What is the Pricing Journey?
Every company that sells anything has pricing, but it is often poorly executed and has a big room for improvement. Building pricing excellence requires time and resources investments and organizational willingness to embrace change.
The pricing journey is five stages where the role of the pricing manager and organization constantly evolves and changes from one step to another.
Stage 1: Sporadic pricing
The pricing team does not exist, or the manager is a one-person show.
The pricing strategy does not exist structurally.
The pricing is not aligned between different departments.
Data is dispersed, not structured, and poorly analyzed.
30% of companies are at this stage (Source: The Journal of Professional Pricing)
What to do: start to gain control of what is going on in pricing. First, initiate change by introducing processes, tools that support new methods and defining pricing strategy. All that will bring the company to realize the importance of investing in data management and IT infrastructure change.
Stage 2: Managing and enforcing pricing rules
The centralized rules are in place, and the pricing department tries to control the application of the rules.
Data is being structured and transformed for insightful analytics and strategy improvements.
Analytics are used to review and improve pricing rules and guidelines.
Cost-plus pricing or last-year price are the most common methods.
Sales are frustrated with strict rules and less flexibility to sell.
High focus on sales KPIs.
Struggles with change management and new pricing tools adoption.
40% of companies are at this stage.
What to do: while structure helps to have more controlled pricing, to optimize pricing company needs to look more into the product portfolio and customer behavior to understand what delivers real value to customers.
Stage 3: Building Pricing Collaboration
The pricing strategy includes a variety of methods based on better customer understanding.
Marketing, Pricing and Sales are working smoothly together on fully customer-driven pricing.
Change management is not an issue anymore, and cross-functional collaboration is flourishing to generate the best value proposition.
The pricing strategy is defined through vertical collaboration, where pricing managers provide their insights.
20% of the companies are at this stage.
What to do next: While the customer's understanding is deep enough for profitable pricing decisions, there is still limited capacity in predicting customer pricing decisions. That is where a more complex optimization approach would be necessary.
Stage 4: Implementing Pricing Science
Price elasticity and profit optimization are the key areas of focus.
The pricing organization is growing to C-level, expands data science department and experienced pricers.
More efforts are invested in training and onboarding sales and marketing with advanced pricing methods.
<10% companies are on this stage.
What to do next: While it is the highest level of transformation that most companies won't achieve, there is still room for achieving absolute excellence.
Stage 5: Reaching Pricing Mastery
Pricing is a strategic topic for company management.
The company is outperforming its competitors by a solid margin.
The stage 4 pricing changes have been adopted and sustained for more than 18 months.
The pricing borders will become blurry, and the pricing team will solve business challenges.
What to do next: keep it steady and focus on improvements where necessary.
Where are you standing now in your pricing journey?
Check Pricefx Pricing Maturity Map that our Success department actively uses to support our customers in defining where they are currently in their pricing journey.
How do we address pricing journey stages in our tool?
While Excel and in-house solutions may support some of the pricing activities, if you are moving from stage 1 to 2 or latest, there is a definite need for the professional pricing solution when you plan to transition from stage 2 to 3.
With the Plan, Price, and Profit packages, we are offering actionable steps to tackle the challenges of each step in the pricing journey. Some companies may execute them in the order below, and others may not; the result will always be the same: data-driven decision making, transparent view into pricing actions, and increased profitability. It is a fact 100+ successful Pricefx solution implementations confirmed that.
Step 1:
We start looking into the company data and see what is going on in company pricing. Some changes and updates to the data management may be required first. However, all investments into technical infrastructure and tools support your price management improvements by default.
The set of standard Sales Insights and Customer Insights dashboards will provide a quick introduction to current margin leakages, pricing performance, and profitability. If deeper dive is needed, our complete set of Analytics functionality like standard pricing charts, data marts, and roll-ups are ready to use for pricing managers.
Steps 2-4:
Now, as it is clear what is going on in pricing, it is time to define global and regional rules, define clear customer and product segments, understand which data we need to support the price calculations, and set up approval workflows. While setting up price lists calculation logics based on newly defined pricing rules and defining customer/product segmentation in Price Setting, we can gain more insights into optimized targets like gross margin from our Optimization capabilities.
As many companies realize margin leakages often happen because of the sporadic discount structure, Agreements and Promotions functional capabilities will allow them to manage new standard discounts and regional agreements and correctly apply them in the pricing process.
Steps 5-7:
The next challenge can be addressed with clear rules and boundaries in the pricing execution: a flawless selling process. Quotes offer a full range of configure, price, and quote functionality that streamline the negotiation process, simplify decision-making, and provide relevant data to weigh in quote potential. There are no more long internal discussions about price and two days waiting time on the customer side.
Rebates and Channel Management offers various supporting functionality to manage the whole supply chain in an automated and structured way to manage the more sophisticated business processes.
Step 8:
Once the customer has been using Pricefx for some time, and solution adoption goes well, there are always the next steps in achieving pricing excellence through more advanced analytics, advanced pricing methods, optimization, and expanding pricing automation. Then the journey will start again from step 1 and bring further improvements.
We know how important data is for good pricing, so integration topics are at the heart of the Pricefx solution. We have a user interface, PlatformManager, that helps manage and review all integrated data flow, take advantage of different Pricefx integration templates and manage data uploads. IntegrationManager supports backend integration processes with many systems like SAP, Microsoft, Salesforce, other e-commerce platforms, ERPs, and CRM systems.
Pricefx Case Studies
If you want to check our solution in action, check our customers' success stories below.
Printing & Packaging - integrating all systems, streamlining sales quotes, and tracking the deals.
Manufacturing - setting up global pricing strategy, increasing adoption of pricing tool, and enhancing sales negotiations with simulations and automated quotes.
Consumer Electronics - 30 million prices recalculation and distribution, global competition-based pricing strategy, instant prices export.
Chemicals - tracking margin leakages, system integration and streamlining negotiation, automated contract pricing management.
Food & Beverage - managing complex price list creation and approval process, analytical insights with simulation, data changes monitoring.
High-tech - scaling pricing opportunities with a deeper look into company pain points, automated process for dealing with supply chain changes, receiving greater visibility into pricing.
Automotive - sophisticated discounts management.