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August 4th, 2021 (Updated 08/05/2021) | 5 min. read

Carolina Alvarez
Business Development Representative at Pricefx

8 Pricing Essentials to Help Mitigate Cost and Risk  

A common struggle many businesses are familiar with is mitigating costs and controlling risks to reach margin targets. Cost-plus pricing methods (where price execution is determined from static rules rather than real-time changes) are unable to respond to fluctuating market dynamics. Therefore, prices become outdated and potentially harmful to your business – often overnight.  

Another problem is inconsistent pricing deviations, meaning prices do not reflect a customer’s willingness to pay.  

Basically, in the absence of pricing and quoting processes standardization, contract pricing and customer agreements are inconsistent, and because of habitual over discounting, complex contracts constantly achieve low margin results.  

In addition, a complete lack of true customer profitability visibility leads to inconsistent margin performance. This makes price building and execution processes error-prone, causing customer pricing to be calculated according to faulty cost inputs. 

The implementation of smart business tools, such as the pricing solutions offered by Pricefx, enables businesses like yours to maximize profit and reduce risks simultaneously.   

Pricing Risk Considerations 

Value Management 

Do you own clear documentation of what drives customer value? And is there a customer communication plan for each product or service?  

Pricing Strategy 

Do you have a published, up-to-date pricing strategy that aligns brand positioning and customer behaviors? 

Trade Agreements 

Are your company’s contract structures formulated to protect your cash flows with the correct rebate structures? 

Management Agreement 

Are the executives within your company in agreement about the business strategy and processes, and does this trickle down into each department?   

Skills & Teams 

Are staff properly trained to understand pricing, the platforms and daily operations?   

Salesforce 

Are the sales team comfortable with value-based pricing to generate more profitable margins? 

 

Pricing Essentials for Your Business 

1. Visibility 

You should have a clear and holistic view of all your data. That means internal (including current and projected sales history as well as costs) and external (consisting of customer demand and channel partner data). 

2. Strategy and Leadership 

Your leadership team needs alignment with company goals. They should understand how and why they will influence tactical decisions and know the potential impact of all exceptions. 

3. Processes 

By automating and streamlining workflows, you can execute mass price updates using less manpower while improving accuracy, consistency and speed. 

4. Tools and Systems 

Tools are critical in the pricing decision-making process because they allow more specialized systems and analyses to support optimal pricing decisions. 

5. Structure 

To avoid macroscopically siloed and locally optimized decisions, you need to limit decision-making to only those best able to do it. Having an interconnected data system allows teams to make better decisions based on real-time, accurate data. To ensure everyone is looking at the same info, it is essential to leverage a cloud-based platform that easily integrates with your existing technology. 

6. Skills 

One of the necessary top skills is pricing acumen. But when manual tasks that could be automated are taking up your pricing team’s precious time, you’re wasting their talent. With the right tools, processes and workflows, your team’s skills can be freed up to work on profit growth. 

7. Value and Price Communication 

Ensuring prices are not only based on value but that your customers consider them fair and consistent requires specific practices. 

8. Reduced Risk 

Companies should search for data insights that reveal opportunities and mitigate costs to reduce risk. Automating your quoting and negotiation workflows will ensure order-taking is both streamlined and accelerated. Mass price update executions should, therefore, take less manpower and, at the same time, result in greater speed and accuracy. And the complexity and overhead around the ship & claims process should be reduced. 

At the heart of these essentials is price analysis. 

Without putting too fine a point on it… most data is in disarray, stored across multiple siloes and choked with irrelevant or incorrect entries or gaps. Data like this won’t bring tangible results. 

The Pricefx Profit package from Pricefx cleans and enriches all your data to build a holistic picture from which it creates highly relevant and useful data marts that you can pull at will for analysis to help you identify pricing opportunities and segment your business by product, customer regions and more. 

Also, with PriceAnalyzer, you can visualize your data as data tables; scatter plots; bubble charts; line, bar, and pie charts; time series; price waterfall; revenue and margin breakdown; histograms; box plots; heatmaps; and dashboards. 

With visibility comes insights – and with insights come smart pricing decisions. 

 

Price Analysis for Better Pricing Decisions  

The right pricing solution will propel your business toward your revenue goals by turning your scattered mismatched data into powerful centralized insights with which you can uncover new opportunities and mitigate costs. 

Pricing analysis is at the heart of pricing success. And at the heart of pricing analysis is PriceAnalyzer from Pricefx.