Vendavo Glossary

Artificial intelligence seeks to copy the skills and abilities of a human mind, using computers. 

In its simplest form, bundle pricing is the act of putting a number of products together to create a bundle of items, then selling that bundle at a price that’s lower than the cost of purchasing the items individually. We see bundle pricing being used to sell anything and everything, from grocery store meal deals to Adobe’s Creative Cloud.

The use of sales channels continues to grow, and that makes it important to learn the ins and outs of the channel management process. In this article, Robert Irwin, Senior Vice President of Business Consulting at Vendavo, explores what channel management is, and explains the type of channels, strategies, and use cases that are needed to make the channel management process as effective as possible.

Channel pricing is the utilization of your various routes to market, or channels, in pricing decisions.It’s been stated that the golden rule of channel pricing is that it’s not enough to merely base pricing decisions on the market. In other words, internal costs and competitive factors must also be considered.

Commercial excellence is the set of business processes that reside between your back-office ERP system and your front-office CRM. It requires the articulation of what should occur between engaging with the market to make your offer all the way through reaching a commercial agreement with a prospect, partner, or of course, a current customer, and optimizing that process for efficiency, accuracy, and profitability.

Commercial transformation is the business process of making fundamental organizational changes to marketing, sales, and pricing capabilities to provide actionable strategy and focus that drives revenues, increases margin, and grows your business. 

Cost based pricing can be defined as the practice of determining prices based entirely on the cost of the goods and services being sold, rather than any other influential factors. 

Customer profitability analysis is a method widely used by companies hoping to gain a better understanding of how much revenue each customer, or group of customers, generates.  It enables a business to understand the true value of its customers, through careful evaluation of their profitability. 

Deal management is the process of defining specific deal parameters and using them to negotiate and secure deals. By practicing effective deal management, businesses can ensure their sales teams are taking a wide range of important factors into account when working on deals, so that beneficial deals are secured quickly and efficiently. 

Through historical trends and business guidance you can assign the right price for your products, segments, and deals at the right time. Sales reps can review and use the target, stretch, and floor recommendations. 

The ability to use historical sales data, Artificial Intelligence (AI) / Machine Learning (ML), and business expertise to produce the most effective pricing based on segmentation and discounts to enable sales teams with improved prices and negotiations. 

Dynamic pricing means that the price of a product will change according to changes in market demand and other criteria. Calculating the optimal price can be complex, but software is available that can take into account numerous factors and make the calculation seamless. Prices can also be updated automatically, even second by second, to help companies keep up with changes in market conditions as they happen.

Learn what defines dynamic pricing optimization, a concept that combines the two distinct principles of dynamic pricing and pricing optimization.

The term ERP refers to enterprise resource planning. This is a process widely used by companies in a number of different industries, to manage and integrate different parts of the business. 

ERP stands for ​​enterprise resource planning. When we talk about ERP, we’re referring to ERP systems designed to handle a number of different business processes. 

Guided selling gives buyers a helping hand as they navigate the buying process. It provides all the information and advice buyers need to help them make the right decision. It gives buyers the confidence to commit to purchases they might otherwise have been hesitant about. It’s usually part of a broader strategy, aiming to provide vital information to accelerate sales and facilitate better-informed decisions. 

Margin leakage is a decline in the profit margin occurring as a result of various factors particularly related to offering different types of incentives and promotions. These leaks can be detrimental to the company’s revenue, significantly minimizing pocket price, and thereby profits, which makes eliminating them a top priority for all businesses.

Margin management measures and increases a customer’s expansion over time. All the processes and tools that come under the umbrella term should be aimed towards long-term, sustainable profit growth. Doing this well is not only a matter of capitalizing across market conditions, but it also relies on a willingness to reframe internal conversations to be around margins as opposed to only revenue or volumes.

Market pricing is a strategy used to set prices according to current prices in the market for the same or similar products or services.

Penetration pricing is a marketing strategy whereby an organization sets a low price for its product or service to rapidly gain a significant market share. Paul Sansom, Business Consultant at Vendavo, explains how to make your penetration pricing strategy as efficient as possible. 

Predictive sales analytics uses algorithms, patterns in historical data, and machine learning to anticipate future outcomes as they relate to sales. Heavily reliant on data sets, its power ultimately derives from the accuracy, depth, and breadth of the data it is fed – and this is why it is becoming a key player in the increasingly data-led field of B2B sales.

This analytical software is often used to help companies gain a more thorough understanding of how profitability differs for a range of different pricing options and how far pricing optimization could improve the potential profitability of products and services.

Pricing efficiency is the assumption that a price is reflective of everyone in the market being in possession of all available information. It is also using smart process decisions to minimize the inefficiencies that are cutting into profits.

Pricing margin – or profit margin – is the difference between the cost of an item and the price at which it is sold. The aim, therefore, of most businesses is to make as much margin as possible while ensuring prices stay competitive. 

Product configuration is the process of offering options to customize a product or service to meet specific customer needs. This glossary entry from Paul Sansom, Business Consultant at Vendavo, will help you understand the basics and how to make your product configuration strategy as impactful as possible.

Before digging deeper into optimizing profits, let’s define profit optimization. It is the process of strategically and systematically increasing a company’s profitability by identifying opportunities, implementing effective strategies, and adhering to best practices.

The definition of revenue optimization can be simplified into achieving two key objectives: sell more and sell more profitably.

Sales enablement is a strategy aimed at improving the productivity of a sales team, and therefore boosting profitability for a company.

Sales optimization is a set of initiatives or actions taken to improve the sales process.

Value-based pricing is a type of pricing strategy, just like cost-plus pricing, competitor-based pricing or demand-based pricing.

Volume discounting is a pricing method that essentially rewards customers if they purchase more of a product or service, essentially incentivizing a higher purchase volume.