In uncertain times, business must make savvy investments to ensure their ability to drive profitable growth today and into the future. PROS recently commissioned Forrester Consulting to complete an independent analysis of the potential ROI businesses can expect from using the PROS Platform. The study discovered that PROS helped customers develop impactful pricing strategies and deliver market-relevant prices in real-time to maximize revenue, profit margins and productivity. In this session, learn more about the benefits of Profit + Revenue Optimization Software and how it addressed our customers’ business challenges.
John Bruno: Alright. Hello and welcome....
Thank you for joining us at outperform twenty twenty three. This is it's always a really special event for me. Name is John Bruno, vice president of strategy here at PROS. I've worked at PROS for three years, but I've actually attended almost every single Outperform going back to twenty fifteen. My very first Outperform was twenty fifteen in in Orlando, and I was sitting right over there. And what's really important for me and what I find really special about outperform isn't necessarily the fact that you get to hear from those of us at pros, but the event is chalked full of great customer stories.
And over the past year or so, we've done a lot to dig into those customer stories, to understand them better, to really understand the value that pros technologies bring to businesses, of all shapes and sizes. So many of you may have seen on our website that we had recently done an internal study of our customers and the value they get from PROS and PROS technologies, but we wanted to take that a step further. We wanted to further validate that. And so today, we're really fortunate to be joined by a couple of distinguished guests. We have Seth Mars and Chris Layton, each from Forrester Research. So Seth is a principal analyst, background in marketing, in sales operations, you know, looking at the role that data plays and process and technology, to help businesses drive revenue growth. And Chris is a consultant on Forrester's total economic impact team, and we'll get into that in just a moment.
Before we dig into the session, make sure you go into the app. You check-in to this session, outperform sixty six.
And so today, what we've asked Forrester to do is share some of their insights in terms of what's going on in the industry right now What are some of those macroeconomic trends really shaping the way that businesses are looking at investing in technology and how they're driving business value. Namely profitable growth. And so they'll join us on stage here in just a moment. And then, really, the the kinda coup de grat of all of this is you will be the first audience ever to see the results of this total economic impact study.
So at the end of the session, we'll show you exactly how to get your hands on, that data, that analysis, and that report. But to kick things off, I wanna pass it over to Seth Mars to walk us through some of those insights that he's seeing in the market.
Seth Marrs: Thanks, man.
Right. Hello, everyone. So I'm gonna talk through it from a market perspective. So as John said, I I play in the sales operation space. I've spent a lot of time working with pricing, with with a lot of these tools. So jumping in, We're in a pretty rocky business environment, no no pun intended.
If you look at inflation, it's been running rampant, that's really draining cost for companies. So they're focusing on how do I how do I reduce cost to be able to manage this. And then if you look at the war in Ukraine, you're seeing country after country after reduce their growth forecast. So you have cost constraints, you have growth issues, it's painting a pretty tough picture, and I don't really want to spend a lot of time on that. It's more around how does this picture impact businesses like yours? And how you go forward. And that's that's what we're gonna talk to today.
So One of the things is Company multiples are dropping. As you see the fed increase rate do rate hikes to try to get inflation under control, you're watching the multiples of those companies drop. So it's almost a direct correlation as the Fed raises interest rates, companies are becoming less and less valuable, which causes changes in the markets, companies that cut back.
One of the things I cover the sales technology space and twenty twenty through twenty twenty, mid twenty twenty two was booming. When you talk investment, money was flowing like water into companies who are being capitalized and spending like crazy.
Until they weren't.
So one of the biggest drops that I've ever seen happened in q four q three of last year a billion a quarter was being pumped into the sales technology market and in one quarter it drops down to sixty to sixty million. It's just tough times companies are starting to cut back.
Investments are going into other places because of inflation.
If you look at publicly traded companies, they followed very quickly. You're seeing a a change where they're sacrificing or not facing. They're focusing more on how do I secure my business?
You're seeing layoffs on the market. We've all seen those things. Where as growth is starting to go down, their focus on profitability is starting to go up. It's a heavy focus on how do I secure my business. There's been a lot of thinking that there's gonna be a recession this year even though it hasn't materialized yet, but businesses are preparing. And you're seeing this based on what's happening in and around the world.
Another thing which is really interesting, if you look at three points in time, November twenty twenty one, If you talked about what was more important, it was six times more important to drive growth in your business than it was to be profitable.
In one year, that inverted.
