How You Can Measure Success in a Pricing Digital Transformation
Even in the wake of COVID-19, digital transformation continues to surge in popularity across all sectors. It’s forecasted to increase by 10% in 2020 to $1.3 trillion. Still, despite this sustained growth, some 84% of companies’ digital transformation efforts end in failure. It’s an alarming statistic, but one that seems less surprising when you learn that half of CEOs have no metrics whatsoever for digital transformation success!
It’s vital to remain alert to successes and failures along your digital transformation journey, staving off problems as they arise. Having clear, carefully tracked KPIs in place lets you react with agility and decisiveness to risks before it’s too late. But identifying the right KPIs to measure is a challenge unto itself – each company’s road to digital transformation is unique. Chuck Davenport, a Pricing Partner at Bain, saw a 200% increase in speed in a quoting project but they would not have known that without finding the right statistics for them.
There’s no one-size-fits-all approach. Your chosen metrics must be industry-, company-, and even department-specific to have any real value. Metrics for gauging success in one area of a business may be entirely irrelevant to another. Below, we offer some suggestions for KPIs with widespread importance.
“Choose KPIs that you can measure easily(…) Select just 5 to 9 metrics to track, report and act on(…) Get your transformation metrics right and you’ll improve your ability to succeed and describe that success to your key stakeholders.” – Paul Proctor, VP Analyst, Gartner
Which KPIs Should You Use to Measure Successful Pricing Digital Transformation?
1. Win rate: The number of quotes won over the number of quotes bid.
Perhaps the clearest indicator of ROI from successful pricing digital transformation is your win rate. Knowing how many bids are won quantifiably shows just how much value digital transformation is bringing to your organization – it’s compelling evidence that’s hard to dispute. Sales teams tend to be great at recording wins, but when it comes to failed bids – not so much. For your win rate to be reliable, your data has to be pristine.
2. Quote turnaround time: The length of time from the moment an RFQ is received to the moment a quote is delivered.
Quote turnaround time is closely correlated with win rate, so it remains a definitive measure of successful pricing digital transformation. In this Amazon era, we’ve come to expect instant gratification when buying in both our personal and working lives. Making customers wait days for a quote is no longer an option and risks forcing them into competitors’ arms. Digitizing pricing processes, automating the most time-consuming, menial tasks, supercharges quote speed, and, by extension, sales.
3. Approval process speed: The length of time from approval request to sign-off.
A slow approval process reduces productivity, slows deal flow, and creates additional work through repeated reviews and edits. In many companies, the chain of reviewers and approvers is unnecessarily long, and senior personnel are required to sign off on deals that are of little significance to them.
The greater the number of people involved, the more protracted the approval process becomes. Measuring approval speed, and the number of deal-touches before final sign-off, might be a key metric for your business.
4. Pricing accuracy: The number of pricing calculation errors recorded.
Any manual process is susceptible to human error. Mistakes lead to delays, chargebacks, disgruntled customers, and ultimately lost profits and reputational damage. Fewer errors mean shorter sales cycles and more wins, making pricing accuracy an ideal KPI for measuring digital transformation success. One of the critical motivators for automating pricing infrastructures is to free your sales team from labor-intensive, labor-intensive, on-premise solutions or tools that are simply not designed for the heavy lifting that dynamic and competitive pricing demands, such as Excel, which are inherently error-prone.
5. Pricing pushback: The number of customers that successfully negotiate lower prices.
Buyers push back on prices for several reasons, all of them costly. Perhaps they don’t have the budget, or your prices have recently gone up. Most often, though, they simply don’t feel your quote provides good value for money. Salespeople don’t have the tools to defend their prices, so, give away unwarranted discounts, sacrificing margins to maintain customer loyalty.
Pricing software gives your sales team the tools they need to defend prices when they come under pushback pressure. Salespeople gain renewed confidence in their quotes. They know that they’re free from errors and in line with the competition. They can look back on past quotes, won and lost, putting prices into perspective and ensuring that every customer is treated fairly.
6. Agility: The ability to adapt quickly to market changes.
Companies want to become more efficient with a better level of predictability. They want to learn faster than their competitors. And respond rapidly to opportunities and threats. Most CEOs think their companies are more agile than they are. Why? Because agility is such a hard metric to codify and measure.
When it comes to measuring agility, it’s tempting to focus too narrowly on recording outcomes, e.g., the speed at which a new product is developed rather than the finished article’s profitmaking potential. “To ensure agile success, companies must keep their eye on essential business outcomes, rather than be caught up in process metrics that create a sense of false success,” Surya Panditi, member of the World Economic Forum’s Global Future Council on Agile Governance, writes. “By doing so, organizations are not only being built to change – they are also being positioned to last.”
Interested in finding out which KPIs other companies used to measure success? Check out our Ticketcorner case study!