Customization vs Configuration: Understand the Difference

Pricing software has become an essential tool for businesses in today’s competitive market, allowing organizations to analyze their products and services’ profitability and make informed pricing decisions. However, when it comes to implementing pricing software, businesses face a crucial decision: configuration or customization. Out of the box functionality? Or does your specialized business type require something tailored uniquely to your one-of-a-kind organization? While both options can provide benefits, the choice between configuration vs customization can be challenging. Understanding the difference between the two is crucial to making the right pricing software decision for your business. 

At Pricefx, we are a leading pricing software vendor with more than 12 years of experience in the industry. During that journey, we have helped numerous businesses choose between configuring or customizing their pricing software solutions to find the best fit for their organizational goals and objectives, whilst improving your overall pricing performance. 

In this article, we will explain what both customization and configuration are exactly in the pricing software environment, examine the benefits and drawbacks of each and examine the types of businesses both are for (and not for).  

What is Configuration? 

Configuration is taking a functional software product and tweaking it to suit your perspective or way of doing business. It’s simply the fine-tuning of a piece of software, performed typically by the person or persons who intend to use it. 

Configuration can range from simple changes such as color schemes and layout to some slightly more complex extras like custom thresholds or formulas. Configuration can enhance the software’s procedural relevance & usability, increase user efficiency, and provide competitive edge to businesses by allowing them to adapt to unique market demands. 

Configuration in Pricing Software 

Configured pricing software allows businesses to tailor their pricing strategies to meet specific needs and goals, which can in turn lead to increased revenue and/or profitability. 

Configuration of an out-the-box pricing tool can assist in bridging the functionality gap without the expense of time and money required for a deeply customized pricing solution. Sure, a customized pricing system might solve 100% your pricing issues, but it might take far more time and resources than you’d imagine getting there. 

Configured pricing solutions, such as our Pricefx Accelerators for example, aim to provide your business with user-configurable pricing and business efficiency solutions to issues like price list simulations, price building rules, quotations, rebate management and more without requiring an expensive and time-consuming customization.  

The Pros of Configuration  

When considering the pros of configuration, its greatest benefit is that it is approachable. What that means exactly is that you do not have to pay other people to get involved in your pricing software project. 

With configuration, forget about paying for software developers over the long-term lifecycle of your pricing software. It is simply not required.  

Managing the configuration of your own project means; 

• You are not forced to have an already established process in place for whatever the software aims to improve 
• You’re decreasing the total cost of ownership of the software, because you can make, manage, and maintain the configuration yourself.  
• You’re more likely to have a useful product, sooner (more rapid time to value) 
• You’re not taking on substantial technical debt as with a traditional custom build 

Opting out of coding can result in significant savings in both time and money. With configured pricing software, you can have the software live and informing your pricing rapidly. Time to value in pricing software (and all software for that matter) has become a favorite metric for most organizations. 

Over the past decade, Pricefx has gained valuable insights into our customers’ need to support diverse requirements, but without significant capital outlay to get started. In response to this feedback, we developed a configurable version of our pricing software (the Accelerators as mentioned above), particularly for companies that do not require a highly tailored system. While we offer many depths of customization options, we understand that not all organizations need them. 

The Cons of Configuration 

Not every company fits an ‘out of the box’ pricing software solution.  

If your company has highly nuanced business requirements (for example, your rebate strategies are out-of-this-world creative, or your customer discount matrix has more dimensions than one can comprehend), clearly, the ‘one size fits all’ approach of configuration is simply not for you and will not work for your nuanced scenarios.

When considering the “one size fits all” approach, it is important to recognize that relying solely on out-of-the-box functionality typically results in an 80/20 outcome. In other words, pre-configured solutions often only fulfill 80% of a complex requirement, leaving a 20% functionality gap that either requires custom development or is altogether missing. 

You’re then left with a choice, to either work with your vendor or a partner in order to fill that gap, or to accept fate as it is and continue on without that missing piece. Consider also, it is sometimes even more challenging to adapt a prescription to fit nuance than to start from something truly flexible in the first place. 

Who is Configuration For & Not For 

Pricing software vendors that adopt a highly prescriptive approach tend to offer customers pre-defined solutions. However, the more vendors adhere to this approach, the more restricted the functionality becomes, making it less likely for those vendors to truly meet their customers’ unique pricing software requirements. 

Consequently, configured pricing software solutions are generally best for smaller companies, and practically, those companies that cannot afford the customization bill.  

Configuration is cheap in terms of implementation, and rapid in its time to value. There is no need to deep dive into user stories and project delivery. Generally, these pricing solutions are simply ‘dropped in.’ And that cost is a lot lower than the alternative customization, which can rapidly spin up costs and time with a project team building it up over the course of six months or possibly more. 