So in November of twenty twenty two, it was actually almost even actually a little bit more towards I need you to drive profitability in your business. And now when you take a look at it, it's two to one, which It's actually very encouraging because we're starting to see signs that things are coming back to normal. So it's good and you would typically see growth be a little bit bigger than profitability.
So When we looked at investors and talked to investors or or if if you look at study from investors, one of the things that's really interesting is eighty eight percent of investors that are looking at companies going to IPO are expecting them to be profitable in six months.
Eighty-eight percent. That wasn't even in the picture for many of the companies that were looking to go profitable in sales tech. Now it's an expectation from investors.
Also on the other side, you guys all know the rule of forty you have your growth plus your operating margin should be around forty percent. Investors aren't even looking for that to be at forty percent. They're asking for more. Eighty percent of them want you to not only be at forty percent, to be profitable at that forty percent. They don't want you to be negative margin to have a negative margin and make that up through growth. They're looking for profitability.
Another thing that we looked at is if you look at growth in comparison to the valuation of the company, it was running right in line. So you could see the split. If you look at the dark blue line, the correlation that's above, higher correlation was all around growth.
That was running completely different than if you take growth plus plus margin. So over that two year period, it was better for you to grow and that was very clear, but you've seen over the next year, that's all tied together. So all of these slides really tell you if any company that's in this market right now, needs to have a focus on both driving growth but also a clear hand on how they're managing their spending and their profits.
One of the things we looked at with this is how are they gonna do it? And when we looked at what they were looking to buy. We asked them what technology are you gonna buy? Are you gonna be buying technology in the future? In twenty twenty two, sixty percent said they were.
And a large reason for that is these are hard problems. You can't just say I wanna be profitable so you go be profitable. You have to do difficult things. You have to take on big challenges you need technology to be able to support you in that transformation.
We're gonna talk through two of those things today that are the most relevant to this group. One, generating prospects. There's a real challenge in generating prospects to be able to drive business growth. And then two, we're gonna talk about price because there's no better way to be able to get more margin than to effectively manage your pricing.
So jumping in on generating high quality prospects.
Opportunities are really tough to get. So marketing team, sales team, sales team struggle. It's one of the biggest challenge, how do I get more prospects to be able to hit my number? Marketing teams three and a half percent conversion rate into opportunities for sales. It's really hard to do.
And then once they get them, if a seller is closing. So we did a study with pipeline where we looked at pipeline assessments.
When we looked at loss reasons, why sellers were closing deals as lost when they lost momentum? The number one reason was other.
So they're not only just taking these that are very hard to get, but then after the deal goes cold or they lose the deal, it goes away. So there needs to be a better way to identify opportunities to help businesses drive their growth going forward.
I'm gonna go through four different ways that you can use technology to be able to do this, and it should make it very easy for sales and marketing to have a base to work on, that gives them a head start if you do this analysis.
First, share of wallet optimization.
So a very straightforward thing. You look at your total share for a company, You look at how big it is, subtract the two, and you could see opportunities for sellers that become across all opportunities Right? I now have cross sell opportunities by evaluating both. That sounds simple. It's this type of stuff to do actually takes a lot of data analysis. You've gotta look at your CRM. You've gotta look your ERP, you've gotta look at your you've gotta look at your pricing, you've gotta look at your product, pull all of that together to be able to derive those insights.
Another thing, if you're looking at cross customer optimization.
If you look at a fully penetrated customer, a customer that you believe is is use utilizing all of your products, Compare them to the ones that are less penetrated, do a gap analysis. Now I can see another set of that I didn't get to see before that I could apply sales and marketing to be able to convert.
The other thing, new customer targeting.
If you look at the current profile of your top customers, the customers that that you believe are a best fit for your product, Look for like customers that aren't buying your product at all gives you a set of customers you can give to your sales and marketing teams to be able to to drive growth. And the beautiful thing about this is not only do I have a group of like customers that aren't using us, But I also have case study after case study after case study of customers that are like them that are doing really well with your product that you can use with sales and marketing to be able to drive growth.
And the final thing in terms of being able to help drive more opportunity into your business and more growth into your business is consumption. Consumption is the thing that's happening over and over and that's growing very, very fast, especially in software. It's been very visible or or it's been pretty common outside of software for a long period of time, but managing that takes a very heavy it requires a lot of data and a lot of analysis to be able to identify insights.
Here, you can look at and run your analysis of trends and how customers are spending and use that to be able to identify opportunities for your business.
It could be you see a one off spike in sales and you can go in and understand what that is and how do I get more sales.
