.
Give yourself a competitive advantage by elevating pricing within your organisation, make margin management a strategic and visible part of your organisation – and invest in a price engine solution. Here's to happy and successful motoring!
Sources
- http://blog.blackcurve.com/8-reasons-why-excel-based-pricing-could-be-hurting-your-business
- http://blog.blackcurve.com/the-benefits-of-price-list-management-software
- http://blog.blackcurve.com/what-can-a-pricing-solution-do-for-your-business
- http://www2.deloitte.com/us/en/pages/strategy/solutions/pricing-and-profitability-management-services.html
- The Strategy and Tactics of Pricing by Tom Nagle and John Hogan, 2016
- Confessions of the Pricing Man: how price affects everything, Hermann Simon, 2015
- Pricing Strategy:tactics and strategies for Pricing with Confidence by Warren D. Hamilton, 2014
- Pricing with Confidence:10 ways to stop leaving money on the table by Reed K. Holden and Mark Burton, 2014
- Pricing for Profit:how to develop a powerful pricing strategy for your business by Peter Hill, 2013
- Harvard Business Review on Pricing, 2008
- The Art of Pricing:how to find the hiddeen profits to grow your business, Rafi Mohammed, 2005