The previous note, The Case for Price Management, dealt with explaining the inadequacy of glorified price and discount list capabilities coming from traditional enterprise resource planning (ERP) and accounting back-office systems.
Given the prospective upsurge of pricing solutions demand, and the fact that an increased focus on change management often leads to better results, many professional services firms have begun to focus on price management. For example, Deloitte Consulting, anticipating a pertinent need, relatively recently launched the Pricing Center of Excellence, which is based on several years of experience delivering price and profit management projects. To that end, the practice has developed a detailed price management implementation methodology; created tools to streamline implementations; and included many vertical industry teams from across the company (from such sectors as the automotive, retail/consumer products, financial services, process manufacturing, and high-tech/electronics industries).
Depending on the pricing problem the company is trying to solve, there might be different pricing processes and software categories, such as:
* price execution
* price enforcement
* price visibility
* price optimization
* pricing management
For example, according to AMR Research, the price execution category is designed to control (or altogether curb) maverick selling practices, and to obtain insight and feedback from the field. This is the process used to capture pricing, most often in tables and spreadsheets, and then distribute that information as predetermined pricing to salespeople, for deal structuring support. In other words, price execution is the process through which prices are delivered and communicated to salespeople and buyers, whereas price enforcement involves the adequacy of the processes and tools (such as workflow management) supporting deal negotiation and contract compliance. Another related term on the execution side is price visibility: once users set a better price and understand how it performs, they want to put this into action and enforce it in the downstream components of the value chain. This execution and enforcement aspect of pricing has been particularly embraced by chemical producers.
Price optimization is the process through which the best prices are determined, based on multiple demand-side variables and market factors. Some of these factors are quantifiable (such as the inventory situation) and some are not (such as competitor moves or seasonality), which makes building pricing models a difficult process. Optimization looks at the profit-critical variables of the business, and advises management on how these variables can be changed to achieve greater total profitability.
In every business, many variables control or impact profitability. Some variables are obvious (such as selling prices), while others are not so obvious (for example, queue time in a production facility). Since these variables are interrelated, the best solution considers the variables within a holistic view of the business, so that over-adjusting some variables does not negatively impact others. As in the aairline industry, the best price solutions monitor the situation in real time, to get the information necessary for making quick decisions. These applications are typically a set of equations and parameters, and are used to decide what is (or is not) an acceptable price, given the customer and the circumstances.
Given the prospective upsurge of pricing solutions demand, and the fact that an increased focus on change management often leads to better results, many professional services firms have begun to focus on price management. For example, Deloitte Consulting, anticipating a pertinent need, relatively recently launched the Pricing Center of Excellence, which is based on several years of experience delivering price and profit management projects. To that end, the practice has developed a detailed price management implementation methodology; created tools to streamline implementations; and included many vertical industry teams from across the company (from such sectors as the automotive, retail/consumer products, financial services, process manufacturing, and high-tech/electronics industries).
Depending on the pricing problem the company is trying to solve, there might be different pricing processes and software categories, such as:
* price execution
* price enforcement
* price visibility
* price optimization
* pricing management
For example, according to AMR Research, the price execution category is designed to control (or altogether curb) maverick selling practices, and to obtain insight and feedback from the field. This is the process used to capture pricing, most often in tables and spreadsheets, and then distribute that information as predetermined pricing to salespeople, for deal structuring support. In other words, price execution is the process through which prices are delivered and communicated to salespeople and buyers, whereas price enforcement involves the adequacy of the processes and tools (such as workflow management) supporting deal negotiation and contract compliance. Another related term on the execution side is price visibility: once users set a better price and understand how it performs, they want to put this into action and enforce it in the downstream components of the value chain. This execution and enforcement aspect of pricing has been particularly embraced by chemical producers.
Price optimization is the process through which the best prices are determined, based on multiple demand-side variables and market factors. Some of these factors are quantifiable (such as the inventory situation) and some are not (such as competitor moves or seasonality), which makes building pricing models a difficult process. Optimization looks at the profit-critical variables of the business, and advises management on how these variables can be changed to achieve greater total profitability.
In every business, many variables control or impact profitability. Some variables are obvious (such as selling prices), while others are not so obvious (for example, queue time in a production facility). Since these variables are interrelated, the best solution considers the variables within a holistic view of the business, so that over-adjusting some variables does not negatively impact others. As in the aairline industry, the best price solutions monitor the situation in real time, to get the information necessary for making quick decisions. These applications are typically a set of equations and parameters, and are used to decide what is (or is not) an acceptable price, given the customer and the circumstances.
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