New White Paper: Questions to Ask Before Implementing Pricing Software

As touched on briefly in a previous blog post, Next Level Pricing's most recent white paper focuses on several key questions organizations should ask before implementing pricing software. In addition to helping an organization understand if software is appropriate for them, the white paper helps organizations decide which kind(s) of software are appropriate for them, and which vendors are the best solution provider to meet their needs. The white paper is currently pending possible publication in an industry newsletter, but anyone interested in an advanced copy can e-mail us anytime.

Three Questions to Ask Yourself Before Buying a Multi-Million Dollar Software License

To be perfectly clear, we're not anti-pricing software. We believe pricing software can be immensely valuable and have a tremendous ROI when implemented correctly in the right situations. Many factors will determine if pricing software is appropriate for your needs, but three basic questions should be answered up front to determine if software is a complete non-starter.

How stable are my ERP systems?
Since pricing software generally either receives data from or directly interfaces with your existing ERP systems it's best to review your future plans for existing ERP systems before making plans for software add-ons. If you're planning on moving from JDE to SAP or vice versa two years from now it probably does not make sense to invest time and money on a software implementation that may be turned off and have to be rebuilt or reconfigured just a few months or a year later.

How good is my transactional data?
Even great software can't cure all of your data problems. If business users do not trust the current COGS, freight, or pricing data in your systems today, they aren't going to trust it in the pricing software either. Automating analyses with bad data is a road to nowhere benefits-wise. It's best to first develop data users trust before building a sophisticated tool. If you are unable to get your data under control and users constantly require manual adjustments to data, pricing software is generally not the answer to your problems.

Who are my targeted users for the software?
Different software modules are built with different user groups in mind. Analytics software can be used by anyone from sales to finance to marketing, while many executional modules are based around account managers entering deals into the system for pricing approvals. Many companies do not want their account managers spending time on their computers, they want them spending every possible second with clients. If you don't want account managers using software an execution module probably is not not a good idea for you.

These three are just a few of the questions companies need to answer before making a pricing software decision. For help with any additional questions you have feel free to contact us anytime.

Pricing in the News: The $1.6 Million Mistake

6pm.com, sister site of popular online shoe retailer Zappos, had some trouble with their pricing software that led them to mistakenly cap most product prices at $49.95 for a period of six hours. Honorably choosing to respect all completed deals, Zappos took a $1.6 million dollar hit that could have easily been prevented with easier to use pricing software.

Tony Hsieh (CEO, Zappos.com, Inc.):
We have a pricing engine that runs and sets prices according to the rules it is given by business owners. Unfortunately, the way to input new rules into the current version of our pricing engine requires near-programmer skills to manipulate, and a few symbols were missed in the coding of a new rule, which resulted in items that were sold exclusively on 6pm.com to have a maximum price of $49.95. (Items that are sold on both 6pm.com and Zappos.com were not affected.)

We already had planned on improving our internal pricing engine so that it will have a much easier-to-use interface for our business owners. We are also planning on adding additional checks and balances to hopefully prevent this type of thing from happening again.

For more information direct from the Zappos blog: 6pm.com Pricing Mistake

For more information on which pricing software is right for you, feel free to contact us anyitme.

Pricing Software: An Introduction

When an organization is ready to make an investment in pricing technology, there are a host of software vendors in the marketplace offering a variety of solutions. Most vendors offer 3-4 software packages that perform related pricing functions and integrate with both other pricing packages as well as an organization’s existing ERP system. Pricing software packages normally break down into four main categories.

Pricing analytics software is designed to increase your visibility into price and margin data through the use of scorecards, dashboards, and common pricing analyses like waterfall charts, scatter charts, etc. The software generally allows customers to design and save custom reports as well – a great way for companies to institutionalize the analysis frameworks that best help them identify opportunities for margin improvement.

Pricing execution software helps companies accelerate and automate their pricing approval workflow. Many execution programs will begin by “scoring” a potential deal based on pricing, volume, and cost estimates, and then allows companies to route pricing approvals based on deal parameters. (i.e. Companies can configure the software to allow small, high-margin deals to be approved automatically while low negative margin deals can require various approval levels based on size.) In addition to getting customer quotes together more quickly, the software can also provide an audit trail for Sarbanes Oxley requirements – an added bonus for companies who need to fulfill that requirement as well.

Pricing administration software aims to take some of the headaches out of price management. In addition to improving invoice accuracy, many packages in this area allow users to easily perform mass price updates – something many existing ERP systems do not allow. For large companies with hundreds of thousands of pricing records processing price increases more efficiently not only reduces personnel costs, but also allows you to start capturing higher prices faster. Since these activities are highly related to pricing execution work, some vendors lump administration and execution functions together in a single software package.

Pricing optimization software is designed to help companies maximize their profit potentials by identifying optimal prices for certain customer segments in their portfolio. As these modules use patented or proprietary algorithms to identify these segments, optimization software varies between vendors more than the previous three packages.

Companies can decide which package or combinations of packages are right for their needs as well as their budgets. For more information on the importance of selecting the right software vendor please contact us anytime.