Excel vs Pricing Software – 5 Reasons Switching Could Benefit Your Business
The chances are if you’re in any type of large enterprise or even medium-sized business, you’ve probably heard a lot lately from any number of people that Excel might not exactly be the pricing tool that your company is looking for. But what’s it all about, why are companies considering moving away from Excel to such an extent? That’s why we’ve lined up this head-to-head article on Excel vs Pricing Software to break it all down.
At Pricefx, as a next -generation, native cloud-based price software company, we hear from our customers all the time of their headaches that Excel can cause their pricing efforts. Many of our clients are more than aware of the infamous Excel pricing issues that have occurred over the last few years. Most notably, Canadian-based electric power generator Trans Alta losing $24 million in a contract purchase in 2014 when an Excel manual entry copy/paste error accidentally increased purchase prices, wiping out 10% of their profits for the year.
What we hear most from our clients is that Excel is not bad software – it’s excellent at doing what it was designed to do – but no one could ever have imagined what the modern pricing industry would has evolved into today.
If your company only has relatively few products all priced identically across the few regions you do business in, you are possibly fine by continuing to use Excel for your pricing. However, if your product list is large, you spend a packet on distribution, and the goods you manufacture are subject to the whim of raw material price fluctuations, or you need to organize rebates and discounts, read on. Pricing software maybe able to assist in escaping from a manual input nightmare.
During the collation of our Excel vs Pricing Software head-to-head, we have identified 5 reasons a switch from Excel to modern pricing software could help your business become more efficient and profitable.
But first, let’s check out the criteria matchups.
Excel vs Pricing Software – The Head-to-Head Criteria Examined
For good or bad, not all software is created equally, each has a different range of functionality.
However, for the sake of this article we’ve tried to stick to the topic of how each different software type – Excel vs Pricing Software – performs specific tasks important to the pricing industry and how companies use it in their pricing.
In other words, we’ve tried to compare apples with apples here, not hamburgers with apples, or oranges with avocadoes. But, given that they are different tools designed for different jobs it’s not always possible, but we’ve tried to stick to an impartial approach wherever we can.
With that in mind, let’s move forward and examine the Top 6 comparison criteria for Excel vs Pricing Software:
- How Much Does the Software Cost?
- Which Software Provides the Most Automation?
- Which Software Provides the Most Pricing Insight?
- Which Software Model Makes It Easier for Me to Understand and Justify Pricing?
- Which Software Can Calculate the Most Data Points?
- What Software is Easiest to Integrate with My Current System?
1. How Much Does the Software Cost?
Winner – Excel
Compared to purchasing pricing software, Excel is about as inexpensive as it gets, Excel is about as cheap as you can get. It’s fast to set up and the chances are that everyone in your company already knows how to use it.
Yes, Excel is inexpensive, easy to learn, easy to customize and has useful computational features. However, as businesses and their analytic needs grow, the ‘inexpensive’ strength of Excel can quickly develop into faults. When you use Excel, you’ll be making a lot of manual inputs and human errors are commonplace, especially when spreadsheets are being used by multiple individuals, or multiple versions of the same document are created.
But that said, Excel is inexpensive considering what it does, and it’s a great tool for companies that aren’t experiencing growing pains.
However, if your company has a large set of product items and hundreds or thousands of customers, various pricing rules plus other variables, it may not provide the automation you may require.
2. Which Software Provides the Most Automation?
Winner – Pricing Software
Regardless of whether you already have or are considering purchasing either an on-premises first-generation or a native-cloud next-generation pricing software system, either way, it is a more automated system than an Excel spreadsheet.
Excel software requires humans to input data manually and do a stack of it! And with manual data input comes the potential for costly errors as in the extremely costly Canadian example we mentioned above.
With most modern pricing software, cutting-edge machine learning helps you turn your data into intelligent, automatic, and insight-driven pricing.
If you have previously struggled with keep your pricing up-to-date in real time with Excel, (for example, tracking the impact on your prices of any promotional activities that were running), a pricing software solution takes away the stress, and automatically corrects your pricing. No sneaky margin leaks potentially eating into your profit as your pricing is in real-time.
3. Which Software Provides the Most Pricing Insight?
Winner – Pricing Software
Modern pricing software delivers an all-round view of pricing – from list price to gross price to net price– including advanced data analytics and Artificial Intelligence (AI) and Machine Learning (ML) based price optimization to highlight your business opportunities.
Pricing Software’s optimization enables pricing to get as real-time and as precise as possible.
It provides a level of business agility that can easily adapt to market conditions that may dynamically shift several times per day.
The AI-ML used can be as dynamic as you like and customized to your business needs displayed on easy-to-read dashboards.
On the other hand, while Excel can present information in various types of charts, there is no ‘in-program’ drill down. In Excel, you’ll need to cross-reference and use KPIs and metrics to highlight underperformance and run multiple ad-hoc analyses to discover your business opportunities.