It could be you see consumption progressively declining that or maybe slowly phasing you out and you didn't know it, you can go back in and be able to proactively intervene to try to stop that. Same thing if you have a one off drop, you can go back and figure out what that drop is, and potentially that's a customer testing out a new vendor to to potentially replace you, you can mitigate that prior to. And then you can look for times or companies where it's progressively increasing.
Proactively understand what that's happening and drive more growth. So these are opportunities for you to be able to grow your business using the data that you have available to you and not being completely dependent on sales and marketing to be able to go out and do that for you. All this information is there, Problem is it's pretty complicated to be able to pull together and analyze.
The other thing to talk through is pricing as a core strategy. So the pricing side is where you get your margin.
So if you looked at a one percent increase in margin or in pricing, gives you eight point seven percent increase in in margin.
If I were to increase volume by one percent, I get two point eight percent back to my bottom line.
If I go and say, well, I'm gonna do I'm gonna work on my variable cross cost and I I decrease those by one percent. That's only gonna give me five point nine. This is the pathway to be able to get you the profitability numbers you need.
And one of the things that that we found is if when we ask customers how they feel about their pricing, eighty four percent of them said that they're basically it's very affordable of or a good value. Most of you as customers or as companies probably prefer that they feel it's not cheap but worth the money.
Right? You would want theirs. That means there's something there that you can pull that you can incrementally gain with your pricing strategy. But it's always hard to change that because changing pricing can be very difficult. You need to be very smart about how you do it.
I'm gonna talk through three different areas that you can use beta technology to be able to do that.
One, different determining competitive value. So looking beyond just what you're selling, but stratifying what a customer wants and understanding should I add more products at the top end to be able to get to be able to get maybe a lower priced product but the featured. Do I do a premium product to gain that part of the market? How do I expand based on pricing to be able to do that?
The other thing is where do I price? Like how do I run the analytics? Earlier at the keynote, you saw some of the data that was happening there around how do I look at this, analyze it, understand what the perfect prices for what we're trying to do and you wanna select that. You get it too high.
You lose you lose value. You get it too low. You lose value. You have to find that right spot.
And then finally, developing the pricing objectives, where do you wanna be in terms of your competition? You've gotta figure out when you're looking at it, do I want to be high margin? Am I do I understand my product well enough that I can explain it to a customer in a way that they'd be willing to pay more?
Do I wanna be in line? Do I feel that I can get?
If I keep my pricing in line with my competitors, I can sell my value and out compete them or do I want to undercut and have your offering come in at a a lower price to be able to gain more market share. These are important questions to ask and it was a lot of the questions that we asked in the in the TEI that we did. So I'm gonna bring Chris up to talk through real customer examples around how this works with them.
Chris Layton: Hey. Thank you, Seth.
So we've heard a lot about how pricing needs to be a core piece of business strategy, and many companies out there are beginning to use PROS to help them get there. Right?
PROS asked us at Forrester to independently evaluate the results that these companies were having. So in other words, we've just gone through exactly how difficult this is.
We've heard, you know, a lot of the the benefits of using PROS and how it can help companies to solve these issues. What are the actual impacts PROS is having in the market today?
In order to do this, we used a methodology that we called total economic impact, and I won't go too into the weeds here but at a high level, what's important to know is we are looking beyond just cost of an investment like PROS and we are looking beyond just the ROI. We're looking at the long term strategic impact that PROS could have to an organization, and we're also incorporating risks that would be associated with any technology investment, so that our analysis is conservative and so that it we can be broadly applicable.
The first step was to interview customers who had actually used PROS as a core part of their pricing strategy, you can see we interviewed folks from a variety of different industries.
They all had revenue in the billions, but what I do wanna mention is most of them started with PROS in a smaller part of the business sort of as a pilot stage. So PROS initially was being used in millions of dollars in revenue under management.
After these companies saw the initial success with PROS though, they, you know, expanded that and the PROS began to manage more revenue and reach more into the billions. So we had a chance to sit down with each of these companies, five interviewees total, and ask them what was your experience like with PROS? You know, what ultimately made you want to make this investment and use it as a core part of your pricing strategy.
One of the first things we heard when we started speaking is just the the pain that existed before prose. Where folks were coming from? If I could summarize it in one phrase, it would be a a spreadsheet nightmare. It was what we heard repeatedly.
Pricing analysts were spending hours of every day just staring at a screen, staring at a spreadsheet, trying to go through thousands of different products, and update the pricing, they were you know, on on the line with management, trying to talk about macro trends, and then why, you know, they might see different types of pressures, how they can respond.