On the flip side (as we discussed above), if your multi-billion-dollar enterprise-level business is simply too big and complex in how it does business, then the ‘cookie-cutter’ approach of configured pricing software will never cut it for you. You will need to bite the bullet and do it right and go down the path of a customized pricing software solution that 100% matches the intricacies of the way your organization does business. 

What is Customization? 

Customizing a piece of software refers to making significant alterations to its appearance, user interface, and functionality to better suit a specific requirement. This process is usually carried out by accessing the software’s underlying code, which is not easily accessible to the business users intending to use that software.  

By utilizing programmatic access, one can modify the software product to precisely align with their desired specifications, allowing for tailored functionality and customized performance that can effectively address the unique needs of their business. 

Customization in Pricing Software  

Customization in pricing software refers to the process of setting up the software to align with your business needs and pricing strategies. This involves selecting pre-existing features and adding to them the functionalities you need to create a unique pricing structure that specifically meets your business needs. It is far more flexible than configuration as it is manipulating & tweaking the deeper aspects of the software.  

Customization enables a level of sophistication that a nuanced organization will require to price goods and services 100% effectively, efficiently and profitably. 

The Pros of Customization  

Customization is building a set of specific implementations on top of a toolbox of proven abstracts, regardless of which pricing software you may choose for your organization.  

The first big plus for customization is that you are not starting writing code from scratch, but rather adding code and pricing functionality to a pre-existing system.

Of course, the second enormous benefit for customizing your pricing software in partnership with your vendor or partner is that it will very closely match your organization’s business practice. As your business grows, changes, and evolves, so too can your pricing software.  

If you have a totally customized pricing software system that you’ve built specifically for the way your business works, you can simply keep bolting additional pricing functionality on. It is simpler to add more customized functionality to system that has been tailored from the beginning than to add customizations atop a pre-configured solution.  

Good customizations are built with what we call domain driven design. That means that the customization layer architecturally mimics the business structure and functions that it’s built for, and so can easily bolt on extra functionality that further mimics an already operational business. 

Thirdly, large enterprise organizations find value fast from a customized pricing software solution, meaning it’s very affordable for them. For an enterprise level business with revenue in the many billions of dollars implementing a customized pricing software solution that could cost them up to $3.5 million, achieving a 50-600 basis point increase in profit goal can be seen as a bargain. Check out the video below to learn that even a 1% increase in realized price can make an enormous profit difference. 

The Cons of Customization 

If your company does not have the resources, customization can be considered expensive. Software developers are expensive, and good business-software architects even more expensive. The sheer cost of good talent can be very expensive. It’s a unique skill set because those people need to understand business, which is in and of itself, not that simple, but they also need to understand coding, systems infrastructure and more. 

Further to that, when hiring talent there is always an element of risk in the human resource department. While this can be mitigated with a proven solid partner, there is always the potential of suffering the loss of a key-person dependency. 

Another costly downside is that customization is not particularly fast.  

Many of Pricefx’s customers come to us because the current cost of status quo is breaking the bank; customers need pricing solutions ASAP to resolve pains. When considering customization, one must consider the amount of time it takes until deployment and adoption. Think, what is your opportunity cost in the meantime until rolling out your completed pricing software solution?  

For example, an inability to respond to upstream cost changes during inflationary times has enormous potential for margin leakage in the current volatile environment. For example, customers leaving your business hand over fist because quotation response time is far too long. These are the costs of status quo that also need to be considered. 

Who is Customization For & Not For 

Customization is best for enterprise level companies with a degree of complexity in terms of product mix, customer variations, geographies they operate in and nuances in business practices. 

Customized pricing software is best for organizations that know their business objectives well and precisely know the goals they are seeking to achieve with the solution.

Yes, smaller companies with less complexity will most likely not benefit from customized pricing software, but neither will an enormous multinational enterprise-level organization if they don’t know specifically what they want and need for their business.  

If your business is incapable of forming a digital transformation committee that can make executive decisions and roll out these software transformations internally as an organization, think again.  

Or if your company is not resource-rich for a digital transformation or the IT Team is committed elsewhere, or you don’t know what you want out of the pricing software that you intend to customize, think twice before embarking on that journey. 

Why Pricefx Configures & Customizes Pricing Software 

Pricefx both configures and customizes pricing software to provide businesses with a pricing solution that meets their unique needs, budgets, and challenges. We have recognized that every business has its own niche pricing strategy, market, customer segments, and product portfolio, which requires a tailored pricing approach. 

We have also identified that regardless of whether your business is best suited to either configuration or customization of your pricing software, you might need some specialist help in getting the job done.  

If yours is a business that is on the lookout for a pricing software solution with assistance from a dedicated strategic pricing partnership or even a system integration component, then learning more about the Advantage Pricefx Partner Network and the partners available should be your first port of call.  

To learn more about the benefits of working with a pricing software partner, check out the handy article link below:

Or if you feel that you already have the internal resources to get your pricing software up-and-running now, talk to one of our pricing experts now. 

Happy Pricing!