Industry – The Least Important Criteria for Choosing Pricing Software
Choosing pricing software is no picnic. A lot of time and money is at stake, not to mention the future of your business. So, it makes sense for companies to do their due diligence. And most companies like yours search for proof points – evidence that the vendors they’ve short or even long-listed worked with clients in their industry. It’s no wonder that you might see yourself asking this question repeatedly of vendors, “do you have customers in my industry?”. But is this question the best criterion when choosing software that’s best for your business needs?
At Pricefx, we’ve been working with companies across all industries and markets for the last 10 years and we can say that while working with a vendor that works in your industry can be helpful, it’s not the be-all end-all.
In this article we’ll explore why whether a vendor has worked in your industry before or not is of little import and what you should be focused on instead. In fact, we’ll even show you what you should consider when choosing a pricing software vendor as well as the very real benefits that could give you.
“What Clients Do You Have in Our Industry?”
We hear this question time and time again from our prospects. It’s clear that knowing if a vendor has worked with other companies in your industry is an important factor in the purchase decision. And we see it not just across industries, but verticals and regions too.
Of course, we understand. Knowing that a vendor has cleared the path before and laid the foundations for your specific use cases suggests your project will run smoother, maybe faster, and you’ll start seeing ROI sooner. And committing to the wrong vendor could mean the project fails entirely.
The three fears that organizations face about choosing the wrong vendor is losing:
- Time: Wasting time that could have been spent building success with a better alternative.
- Capability: Not having the required functionality to solve their specific business issues.
- Money: Being locked into a contract with a vendor unable to fulfil their requirements.
And they are absolutely right. Choosing the right vendor is of utmost importance. However, knowing whether or not and if the organization has worked with companies in your industry is not going to help you do this.
The reason companies ask, “who else do you have in our industry?” … is it’s easier.
Buying enterprise software is complicated and for many it’s an added task to their already demanding jobs.
Do you work in my industry is usually shorthand for “will you understand my needs and deliver on their promise?”
And that is the real question you want answered.
Let’s unpack this a bit…….
What Should You Really Be Asking Your Potential Pricing Software Vendor?
At the end of the day all pricing software really is, is a tool that can be configured to allow you to manage your pricing strategy in the way you do pricing. Good pricing software is actually a problem solver.
When you look at it like this, it’s easy to see that whether (or not) a vendor had customers in your industry is extraneous information compared to whether (or not) the solution can solve your specific problems.
So, when shopping for a pricing platform, client stories and case studies are great and provide context, but they should not be your only source for a real understanding of what a vendor can do for your business. (After all, who do you suppose writes those?)
In order to cast away your fears about sacrificing time, money, and capability to the wrong vendor, then you must do your homework. This means that you need to understand what you want to achieve and—just as importantly—be able to articulate it clearly. Then the vendor can then say “Great! Our solution covers XX% of your requirements.”
This answer is infinitely more valuable to you than a 3-min read of an industry-specific case study or a checking a box in an RFP.
That being said, clarity is essential.
For a vendor to give you a straight answer, you need to ask a straight question. If you cannot articulate the question (a strategy partner might be able to help), you might run into issues. Imagine spending time on scoping workshops, discovery, demos and implementation, only to have your pricing software appear to underperform. That’s what happens when the requirements aren’t articulated clearly. If you understand what you need and are able to communicate that clearly, then the pricing software will help you reach your goals.
Whether you choose a pricing vendor already working in your industry/ vertical/ region or not, you’re still going to come up against the same problems if you don’t actually know what you need your pricing software to do.
Case in point: A few years ago, a retailer that was interested in us ended up choosing a competitor who had branded themselves as the educated choice for retail. The retailer felt strongly that a pricing solution focused purely on retail would be a better bet, despite it being a black-box platform. Nevertheless, they stayed in touch with us. Not long into their minimum three-year contractual commitments, these retailers started complaining that their chosen platform was severely underdelivered and its flexibility was non-existent.
They had chosen a platform based on previous industry experience and had walked straight into the pit of lost time, money, and technical ability. Luckily, they used their three years wisely. They worked out their precise needs and how to articulate them, and then did so for us. We were flexible, capable, and ready and we’re pleased to still have them as customers.
To be sure you’re making the right platform choice, you need to understand how the functionality maps to your specific requirements. And the proof points you should be requesting are those around functionality, not industry.
The Big Benefit of Choosing an Industry-Neutral Vendor
Just as a traveler has a wider view of the world and a broader understanding of how things work, so does a pricing vendor that partners with companies in multiple industries.
A good pricing software vendor should be able to learn from a variety of industries, regions and go-to market strategies, and then apply those learnings to your business.
Let’s look at some specific examples of how a breadth of pricing experience can enhance your pricing strategy thanks to cross-industry learnings.
