March 30, 2016
Do you find it challenging to align your internal team on a pricing strategy? You are not alone. Pricing is challenging, messy, and time-consuming. Maximizing revenue can get lost in the shuffle as you strive to meet tight deadlines and individual stakeholder’s goals and constraints.
Spreadsheet analysis is often the foundation of these internal discussions. Pivot tables can summarize your results. Graphical displays can help your team visualize the proposals, and sharepoint sites can enable multiple people to edit. However, spreadsheet processes are time-consuming and risky. Believe me, we know first-hand the strengths and weaknesses of Excel and e-mail processes—we used them for years.
Consider building an internal pre-negotiation process. Our process is built on three main tenants.
- We get a range of prices approved using a defined workflow process.
- We utilize an in-process status to enable the team to do multiple iterations of pricing.
- We ensure that the negotiation team has overall profit and revenue goals that are captured and measured.
So how does it work?
We configured our Vendavo system to include a first bid (or starting) price and a walkaway price (best and final). We create and submit a deal and get these prices approved using workflow that routes to multiple approvers.
The various approvers evaluate and authorize the individual proposed prices, but the deal stays in an “in process” status and is not finalized until after the customer negotiation. Once an agreement is reached, a quick action at the header makes the whole thing final and available for publication and customer orders.
We also built tools within our Vendavo system to do the heavy lifting of data analysis. The system displays the previous price, previous quantities, and other relevant reference prices. This ensures that everyone sees accurate analytics. We are experiencing average turn-around time of 24 hours for pre-approval. When we did this in Excel, it often took 4 days for the same approvals.
Along with the individual range of prices, the negotiation team must identify a plan for overall profit and revenue. This information is captured in the deal and the negotiation team is held accountable for meeting the goals. Once the prices are final, it is very clear if the negotiation was successful because we can measure against the targets.
This process is invaluable in our business where most customer price agreements include hundreds of unique part numbers, crossing several product groups.
With a defined workflow and automatic, instantaneous data analytics, we enable several people to speak to the pricing recommendations quickly. By capturing target goals and systematically measuring the final numbers against the targets, we build in accountability for the profit and revenue of the deal.
While we can’t remove the messiness of pricing, we have found a process that is more timely and effective and we are getting great results.
Join Linda as she shares some best practices deployed at Analog Devices to equip sales for negotiations in her session at Profit Summit 2016 in San Francisco from April 18-20. Click here for more information on how to register.