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The Advantages of Managing Complexity by Investing in Pricing Technology

Stephan Liozu< Stephan Liozu September 30, 2022

Complexity is compounding around us. Key to managing this complexity is by investing in pricing technology. Stephan Liozu, Ph.D. highlights the benefits.

As the world around us becomes more complex, we respond by adding more complexity in our businesses. We create SKUs, launch innovations, penetrate new markets, and design new business models. Internally, we build complexity on top of complexity. Overtime, this is simply not sustainable. Productivity and efficiency starts to suffer as employees spread their bandwidth across more activities and programs.

We rarely take the time to clean up and remove legacy and unwanted complexity. That’s often because it’s not an easy thing to do. When everything is important or strategic, how do you decide where you can get leaner?

In the last ten years, we saw a need to reduce manual work and business complexity. We solved those problems with technology solutions and rapid digitization. From pricing analytics, CPQ, to price optimization platforms, the pricing space is being transformed to accelerate business and commercial velocity and manage the complexity created by market disruption and innovation. There are concrete advantages to investing in pricing software to manage complexity.

Manage Millions of Data Points

Of course, you can manage a lot of data in Excel. With the right analyst, you can get a lot accomplished using a less sophisticated tool. I do believe in the concept of bounded rationality. There is only so much the human brain can manage. There is a point after which algorithms and advanced analytics need to take over to accelerate analysis, leverage multi-dimensionality, and avoid manual errors.

Automate the Pricing and Quoting Process

Quoting manually and sending quotes by emails is no longer acceptable. The sales and quoting process must be automated to respond to customers’ increased need for speed. CPQ is the right technology to accelerate the response to customers’ quotes and boost velocity.

Remove Manual Intervention via Process Mapping

A lot of the sales process is still manual. In fact, a 2021 paper published by Harvard Business Review, What’s Your Sales Automation Strategy, reported that only 30% of the sales process uses technology and includes automation. With COVID and the emergence of virtual work environments, it is now nearly impossible to manage manual processes.

Integrate Your Tech Stack to Increase Velocity

A fragmented technology stack combined with manual processes is a deadly combination. APIs and connectors must be used to seamlessly integrate your systems. It is not unusual in large companies to have multiple ERP or CRM systems. Deploying an advanced pricing system on top of this complexity is extremely challenging. It can be done, but complexity in IT must be reduced to achieve business goals.

Provide Sales Teams with One Source of Truth

When you have multiple systems you don’t have a single source of truth. Your sales team needs to be looking at the same data as your finance team, marketing team, and product management teams. When your systems are not connected or integrated, different reports circulate and manual integration must be done by analysts. This is how pricing becomes a black box.

Provide the Right Price at the Right Time for the Right Product

The future is all about micro-segmentation and personalization. This transformation started in B2C with the use of AI in e-commerce platforms. Amazon is a good example of such sophistication with dynamic pricing and a powerful recommendation engine. Industrial distributors must adapt and embrace similar technologies.

IDC reports that businesses around the world are investing more than two trillion dollars per year in digital transformation and IT. This is a massive amount of money being spent on cloud, infrastructure, and software. A small fraction of that spending, around $1 to $1.5 billion per year, is going to pricing software, so it’s clear there is a lot of potential to improve pricing power.

If a business is investing heavily in digital transformation but not prioritizing pricing science and software, they are creating a definite gap in their go-to-market approach. Without the pricing technology to support sales and marketing, you’ll slow down productivity, reduce sales velocity, and frustrate potential customers. It is time to manage increased complexity with the right software stack. Pricing software is just as important as supply chain and engineering software.