Read Time: 5 minutes

Digital Pricing Transformation & the Pursuit of B2B Pricing Excellence

Mitch Lee< Mitch Lee March 9, 2021

McKinsey, in a recent article, reinforces what we’ve been advocating all along: B2B companies can capture vital value by leveraging pricing technology to make digital pricing transformation a profit-producing reality.

Their take on it? That digital pricing transformation is bedrock to the achievement of “pricing excellence in B2B settings,” as they put it:

Our experience shows that such transformations, when done well, can enhance pricing to generate two to seven percentage points of sustained margin improvement with initial benefits in as little as three to six months.

But as they point out, pricing technology is no panacea. Particularly if companies fail to address other key facets of their pricing strategy and processes, and look to shiny new tech as a turnkey solution in and of itself. That sets them up for nearly inevitable failure, not for a successful and sustainable future.

The Pitfalls of Poorly Planned Pricing Transformation?

Why do enterprises find themselves falling short when attempting to implement pricing transformation? Among the key “pitfalls” that McKinsey cites:

  • Companies may be tech-averse and think they can substitute policies and procedures for technology tools. However, this leaves them saddled with the traditional inefficiencies of manually driven processes, which are prone to human error, delays, and lapses in visibility and governance. Moreover, these approaches aren’t agile enough to meet the demands of the current marketplace, where B2B buyers are increasingly expectant of precise and comprehensive quotes delivered ASAP, even in real-time.
  • Others put too much stock in a single technology platform or solution that’s not adequate to the task. Or it’s not suited to their actual business needs. Or, they may adopt a good tool but fail to revamp the processes that must also be modernized or streamlined. As some pundits point out, technology inflates mistakes if it’s paired with bad processes.
  • The last pitfall they call out? The “build-as-you-do” philosophy that can result in companies retaining legacy solutions while patching needs with products on an ad hoc basis, resulting in a commercial tech stack that’s jerry-rigged, relies on the institutional knowledge of a few individuals, and often can’t scale properly or otherwise respond to shifting demands.

Above all, companies need to remember one truism: “It is crucial that companies treat pricing tech as a key enabler—not the agent—of pricing transformation,” McKinsey notes. There are too many moving parts that need to be addressed, starting with processes and people following a unifying pricing strategy that addresses the true needs of the enterprise.

Any End is Only the Beginning

Digital pricing transformation, like commercial excellence, is a journey, not a destination: Any plateaus a company reaches are only steps toward the next level of optimization, growth, and profitability.

The McKinsey authors point out how pricing transformation should be an endlessly iterative process of continuous review and improvement. Companies should put costs, processes, and prospective providers under a very powerful microscope. They also need to develop in-depth project plans, sound out prospective users and stakeholders, conduct rigorous UX testing of front- and back-office solutions, and have systematized metrics and KPIs in place.

Pricing technology is only one component of pricing transformation, but in this day and ago, it’s a must-have component. It’s why a business must not only evaluable the widgetry, but the provider behind it, and the level of flexibility, scalability, customization, and collaborative support that underpin a product. Those, in the long run, are more important to success than even the most dazzling feature set.