The pricing is difficult. Seth talked a lot about all the factors that go in. It was very, very difficult to do this in a manual way as was being done.
But what happened after that is after you have all of these pricing analyst trying to keep everything updated and manually go through and update pricing on a weekly or daily basis is it starts to have impacts on the rest of the business. And this is what the the folks we talked to said, is that the leadership really didn't have visibility into their own again, the day to day pricing strategy and where things needed to go. They they were doing what they could with the data that they had. But as, again, Seth's talked about, there's a lot of data to analyze. They really didn't have the labor that they needed to incorporate this into their pricing strategy.
The impact this had on the business was many times pricing was too high, and revenue and and volume was being lost. Right? So they were just losing out on deals. On the flip side, often pricing was too low, and the margin was suffering, Seth talked about the common combination of, you know, revenue growth, but also margin, that's really hard to see.
The the manual nature of pricing before using PROS meant that they were losing out on both the revenue and the profit.
They knew they had an issue, the folks we talked to, they knew they needed to make an investment. Our question for them was how did you come to know that PROS was the right solution. You know, you're they evaluated a few different vendors and a few different approaches, and we heard a lot of different reasons, you can read about more of these in the case study, and you'll get a minute in a minute. We'll see how to download that.
But three stood out to me as the main dry of why companies ultimately decided to go with PROS. Probably the most impactful was they just trusted that PROS could get them to the right price. This this trust wasn't based on a sales pitch. It was based on seeing PROS in action and seeing, you know, what the AI could do.
But it could ultimately help them solve the pricing issues that they had. The second major driver we heard was the business leaders were confident that they could use the data and the analysis and the insight coming out of PROS to help them inform their own business strategy. This was really important in the the long term vision that they had for their for using pricing.
And then another driver we heard, which made a pretty big impact for a lot of folks was just it could help free up pricing analysts. It could help free up these folks that were spending their, you know, days buried in spreadsheets to do more productive work and to provide greater value to the organization if they weren't having to manually update all these prices and and sort of, you know, kinda guess where where, you know, pricing should be today and where it should be tomorrow.
Okay. So let's get to actually building the case study. In order to build a business case, we need to start with some assumptions.
And right now, these are the assumptions we're using. This is based on an aggregation of those four companies that we interviewed.
As you are reading the case study after you download it, I would strongly encourage you when you see these assumptions listed, replace them with your own company's details.
And what you'll have is a very robust and detailed case study for your own company that's personalized so you can see the impact pros would have for your organization.
For now though, we're going to stick with this aggregation and we're going to look at what would the impact of PROS be to this organization based on the real world results that we've already seen from PROS customers. So we have we're starting with fifteen percent of revenue under management. This grows to twenty five percent over a three year period. And we have five billion dollars in revenue. Although, again, PROS is is, you know, focusing on on the millions for than than expanding outwards.
If we take the real world results, The companies we talked to and we apply it to an organization like the one we just saw, the ROI is four hundred percent. That's not rounded. It actually ended up being exact four hundred percent, and the organization sees over ten million dollars in benefit over a three year period. So this is profit hitting the bottom line.
In addition to that though, based on the results that we heard from PROS customers, PROS pays for itself within nine months. So within a year, it's already made up for any cost that the organization incurred, including, you know, training and change management, all of that. Paid for itself in nine months. So let's take a step deeper and see where this benefit is coming from.
Most of the profit being driven by PROS is really coming from the two areas that Seth talked about before. So revenue growth, and being able to increase profit by adjusting margin. You can see there's also some operational efficiency. We wanted to include that too. It's really just the icing on the cake.
So starting with revenue, what we heard is that having PROS as a core part of pricing strategy helps companies to improve their revenue in two main ways. The first is that they were not pricing unnecessarily high if there had been recent competitive pressures, changes in the market. The pricing was updated much, much faster, and so deals weren't being lost unnecessarily.
The second and this is a really interesting one I thought, but the second way it helped improve revenue was pricing was available much faster than before. So when we were using spreadsheets, everything was very manual, sometimes deals were being lost because sales folks did not have the information they needed quick enough.
So based on the experiences of PROS customers, we would expect three percent revenue increase over a three year period, which in profit would be just under three million dollars for this organization.
If we then look at, okay, we've we've increased revenue. We've seen how PROS helped with that. How did it help increase profit margin. That's sort of the other side of the coin.
