10 Price Optimization Best Practices to Accelerate Your Revenue
Businesses today are feeling the squeeze to increase their profit margins. The available market in many industries isn’t expanding, leaving companies to fight over share. In fact, 78% of sales teams are reporting that their quotas have increased, while only 24% are confident they can achieve them. At the same time, customer procurement departments have far more access to information to easily shop the competition. It’s easy to feel out of control. But there’s a lot you can control—and it begins by analyzing your current price optimization and quoting capabilities. So where do you start?
A recent PricingBrew research report identified 10 areas where price optimization best practices have been redefined, setting new benchmarks for pricing excellence in B2B.
10 Price Optimization Best Practices
- Improve Focus
Rather than assuming that prices are accurate and that the problem lies with the approval processes, focus on the quality of your price points. In other words, have you laid the foundation to consistently deliver the right price, or is your focus on efficiency driving bad prices faster? Leading pricing teams will view the accuracy of the price points as being their primary concern.
- Price Segmentation
Robust and specific price segmentation is the key to determining the effectiveness of nearly every other pricing-related activity. The greater the granularity in segments, the greater your ability to reflect the dynamics and complexities that exist in the marketplace and therefore enhance your pricing power.
- Optimize Market Response
Are you putting prices into the market and hoping for the best? Here’s a better way: measure price response and use it to set better prices that are less risky. Use historical sales data in combination with your robust pricing segmentation models to measure the willingness-to-pay dynamics and win-rate elasticities in each price segment. Once you have this data you will be able to do many things:
- Accurately predict the changes in revenues, profits, and unit volumes at any given price point
- Determine specific price points that will hit target goals in revenue, profits, and unit volumes
- Execute material cost and other dynamic market factors with surgical precision
- Implement Pricing Technology
Smart technologies and dynamic pricing software can do things like analyze data and recommend optimal actions faster and more accurately than pricing professionals sorting through terabytes of data. Pricing technology today is more accessible than ever before.
- Enable Sales Team Guidance
Instead of expecting the sales team to analyze data and know what prices and discounts are appropriate, pricing technology streamlines the pricing process to give the sales team access to the answers they need. Leading companies are using the power of AI to provide this prescriptive pricing guidance—and are achieving game-changing results.
- Accurately Measure Your Sales Team
Don’t just measure and incentivize your sales team based on top-line revenue. Measure your sales team’s performance and map incentives to the desired pricing outcomes and behaviors. Often, this means measuring “price attainment,” the ratio between the recommended price at the time of the transaction and the price the salesperson ultimately attained.
- Adhere to Pricing Governance
Companies often assume that the only way to drive meaningful pricing improvement is to change who is controlling the pricing decisions. But centralized control over all pricing decisions can be disruptive to business goals. Pricing leaders who work to build Centers of Pricing Excellence which work to provide oversight and promote cross-functional collaboration will improve overall pricing performance.
- Understand the Depth of Coverage
Deal-level decisions are important, but there are other factors that are likely playing a much bigger role in your overall pricing performance. The most successful pricing teams will devote much more attention to the strategic aspects of pricing further upstream than at the time the deal is closing.
- Understand the Breadth of Coverage
Pricing is only one element for profitable growth. Price optimization, when done right, is much more than finding the right price and discount; it's also about developing an analytical and data-driven decision-making capability.
- Innovate and Change
The worst thing business can do today is cling to the status quo and resist change. It’s important to stay ahead by embracing innovation and the change that comes with it. Leaders in price optimization are not afraid of change…they embrace it.
How to Optimize Your Pricing for Modern B2B Selling
From PricingBrew’s research report, we have learned 10 factors about B2B pricing that will change the way you build and deliver winning price quotes. Many traditional strategies for determining the best prices are no longer helping your sales team outperform the competition. The next step is to adopt the necessary tools for adapting to modern B2B selling and eCommerce.
By leveraging AI, PROS Smart Price Optimization and Management identifies revenue leaks and allows your sales team to quickly configure an optimal pricing strategy to recover the potential. With our pricing software, you may expect to achieve 100-300 basis points in profit margin improvement.
Customers expect rapid responses to their requests, which means your sales team does not have time to spend several days putting together price quotes. Consider how machine learning and AI can be used to recommend an optimal pricing strategy with science-based and pre-approved price segmentation.
Want to Learn More About How to Accelerate Your Revenue?
Contact PROS today at pros.com/contact.