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Digital Pricing Transformation: Driving Better Margins In B2B

Vendavo< Vendavo November 11, 2021

B2B pricing excellence is an ongoing process built on a strong foundation of accuracy, agility and data – and digital pricing transformation is slowly becoming the driving force behind it all. 

Companies choose to launch pricing transformation initiatives for a simple reason; to create sustainable margin growth, and fast. As Vendavo’s Alex Hoff observed, omnichannel selling in B2B is the “new normal” that’s escalated how important it is for pricing teams to consistently put the right prices in front of buyers, no matter where or when they’re engaging the seller.

Newer technology is making the process more manageable and efficient, and consequently much more attractive to price leaders. By facilitating end-to-end optimizations, CPQ software and AI-powered pricing solutions are giving adopters the edge over competitors.

However, technology on its own is not always the all-in-one remedy many businesses hope it to be. When a company places an overemphasis on tools, this leads to a lack of understanding of their own unique process needs. The result is a mismatched relationship between the technology on offer and the processes in place, inevitably leading to a failed attempt at pricing transformation. 

It doesn’t have to be this way. Digital pricing transformation can demonstrably create significant margin improvements, it just requires a more holistic approach. 

The Challenges of Pricing Transformation Led By Pricing Technology

When tech-driven pricing transformation falls short, it’s often due to a misalliance between the new technology and the processes and people already in place. Real, lasting improvements should be planned thoroughly and championed from within. Common pitfalls include:

  • Tech Overreliance – Placing too much emphasis on new pricing tools and features without evaluating the needs of the business or considering existing processes that need to be modernized.
  • Tech Aversion – A reluctance to invest in tools and training leading to a plethora of inaccuracies and inefficiencies within manual pricing processes and also an inability to meet demands in the fast-moving B2B market space. 
  • No Planning – A patchwork approach to pricing transformation that involves fitting together new products with legacy solutions, resulting in a system that is unwieldy and unscalable.

Updating and Aligning Pricing Systems 

The first part of a successful pricing transformation is designing and building the right pricing processes for the company. This comes down to assessing current systems and understanding exactly what is needed to make this happen. Some systems may require more changes than others. Due to the interlinked nature of the pricing journey, it may even be necessary to change the pricing process at every stage.

Another factor to bear in mind is the increasing variety of channels available and adopting a more dynamic approach to account for this, as well as accommodating other pricing variations that exist within the business. How achievable this is with minimal system changes? That depends on how mature the systems in question are. Assessing the pricing systems and tools currently in place is thus crucial.

Best practice for this exercise involves comparing the features and capabilities of existing systems against industry standards. A more sophisticated level of pricing tech will naturally result in an easier transition. The opposite is true for older solutions. Once these potential gaps have been identified, the second part is understanding which technology will help achieve your optimal future state. 

Leveraging Pricing Technology For Good

The most effective use of technology in pricing transformation is when it is fully integrated into working processes and used by teams who are willing to embrace the possibilities on offer. The right technology will, of course, vary from business to business depending on the pricing strategy in place. 

Pricing transformation doesn’t always require a huge investment in technology either. When a business already has a fairly sophisticated set of pricing technology in place, leveraging these to facilitate changes shouldn’t cause a lot of friction. 

However, bigger changes will require bigger investments. Being able to use tools to enable impactful price transformations relies on the successful deployment of new systems – and the push needs to come from the top. 

Digital pricing transformation relies on people. Unfortunately, it’s also an area known to slip under leadership’s radar. Pricing is a multi-faceted area that can’t be resolved and managed through one solution or outsourced to a third party. But it’s also not an area of major investment that demands a lot of leadership attention. Managing pricing changes is consequently overlooked. 

Leaders should lean on and invest in their teams on the ground who will ultimately be responsible for delivering on pricing changes. It’s crucial that teams know how to adapt to the incoming reconfigurations. The last thing a company needs is pricing teams working overtime to implement system changes and strategy updates that result in little to no gains – and all because they were unprepared.

Creating Sustainable Improvements

McKinsey states that digital price transformations have the potential to stimulate continuous margin growth of between two and seven percentage points. The benefits of these transformations are apparent but rely on strong leadership from key decision-makers and the roll-out of pricing processes and technology that always support business aims. 

Having tools and processes that complement an organization’s future goals is a vital piece of the puzzle. Completing the picture, however, requires flexibility and agility to meet constantly changing needs. 

Initial deployment is one thing, ensuring ongoing growth and improvements is another. Price transformation is not a one-time initiative. It’s an ever-evolving process that requires continuous evaluation of business requirements. Companies who are aware of how pricing technology is impacting performance, and are ready to adjust wherever and whenever necessary, stand to benefit much more in the long term.  

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