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Making Your Pricing Strategy Profitable Across Your Organization 

Mike Slavin< Mike Slavin November 1, 2023

Most of the economic challenges of the last few years have been resolved in Q3 2023, but many are still impacting the pricing strategies and tactics businesses use to maximize revenue and profits. In this article, Mike Slavin, Business Consultant at Vendavo, shares steps pricing professionals can take to stay afloat in today’s choppy economic seas. 

Does anyone remember 2019? Real GDP grew at a rate of 2.3%. The Dow Jones Industrial Average returned over 23% for the year. Business was booming and pricing professionals were able to flex their pricing power muscles as they helped boost their businesses’ revenue and margins. 

Then, early 2020 came along and the party ended. As the global economy came close to shutting down, everyone was forced to deal with shortages. Many pricing professionals found themselves in the hot seat: With shortages and lengthening (or unknown) lead times, what were the best pricing tactics to use? 

The unprecedented chaos may be a fading memory, but we’re still dealing with plenty of uncertainty in 2023. The impact of inflation and the tactics the Fed has been using to deal with it have been disruptive to say the least. Global supply chain shortages, production disruptions, and changes in consumers’ and customers’ buying trends have impacted almost all sectors of the economy.  

Then there’s the 10,000-pound gorilla question that is still far from resolved: Are we going to have a recession? 

One of the biggest challenges businesses have – and continue – to face during these uncertain times is understanding the detailed causes of period-over-period changes in revenue and margin.  

  • What was the impact of increased costs?   
  • How much of that increase was successfully passed on to end customers? 

As inflation heated up in 2022, just about every business across the board was able to push through price increases with little resistance from customers. In 2023, though, most businesses have found that similar attempts have been very difficult to pull off. New strategies and tactics are needed. 

Pricing Strategies for Uncertain Times 

Pricing strategies are different ways of pricing products or services based on several potential benefits. Many traditional ways of pricing, such as value-based and cost-plus, are very well-known and have been around for decades. But these aren’t the only ways to price products.  

As uncertain times continue, many businesses are trying dynamic pricing, an approach to setting the price of a product or service that is highly flexible. Here are a few things to know:  

  • The goal of a dynamic pricing strategy is to enable a business to quickly adjust prices on the fly in response to market demands.  
  • If you’re using Excel to manage prices and/or it takes you more than a month to implement a major price change, this could be a difficult strategy to roll out.   
  • One of the keys to successfully rolling out a dynamic pricing strategy is to have an agile and configurable price setting and management system.  
  • This configurable system lets pricing professionals apply business logic to the pricing process. 

Let’s take a look at a successful dynamic pricing implementation and the positive impact it has had on business.  

A Vendavo Customer Success Story 

Global industrial manufacturer Xylem is one of the world’s leading water technology companies. Their journey to pricing excellence with Vendavo started more than 15 years ago.  One of their initial challenges was to come up with a better approach to pricing for their thousands of spare parts. The plan was to evolve from a cost-based pricing strategy to more of a value- and/or market-driven approach, while dealing with internal-seller skepticism about “system prices” that caused an unacceptable number of requests for special pricing. 

After implementing Vendavo’s Pricepoint price management solution, Xylem was able to streamline their price maintenance and revision process. The agile, flexible solution has enabled them to:  

  • Quickly react to today’s rapidly changing market conditions  
  • Adjust to ongoing uncertainty  
  • Maintain margins  
  • Improve price change realization 

As their journey to pricing excellence continued, they recently engaged Vendavo’s Value Acceleration team of experienced pricing consultants to implement additional solutions. The plan is to take pricing to the next level by implementing an attribute-based approach for their configured products (and hundreds of thousands of configured product combinations). 

Read the full Case Study

Key Insights and Tips for Dynamic Pricing Strategies 

We haven’t heard much from the economists who, only a year ago, predicted doom, gloom, and a worldwide recession, but even the most optimistic of experts would agree that our current period of uncertainty will be around for a while.  

So, which steps can pricing professionals take to stay afloat in the choppy economic seas? Here are some key insights and tips: 

  • The need for agile price management and price setting tools has never been greater.  
  • Pricing professionals need to have a solution that uses a business-rules based approach to quickly react to changing market conditions.  
  • That solution needs to be managed by businesspeople with clicks, not code.   
  • A solution like Vendavo Pricepoint price management will be key. 

Inflationary pressures and supply chain constraints continue to feed the fires of uncertainty. Customers who accepted the across-the-board price increases of late 2021 and 2022 have been pushing back in 2023 and will continue to do so in 2024. Strategic, targeted price increases are going to continue to be the only viable option, and pricing professionals are going to need to have a solution that uses a business-rules based approach. 

Where will prices go over the next 12 months? Recession or no recession? Will inflation cool or continue to be a problem? What should pricing professionals do?    

The most important thing is to be prepared to act. As we’ve all learned, there will always be another something unanticipated that will come up, something that may require you to make a quick course correction in pricing policy, strategy and/or tactics. Agility will continue to be a key to economic survival.  

Will your current price management systems be able to support the next wild economic roller coaster ride?    

You don’t need to tackle your dynamic pricing strategy or pricing software concerns alone. Reach out to a Vendavo expert to discuss our solutions and get answers to your questions.