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At Pricefx, we’ve spent the last decade in the pricing software space and want to answer some of your first questions when it comes to price optimization software, like what it is, how it works, and why we’re convinced that it leaves Excel in the dust when it comes to truly optimizing prices.  

Let’s dive in. 

What is Price Optimization?

Price optimization is about finding the price point that is most likely to help you execute your strategy, this is not just about finding the right price but finding the right price for the right value provided to the right customer in the right market segment.  

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Price optimization is about finding the right price for your offering based on the value it delivers your customers. If you’re not aware where you customer finds value in your offering, then it’s going to be very difficult to optimize that price in a way that maximizes profitability.  

What is Price Optimization Software?

Price optimization software analyzes a wide range of internal and external data to work out where the perceived value of your offering lies and then recommends price points (or ranges) based on your customers’ willingness to pay. 

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So how would we determine price based on willingness to pay using price optimization software? 

Steps to Optimizing Price with Pricing Software

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 1. Define Your Scope

First you need to work out whether you are going to optimize prices for your entire portfolio or just a subset. For all customers or just some customer segments. For all markets or a selected few.  

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It’s important to think about this step with care, again, the purpose is not just to find the price that will drive the most volume out the door, we need to have a strategy alongside a pricing optimization initiative. 

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Even though we talk about “price optimization” the reality is that price is a lever we will be using to achieve the goal of optimizing the real objective, and as mentioned previously, said objective can take many forms, and quite often it can take multiple forms at once.

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While this is a very simple example, it helps to illustrate how price optimization works and that it can take hours out of the pricing process while putting zeros onto the bottom line. 

Is It Possible to Optimize Prices Without Software?

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Yes… and no. 

There are many companies doing their pricing in Excel where they’re able to build very simple optimization or linear programming models that allow them to find a solution to a particular problem. While Excel presents some constraints, it’s not rocket science. So yes, technically you can. But… 

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Luckily, our price optimization solution comes wrapped in an intuitive design with easy-to-customize dashboards. So, you can get up to that new level of pricing sophistication with ease. 

Do You Need Data Scientists to Use Price Optimization Software? 

No. Not at all. Not if you choose pricing software that’s going to guide you through the steps toward pricing excellence.  

What will help you, however, are people comfortable working with data and statistics as they’ll be able to help you get the most out of it. But a good pricing solution’s job is to make its tools accessible for an entry level data enthusiast at least. No PHDs required.

Redefining Price Optimization

By optimizing prices in line with your defined function and scaling them according to the willingness to pay of your customers, you can dramatically boost profitability. 

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Price optimization software puts you on a journey towards pricing excellence, with all pricing data, history, and analytics stored in one place for continuous improvement over time. Not only does it allow you to get a better overview of all your pricing data, but actively guides you towards strong pricing strategies and successful outcomes. 

Who Should NOT Be Considering Price Optimization Software (And Who Should Be)?

At Pricefx, we’ve noticed a rise in organizations wanting to implement price optimization software because it’s something that successful businesses do—they invest in machine learning AI, which somehow makes everything better. 

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Pricing software is a tool that helps walkers to run. And while crawlers are more than welcome at Pricefx, we feel we’d be doing a disservice to our customers in selling them a solution they’re not ready to get the most out of. And because we believe this would be the same with most pricing software on the market, we thought we’d share our thoughts on who should and who should not be considering implementing price optimization software.  

 Who is Price Optimization Software Not Right For?

First, let’s explore some of the “types” of companies we’ve noticed wanting to start with a pricing solution that we don’t think will benefit from it. 

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If your digital maturity is not ready for the upgrade, then you’re pumping bad data in and hoping to get good prices out. You could not only lose money (with the wrong prices presented to the wrong customer groups) but you could also lose your way on your journey toward pricing excellence. 

Who Should Be Implementing Price Optimization Software? 

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Organizations mostly likely to succeed with pricing software will have a genuine interest within leadership on understanding where the potential of price optimization is who then champions the transformation from the top. 

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So, if you’re asking “Do I really understand my data? And the value of my products in the market? Is there a better way to segment my customers? And create differentiation of price across different customer segments? Do I have a clear vision of what I’m trying to achieve?”  

… then you’re ready.  

Price Optimization Software – Ready or Not?

As painful as it is for pricing solution vendors to admit, pricing software is not for everyone.  

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