Right? When organizations were pricing too low unnecessarily, their margins suffered, and what we heard is that PROS made a pretty big impact shortly after being introduced to organizations. So for our analysis here, we are assuming that it increases profit margin by seventy five basis points. However, I want to really emphasize this This is sort of the the bottom of the range that we heard.
There were several examples where companies saw greater profit margin increase. You can read about them in the case study. I'll just highlight a couple right now, though. One organization immediately after integrating PROS saw up fifty basis point improvement, but after eighteen months, that had grown to two hundred basis points.
Another customer we talked to had one market in particular that they were struggling with quite a bit, and they thought maybe PROS can help us here and help us optimize our margins. They saw in that market a three hundred basis point improvement.
So our analysis, when I say it's conservative. I'm not joking. You know, with seventy five basis points, we're getting seven million dollars in profit over three years. That's great. There were definitely cases where PROS customers had seen even better results.
And then the last area of benefit that we're quantifying as part of this analysis is the operational efficiency.
What we're using to put a dollar sign next to this, basically, is what is the labor cost of these analysts who have their time freed up. However, this is another case where some companies saw an even better benefit, and the reason is because you have all these really smart people, they had been spending their days and their time just buried in spreadsheets. Now they're free. Now they can use this data that PROS is providing, and they can use it to create a longer term and more impactful pricing strategy for their organization. So Again, this is a conservative estimate. This organization would save about two thousand labor hours over that three year period, but there's also higher strategic impact that they would see as well.
Great. Okay. So we've talked about how in this case study, we've quantified the impact that PROS has had for its customers that we talked to. There were several other areas of benefit we heard about, though, that we're not able to be quantified. I won't go into every one of these right now. Again, in the case study, you can read more details. I do want to highlight two, though, that I thought were really interesting.
The first is, we're gonna start in the bottom left hand corner, so improved access to data and analytical capabilities. So what we heard from the folks that we talked to is business leaders especially craved the type of information that PROS was able to give them in the insight. Seth talked before about how valuable this is and how it can inform business strategy it can be difficult to extract this when you have just tons and tons of spreadsheets, and you have a lot of data coming in every day. What business leaders really appreciated was that it could be automatically analyzed, PROS could use its AI, to help them anticipate future market trends and understand how their company could pivot best.
This leads us into another area of benefit, though, in the upper right hand corner, so better pricing, communication with stakeholders.
So this is kind of the flip side of what I just talked about. So not only was PROS able to provide deeper and smarter insights to business leaders, But it also gave reasons why pricing recommendations were made. It wasn't just sort of a black box where you put a bunch of data in and price goes up, price goes down comes out. What happened instead was it would explain, you know, this is the reason we would recommend pricing goes up for these products, pricing needs to go down here, and this is language that everyone in this room could understand, and everyone in the company could understand. There was one example where a director needed to help hospitals understand why pricing was changing the way it was. This was really difficult before the heavily manual process.
With PROS, what we heard from the medical community system there is that They were able to just send out a simple email, explain very easily. This is why pricing changes needs to be made, and employees across the company could understand.
So I'm gonna wrap up by saying, we heard a lot of really great things from PROS customers about the impact it had to their strategy, I would strongly encourage you as you get the case study, again, replace the assumptions we made with your own company and you'll get a personalized view of the impact PROS could have for your organization.
This is based on the real world data is based on what PROS customers told us in our independent interviews and analysis.
It's been a pleasure speaking with you today, though. And I wish you the best in the rest of this conference. Thank you.
John Bruno: Alright. You're probably asking yourself the million or the several million dollar question. Well, how do I got my hands on this study?
So first of all, hats off to the team at Forrester for walking us through all that and providing that great synopsis in such a short period of time. The amount of information available is immense.
And we've recently just finished this study, so everything went live, went through the editing process, and published, and we've had it in our hands for, you know, days, but a little over a week or so. And we wanted to sit on it. We wanted to sit on it because we wanted to make it available first foremost to those of you attending Outperform live. And so for the very first time, if you're interested in downloading a copy, of the total economic impact.
So as Chris had mentioned, there's case studies of each of the customers that were interviewed in this report. In addition to those case studies, it is chalk full of really insightful anecdotes and quotes. So it shouldn't have moved forward. I'll go back again and give you a chance to scan that QR code.
So there's a lot of really great anecdotes insight in terms of how businesses were getting value out of this solution. So I encourage you, pull up your phone, scan the QR code, download a copy of the report, make it available on our website. We wanted to make it available to you here at Outperform.