ArticlesThinking of Implementing Pricing Software? Get Your Pricing Strategy Right.

Thinking of Implementing Pricing Software? Get Your Pricing Strategy Right.

Unlocking Value: The Crucial Role of Strategy in Maximizing the Impact of Pricing Software

Back in the 1990s, many companies purchased big, new ERP systems at great expense. The CEOs and boards of these organizations were assured that "yes, it is expensive, but it will pay for itself in just a few years."

Unfortunately, in many cases, the financial benefits didn't materialize as planned. Why? Often, these systems were installed without thinking through the business context and/or the changes required to take advantage of ERP capabilities. Strategies were not thought through. Processes were not changed in advance of implementation. Data architectures were not updated, requiring continued manual intervention. The ERPs were installed, but only after significant patches and customization to make them work. The result? Wasted investments, wasted opportunities.

The same can be said about pricing software. It can absolutely have a material effect on the sales and profitability of the business - but only when combined with a strong pricing strategy.

The benefits of a tight pricing strategy can be significant. Here's what an aftermarket filtration supplier recently achieved, using a value- and market-based pricing strategy:

• 7.9% incremental revenue gain within six months

• 90%+ reduction in manual work during the internal price review process

• Improved competitive positioning

• Alignment of functions across the organization: pricing, sales, product, finance, etc.

However, you cannot achieve results like these without the combination of pricing software and a solid strategy. The combination is important because you will want the software recommendations to reflect both historical data patterns and current strategies, customer insights, competitive moves and market trends. For example, base or list prices could be loaded into software "as-is," which wouldn’t allow you to identify opportunities to selectively raise prices based on the market or competitive positioning. Also, customer segmentation may misalign with your company's strategy and customer behaviors. Implementation can take longer than expected because different functions debate issues that should already have been resolved.

To determine whether your company is ready for pricing software, consider your answers to these questions:

• Do you know the financial value of improving your pricing capabilities?
• Have you performed a deep assessment of your current pricing capabilities? Is your pricing under control?
• Could you easily describe your pricing strategy to someone who doesn't know your business?
• Do you know what customers value most, and how your products/offerings compare against your competitors?
• How aligned is your pricing to how customers perceive the value you bring?
• Do you have a good understanding of the "right" price for different customer segments?
• Will the pricing software integrate with your existing systems and strategies?

If you can answer these questions and have a realistic view of how pricing software will affect your business, then you are ready. If any of the questions are problematic, you will need help to determine the pricing strategy, either in advance or in parallel with the software implementation.

You can achieve solid improvements in performance with pricing software. However, the addition of a strong pricing strategy enhances your ability to gain bigger, results , faster.

Our pricing strategy consultants transform your capabilities to deliver higher margins - sustainably - without harming your brand or market share. We identify and clarify strategies, and develop new processes, tools, and organization to deliver high ROI with immediate results. Learn more here.

About the Author

Jim Armstrong, Managing Director

Jim is a Managing Director at Ducker Carlisle where he is a leader in the global pricing practice, focusing on Industrial and Building Products industries. He brings 25 years of experience in pricing, strategy, and profitable mix, including pricing assessment, customer/ channel pricing, value-based pricing strategies, pricing implementations, and cost-to-serve capabilities. He has served a wide range of clients, including manufacturing, distribution, technology, and business services firms. Jim started his career at PriceWaterhouseCoopers Consulting and has had strategy and pricing leadership positions in both corporate and consulting capacities. Jim holds a B.A. from Princeton University and an M.B.A. from Duke University.