Blog, Pricing

Align Your Pricing Software Capabilities with Your Business Model

By Mitch Lee
September 4, 2019

Price is the top profitability lever any organization can leverage. When aligned with customers’ willingness to pay, price also plays a key role in the delivery of premier customer experiences and inevitable brand loyalty. Further still, custom pricing initiatives go a long way in solidifying customer intimacy strategies.

But just as one-size-fits-all pricing fits no one, pricing software offerings vary in their capabilities too. While all are designed with the goal of supporting price management and optimization, capabilities have contrasting focus just as different industries and business models have unique needs and customer relationships.

What’s Your Go-to-Market Strategy?

Before shopping any software solution, your first and most important step is to clarify your pricing strategy and make sure it supports your business model. Your primary goal will inevitably be margin improvement but given your go-to-market plans, how will your pricing be executed? Is it a simplistic model where your products are sold only through one channel? Or, more likely, does it include direct sales and multiple distributor channels for numerous business units across many different geographies?

As you consider your multitude of go-to-market possibilities available to you now and in the future, the functionalities within your selected pricing software must line up. Below is a list of common options to weigh.

Functionality to Consider

  • Cost plus, competitive pricing or value-based pricing – How will you set price to maximize total profitability? It may be one of these or a combination of all of them, depending upon circumstance. You could have some channels, with some products, in some markets where you have to use cost plus pricing. In other cases, you’re leaving money on the table if you aren’t considering at least competitive pricing or dialing in further with value-based pricing or outcome-based pricing.
  • Use of price ladders – Price ladders will help you with simple, order-based discounts or high-volume buying commitments over time. You can address the cost to serve on orders or the value of volume commitments for the benefit of your production capabilities.
  • Responsiveness to price sensitivity by channel and location – This functionality will help you identify the variations in customer willingness to pay by channel, location and even product / customer combinations. Your customers will be happy and your sales organization will win more deals.
  • Personalization of pricing and offers – Purpose-built solutions that address granularity of your products, customers and their willingness to pay will ensure you have the right price for the right product at the right time.
  • Systems that generate B2B prices for distributors along with all other sales channels – An integrated, enterprise-level pricing solution will help you coordinate your pricing across all channels and lessen the risk of sending contradictory signals.
  • Systems that generate B2B price deal envelopes and approvals – Just like you need coordination across starting prices, this functionality will ensure any insight that is relevant to negotiation is reflected across other channels too, without unintended consequences. You’ll have control over price and the approval process.

For more information on aligning your pricing software capabilities with your go-to-market strategies, check out the new Now Tech: Pricing and Promotion, Q3 2019 report from Forrester. And, if you’re considering a pricing software solution, take a look at our new Buyer’s Kit for Pricing Software. In it, you’ll find sample RFPs, a vendor assessment, tips and tricks along with a business case Powerpoint template.

  • price management software , Price Optimization , pricing software , Willingness to Pay

    Mitch Lee

    Mitch is a Profit Evangelist at Vendavo with 25+ years of experience in the technical, operational, marketing, and commercial arenas of the process industry. Prior to Vendavo, Mitch was with BASF and Orica in product marketing and business management, driving operational optimization, pricing excellence, and margin improvement, as well as personal engagement in high value sales negotiations. Mitch also has deep experience with raw materials supplier portfolio management having negotiated large scale and long-term agreements with global suppliers.