Learnings from B2C
The story of how B2B is learning from B2C and trying to recreate the customer experience for their business customers is not new. Nor is the fact that more B2B companies are looking to discover more direct-to-consumer channels in order to have more control of their brand, pricing, and profits and therefore focusing on delivering B2C experiences. It is a well-known story of one market learning from another.
If a pricing software vendor focuses entirely on B2B customers, how are they going to help their customers achieve their new B2C-esque aspirations?
You would want a vendor that has experience with the highly volatile dynamic markets of B2C and understands the importance of incorporating real-time external data. With this they’d be able to apply ecommerce-specific pricing to the B2B world. That includes leveraging all the same data points, like click streams, page impressions, conversion rates, bounce rates – all at the user level – to inform optimization in our pricing engine and create an advantage for their B2B customers.
A vendor focused purely on B2B will have some serious catching up to do.
Learnings from Distribution
Something somewhat unique to distribution is vendor-specific rebates:
Manufacturer A sells its products to Distributor B, who in turn sells them to Retailer C. At each stage, each company will try to make a margin on the sale.
But often what happens is Retailer C requests (say) 100,000 laptops from Distributor B, and they want them distributed all over Germany within a week. But, as they’re buying in such a large volume, they want a special price. It’s not uncommon that the price negotiated for this order is lower than the price Distributor B paid for the laptops and so they end up selling at a loss.
This is where Distributor B goes back to Manufacturer A and asks for a conditional discount: a rebate. “Dear Manufacturer A, I need 100,000 laptops for a deal with Retailer C, however in order to make the deal work, I need €50 off the usual price per laptop.”
When choosing a vendor, you would want a partner that can help to transfer the logic and benefits of a distributor over to the retailer.
Retailer C will also be getting conditional discounts from their distributors (and possibly also their manufacturers), but what we can do, is allow Manufacturer A to approach Retailer C with a request to have its laptops featured in their ads (in-store, print campaigns, online banners, etc.) and instead of paying a lump sum for advertising as they normally would, they offer pricing support for the products being advertised. So, Retailer C runs a special promotional campaign for Manufacturer A products in return for getting better prices for them, which supports Retailer C in being more competitive and making more sales.
Cross-industry learnings create opportunities for even more win-wins.
Learnings from Manufacturing
If you were a discrete manufacturing company (extremely mature in pricing) and your ERP system ceased to work with SAP because of a mandatory ERP upgrade that broke your ability to calculate the configuration. You’d have cause for concern because every time you needed a price from SAP, you would not be able to get it. Time and money would circle the drain.
But if you chose a pricing software vendor based solely on industry knowledge but didn’t have a lot of experience thinking outside the box, then the money you could lose would start to clog that drain.
One way to solve this would be to instead of simply calculating prices, as is normally done for a quote, a vendor could choose to connect the calculations via an API. So, one system would send information in real time about which customer wanted which products, and the pricing software would do the math, calculate the net prices, and send them back in real time. Not typically done but you could outsource your pricing and computation power over to the software.
In fact, it’s something that we did ourselves. It was a fairly exotic case at the time. But having designed this process, we now have a huge advantage across every single industry. Now, whenever a customer’s other systems (CRM, online shop, external quoting tools) require information to calculate customer-specific net prices we’re able to leverage the same process, no matter what their industry.
Choose the Right Pricing Solution for Your Business
When you’re investing in pricing software, the proof points you should be focused on are around how well a solution helps you achieve your specific goals – not whether the vendor already has clients in your industry.
Choosing the wrong vendor could mean you losing time, money, and pricing capabilities, all of which could set you back years in pricing maturity. It’s best to invest some time into doing your homework right from the beginning, working out exactly what you need and being able to articulate that. When you truly understand how the functionality of a solution maps to your specific requirements, then you’re empowered to make a smart software decision and reap all the rewards from that.
Pricefx has learned a lot from our varied customers and their exacting requirements and is excited to share them with you. Our wide experience base has enabled us to offer our Margin Lift calculator which provides an estimate of the value you could achieve with pricing software, based on your specific industry challenges and objectives.
Why not calculate your potential? Check out our Margin lift calculator
Or….Want to find out what criteria are the most important to choosing pricing software? Check out this article below where we highlight 5 key questions to consider when choosing pricing software.
About the Author
Jochen Schmidt has over a decade of experience in strategy consultancy and advisory in addition to pricing and software. At Pricefx, he currently leads the solution strategy team in EMEA and based on prior experience, spearheads the retail industry team as a subject matter expert. Before working for Pricefx, he has held various positions at specialized consulting companies, providing value to clients by advising on pricing strategies and implementing pricing software. In his free time, he is a passionate cook, beach volleyball and volleyball player, spending most of his vacations travelling and hiking.