How a High-Tech Manufacturer Improved Gross Margins with AI-powered Pricing
This high-tech company is one of the worlds leading manufacturers and is constantly transforming its own internal processes, including the best way to achieve pricing effectiveness, while providing faster, superior service to customers.
A Problem Too Big for Spreadsheets
The pricing complexities at this manufacturing company are mind-boggling:
- A huge portfolio of over 12 million SKUs
- Selling in 145 countries
- Managing 20 million sales records
Each member of the pricing team was manually reviewing about 100 quotes a day which would require a quick decision to be made, was a manual process, and was taking up large portions of the team’s day. With 25% of the high-tech market share, the stakes are high, and the company could no longer afford to get tied down with a slow, cumbersome pricing process or be so far off on target pricing and discounting that they risk margin decline and revenue leakage.
However, pricing spreadsheets made it impossible to keep up with an ever-changing market. They were facing:
- Error-prone pricing since pricing decisions were based on limited data, rushed analysis, and rules of thumb, which meant they were potentially losing money.
- Long price cycles due to manual intervention slowed quote turnaround and created bottlenecks.
- Lack of insight into overall pricing performance, making it difficult to learn from their data to understand things like shifts in consumer behavior.
To become more strategic in their pricing operations, they needed a technology company with experience to:
- Provide transparency into pricing
- Deliver relevant AI-based pricing recommendations
- Speed up pricing responses to customers
- Improve price realization
“We wanted to use the best technology to evolve our pricing and capture the full value of our products,” says a pricing leader within the organization.
The Solution
The PROS Smart Price Optimization and Management solution feeds into the in-house quoting tool to support the go-to-market strategy for the commercial business unit. Pricing recommendations flow directly into the quoting tool, where sales reps enter quotes and negotiate with large enterprise customers. Since reps are focused on margin-based deals, the pricing recommendations help them negotiate winning deals that are within targeted prices.
This tiered low-touch system streamlines the approval process. The solution feeds into Microsoft Dynamics (CRM) where they can surface price recommendations to customers with speed, accuracy, and transparency. This streamlined process enables the high-tech manufacturer to get quotes out to customers quicker, improve their pricing strategies, and increasing margin.
How PROS solved the pricing challenges:
- Intelligent pricing—PROS provides recommendations based on massive market-derived data and deep analytics, specific to each transaction.
- Faster negotiations—A streamlined price management tool returns quick pricing recommendations, which speeds decisions and reduces manual intervention and approvals.
- A holistic view of pricing—Centralized pricing analytics engine supports pricing strategies and execution.
- Supports multiple GTM motions—The solution is highly customizable and caters to all the ways the customer goes to market.
Realizing Transformative Results
“Since implementing PROS [pricing] we have seen a significant increase in pricing quotations closer to target levels, which has contributed to overall gross margin improvement in our business,” said the Vice President of Finance, North America.
Results show:
- + 7.4% Gross margin difference where PROS pricing recommendations are used vs. not used.
- +13.4% Realized gross margin difference between salespeople who are high adopters of PROS and low adopters.
- 3% annualized margin uplift which is equivalent to about $25 M in margin uplift.