For basic cost-plus pricing or discounts from lists, Excel will do the job for you just fine. However, extracting actionable pricing insights from Excel is a labor-intensive activity that means you may struggle to keep up with a cut-throat competitive market. As it is such a timely procedure in Excel, you may never find the time to get it done and your insights may never see the light of day.
4. Which Software Model Makes It Easier for Me to Understand and Justify Pricing?
Winner – Pricing Software
Modern Next-Generation pricing software technology is what can be called a ‘clear box’ approach.
What that means is that the entire pricing software system is transparent, with full reasoning for price shifts provided for end-users.
Transparent pricing can be a powerful tool.
As the price choices are constructed in real-time on the most up-to-date data, executives and salespeople can gain a clear sense of pricing and full confidence to pass on the information to their clients and prospects.
Excel, on the other hand, requires the collation of scattered transaction data from across a business that needs to be scanned for typos and human errors. Then, the useful data will require a complex calculation ran on it and be aggregated into a spreadsheet for access in VLOOKUP or Pivot Tables.
The result; a black box of pricing that only a few people in the organization can understand, fix, scrutinize in detail or replicate without creating multiple versions of the same document.
A black box can breed confusion or even worse, distrust or a lack of understanding of prices among sales staff. What’s more, your margins can theoretically be eaten away without anyone in your business being aware, because of how much work that analysis requires in Excel.
5. Which Software Can Calculate the Most Data Points?
Winner – Pricing Software
Okay, fair enough. We can almost hear you pointing out that Excel can theoretically calculate as many data points as pricing software. But how many people would you need to employ in your business work around the clock, 24/7/365 to keep up with the type of data analytic speed of AI-ML pricing software?
In today’s competitive business world, there is simply no time for manual data input, nor any room for the error vulnerabilities of Excel, or its lack of capabilities to keep up with AI-ML pricing systems.
With pricing software, unique customer insights, genuine historical data, precise cost data and real-time inventory data can besupported with competition pricing, index prices, real-time exchange rates and search engine results, and even local weather data to achieve value capture.
Customers and markets are more transparent than they ever used to be, and businesses need to be connected to multiple internal and external data sources to remain relevant in the modern business world. Pricing software makes it possible.
6. Which Software is Easiest to Integrate with My Current System?
Winner – Well……it depends on your business….
Getting back to the point we made earlier, if your business it not a complex one and your company has only a few products, stoic prices, operates in a single region and you prefer to manage your pricing with manually generated Excel spreadsheets, then your business may not have a need to integrate with any other systems. Integration may be a moot point for you.
On the flip side, if your pricing team require another layer of complexity to its pricing processes and decision making that Excel doesn’t provide, they must find user-friendly methods of importing enormous amounts of data from a multiple sources and transition it into insights that support smart pricing.
Excel is a standalone application infamous for not communicating well with other systems. Unless your pricing team is supported by extraordinary technical understanding, that’s more time your pricing team may need to spend on collating data rather spending that precious time on developing your pricing strategy. It’ll be a permanent state of playing data catch up.
On the other hand, you will not have pricing software installed on your PC in minutes (like Excel) and working in sync with all your systems on the same day. It’s a powerful and insightful tool and getting it ‘just right’ to power your pricing will take time. It can be done in as little as 6 weeks, but once it’s there, the differences in what you can achieve with pricing software and how fast and easily you can achieve them will become evident very quickly.
Following integration and configuration of pricing software, you’ll be looking at;
- Revenue and profitability over time & by geography
- Highest and lowest performing products and customers
- Price waterfall analysis and comparisons over time, product and customer
- Revenue and margin breakdowns
- And much, much more….
The 5 Reasons to Switch from Excel to Pricing Software……Yesterday
As promised, here’s the 5 Reasons to move on from Excel and modernize your pricing system;
- As pricing technology goes, Excel was great, but times have moved on. It will not allow for the flexibility, integration, scalability, security, clarity, efficiency or scope required in the modern pricing world.
- Giving your pricing team mediocre tools to work with could easily be construed as a waste of their expertise. Moving to pricing software will allow them time to do what you are paying them very well to do; analyze, simulate, strategize, and drive more profit for your business.
- Excel is the opposite of transparency. Black Box pricing that only a few people understand can lead to distrust and discounts. Clear Box pricing software transparency is the ‘now normal’ for your salespeople to have confidence and therefore, for your customers and most importantly, for your company.
- You need to be working in real time to truly compete in today’s fast-paced retail world, where your real-world competitors are changing prices multiple times a day in response to a myriad of minute market movements.
- It is 2022, not 1985. Like it or not, the world is a more complex place now, and so is your business.
By now, you should have an idea if pricing software is something that could benefit your business and transitioning from your current Excel pricing system is on the cards.
You have read above that pricing software will streamline your pricing system and have your team working smarter not harder on route to increased profits. However, you want to know how long it will take to have the software implemented and up-and-running.
At PriceFx, we know intimately how pricing software can be in helping companies achieve their unique set of business objectives, but understand too, that switching over to a system has its own set of challenges to overcome.
To help you decide, check out our recent blog article on the implementation time involved;