Article written by Quantiz’s founding partner – Frederico Zornig
In a survey I conducted with my contacts on LinkedIn, I received over 200 interactions and votes responding to which of the options below would be a priority in organizations.
The list was quite comprehensive, as we see Pricing/Revenue Management as a strategic area that encompasses a series of activities that can boost the results of any organization.
Although the results do not have scientific value or statistical significance (because a survey like this lacks some typical precautions of what would be a quantitative research), we can draw some qualitative conclusions about current business pain points.
Below is the list of options offered:
1. Commercial Policies/Incentives/Discounts for Customers
2. Trade Fund Management
3. Promotional Campaigns
4. Pricing for New Products
5. Perceived Value/WTP Research
6. Competitor Price Research/Collection
7. Customer Segmentation
8. Channel Positioning
9. Go-to-Market
10. Structured Pricing Management Processes
11. Governance/Compliance
12. Price Communication to Market
13. Contract Management/Price Adjustments
14. Taxes/Tax Engineering
15. Algorithms/Dynamic Pricing
16. Pricing Strategies/Pricing Positioning
17. Analysis/KPIs
18. Automation/Systematization
19. Structuring Pricing Area
20. Change Management/Sales Team Training
The order of the options is not exactly as above, but the list includes practically all the arsenal that a well-structured pricing area could develop for improvements.
Among the twenty options above, the third most voted was Automation and Systematization. It is a clear sign that many companies are already maturing their processes and that at the moment, bringing a pricing management and optimization software would be the most impactful initiative. It is important to emphasize that what may seem like the ideal world, that is, a pricing software automating various activities and processes, ends up being only the facilitator of implementation and not the agent of change.
What this means is that if the other pillars listed above are not well addressed in your company, bringing a pricing software will be of no use. Worse, a relatively expensive investment may remain unused. Therefore, those companies that consider themselves ready, waiting only for the arrival of the miraculous software, may end up being frustrated with the initiative.
Obviously, to ensure a complete implementation and absolute success of a pricing area, the systematization of many activities is fundamental. But the key is to know the right time to make this investment. If you believe that everything starts with the software, you may be making a big mistake. The software complements the process, it does not start with it.
The second most voted option, the runner-up initiative for 200 professionals from various companies, was pricing analysis and KPIs. It is interesting to note that in an era of information, big data, data lakes, and multiple data available in organizations, many of them are looking for a way to extract knowledge from so much information.
Knowing what to analyze, how often, how to turn data into insights and business opportunities dynamically, ends up being a valuable activity for many companies. And more and more, knowledge will be the rule of the game. The more in-depth the analyses, the better the conclusions. To be able to do good analyses, we need to have good questions and good hypotheses.
The fact is that a well-structured pricing area will need to meet this need in companies. Once again, it is not enough to have a software full of ready-made “black boxes”; it will be necessary to go beyond the obvious, consider externalities, unlikely events (like Covid-19) are an example that relying only on historical data may not be enough for decision-making. But certainly, with some intelligence applied to new events, we can quickly conclude what changes we are experiencing and react quickly to new demands.
To conclude, the most voted activity, with a certain advantage over the others, was one that surprised me. The one chosen by most people was Price Strategy! That is, many companies have not yet clearly defined the direction they want to go. Without a clear definition of the Price Strategy, it is difficult to imagine what to do with the other initiatives listed.
A good Pricing and Revenue Management project or the structuring of a pricing area requires a clear vision of where we want to go so that pricing/RM can then become the lever that will direct the company to achieve its objectives and expectations.
Defining your strategic positioning in the market and executing it exemplarily is essential for the company to maximize its results. Every company needs to decide whether it will be more focused on differentiation, services, quality, which obviously leads to the possibility of capturing more value from the market, or whether it will focus on volume, productivity, little differentiation, and lower service levels, thus trying to gain its margin in scale and production volumes.
Among the two strategic options above, there is a universe of possibilities, especially if your company has a large number of products, channels, customer segments, etc. In this scenario, we can evaluate the option of capturing value in each of these combinations, even reaching strategic pricing per customer or still practicing an optimal single price, trying to ensure price equality for your customer regardless of the channel or consumption situation.
The fact is that the discussion of the best strategy is quite complex. Every company should have this clear definition permeating throughout the organization. If a salesperson does not know how to communicate their pricing strategy, their strategy is probably not well defined or at least poorly understood.
In conclusion, Pricing and RM are very important areas for any business. Your company can benefit significantly by evaluating and improving its processes (all listed at the beginning of the article). Additionally, think of Pricing and RM as a journey. There is no silver bullet that works miracles. Initiatives need to be prioritized and gradually worked on so that results begin to appear and, sustainably, new possibilities for improvements are ensured at each step. Changes are never easy, but in this case, when done well, they are always worth it!
