Organizations must understand the associated costs when selecting and implementing pricing software solutions. Customers are increasingly beginning to understand that they are not merely purchasing software but investing in a transformative new way of conducting business. If your organization is not quite ready to look at your pricing software costs that way, it may be time to rethink your investment. While it may be hard for vendors like us to acknowledge, not every company is ready for pricing software. If your organization lacks the digital maturity to integrate such solutions, if you remain reliant on basic cost-plus pricing methods, or if you have not fully grasped the benefits and costs of a comprehensive pricing software solution, it might not (yet) be the right time for you to adopt it.

At Pricefx, we have almost a decade and a half of experience helping our customers to understand the payback they can get from pricing software so that they can track the success of their investment and go forward to get support for the purchase. There are several KPIs (Key Performance Indicators) that pricing improvement projects can move, such as win rates, resources needed to carry out processes, deal cycle times, etc. If you are interested, you can discover those in this informative article below:

However, as important as those KPIs and the business improvement numbers below are, in this article we will not be touching on those in depth.

Instead, we will spend most of our time discussing that your investment in pricing software will be buying your organization a new and transformative way of doing business rather than simply being an investment in a new piece of technology to add to your tech stack.

The Transformative Investment in Pricing Software: A New Way of Doing Business

As a SaaS salesperson and former pricing practitioner, I have observed that while the promise of enhanced revenue, improved profit margins, and streamlined operations is compelling, the internal costs of implementation can significantly impact the overall return on investment. These costs typically include the dedication of internal resources for implementation, training, and change management, all of which require careful planning and allocation to ensure a smooth transition.

These internal costs can account for up to 20-30% of the total implementation expenditure, a significant percentage that underscores the need for thorough financial planning. This planning is not just a step but a crucial process that can make or break the success of the implementation.

Internal implementation labor costs tend to be underestimated and under resourced. Integrating new pricing software demands the involvement of cross-functional teams, including IT, pricing analysts, and sales staff. These team members must commit substantial time and effort to the project, often dedicating a significant portion of their workload to ensure successful implementation.

Successful pricing software implementation not only incurs direct labor costs but also impacts their regular responsibilities, potentially affecting productivity in other business areas. When these labor costs account for approximately 15-20% of the total price, it becomes clear how substantial their impact can be on the overall budget and timeline.

Moreover, practical training and change management are critical to maximizing the new system's benefits. Training programs for pricing staff, sales representatives, and IT personnel are essential to ensure everyone is adept at using the new software and can fully leverage its capabilities. Change management efforts, including communication strategies and user adoption programs, are vital to mitigate resistance and ensure a smooth transition.

Though often seen as ancillary, these initiatives are integral to the long-term success of the pricing software and require careful consideration and investment. Neglecting these internal costs, which can account for an additional 5-10% of the total investment, can lead to suboptimal use of the new system, reducing its potential benefits and prolonging the return on investment.

To take a deep dive into the advanced metrics and costs of doing nothing and not implementing a pricing software solution, check out this eye-opening video from my Pricefx colleague, Gabriel Smith:

Ultimately, we're moving towards an environment where the conversation shifts from "software" to "a way of working" as the pricing software becomes seamlessly integrated into operations.

What That “New Way of Working” in Pricing Looks Like

Moving beyond pure implementation and subscription costs, transforming your organization’s pricing requires a gentle push in the right direction from technology.

For example, consider these following benefits your business could be missing out on by NOT adopting a next generation pricing software solution;

Proactively Simulate the Impact of Your Price List Changes Before They Occur

The price list impact simulation feature in certain pricing software enables you to evaluate the business consequences of a planned price list update prior to its market application, accounting for all components of the related price waterfall, such as special price agreements. It offers a visual comparison between the simulated price list change and the current state, along with all necessary calculation outputs to assess the potential changes.

Learn More About Price List Simulation Here

Rethinking Your Current Price Setting Processes

Doing away with reactive, drawn-out price setting processes in Microsoft Excel, the adoption of advanced pricing software solutions enables a revolutionary approach to price management. Instead of relying on slow, manual updates that can take months to complete, businesses can now adjust prices in near real-time to keep pace with rapid market changes.

For instance, if you have tens of thousands of SKUs that require frequent updates, the probability of completing them timely through traditional methods is quite low. However, with innovative pricing technology, these updates can be executed swiftly and accurately, significantly reducing the risk of margin leaks. The ability to react promptly to fluctuations in raw material and delivery costs ensures that your pricing remains competitive, and your profit margins are protected.

Additionally, with pricing software, forecasting the business impact of pricing adjustments becomes more straightforward. The software offers clear insight into where margins are eroded due to underpricing, or where revenue is lost due to overpricing. Pricing software enhances price list management, thereby refining your organization's understanding of the optimal pricing points for your products and services.

The Pricing Team Culture Shift Permeates Your Entire Organization

Using the above examples, you can see that its proactive nature, pricing software begins shift the focus from “when do I do it” to “how much, when and why.” In other words, pricing strategy becomes the focus rather than execution.

No more wild goose chases, hunting data from multiple disparate systems and disconnected teams and aggregating it all to enable some mediocre visibility of what is happening.

However, despite your pricing vendor's assurances, implementing the solution will demand significant effort from your team. More data input and specific rule-setting will lead to a solution that meets your precise pricing needs but yes, your team will be kept quite busy initially.

So, what are the pricing team going to do with all that extra time on their hands?

The Value of Your Pricing Team Increases with Pricing Software

Many worry that pricing software will totally replace their pricing team. However, it enhances their roles instead.

As mentioned, pricing software will streamline your current processes, greatly reducing the time your team spends on files and data analysis. This allows them to focus on using the new tools to identify better, more strategic opportunities.

Discovering these new opportunities will immediately provide your team with more challenging and creative work that adds significant value to your business. Additionally, they will begin collaborating with other departments, such as Purchasing for proactive pricing around cost changes and Finance and Marketing to align with strategic goals.

A team equipped with pricing software can handle larger tasks. It may take a few months to adapt, but typically within six months, your team's duties will shift from basic tasks like finding the latest Excel file or uploading data into the ERP (Enterprise Resource Planning), to more complex inquiries such as assessing how a price change will affect customer willingness to pay or determining the optimal combination of rebates to ensure desired profitability.

This transformation within your pricing team will catalyze a proactive mindset across the entire organization. As the team becomes more efficient and strategic, other departments will see the benefits of a more data-driven, collaborative approach. Procurement will start leveraging this newfound agility to anticipate and respond to market changes, while Sales can better understand customer behavior and tailor their approaches accordingly.

Senior management should notice the ripple effects, gaining insights that drive more informed decision-making. Gradually, this proactive ethos will become ingrained in the company culture, fostering an environment where innovation thrives, and everyone is focused on driving the organization forward.

BUT What is the Cost to Implement Cloud Native Pricing Software?

Pricing is challenging and complex.

Getting it right often requires some technological assistance.

Rather than asking yourself, 'can I afford pricing software?' consider this: Can your company afford NOT to use a pricing software solution?

Of course, you still need to understand the overall cost and determine if your business can manage the initial investment.

At Pricefx, we have direct experience with how beneficial pricing software can be in helping companies meet their specific business goals. However, we also recognize that the initial expense is crucial to the decision-making process.

To help you decide, I invite you to read this informative article on the costs of an advanced and game-changing pricing software solution:

Meanwhile, Happy Pricing!