Price List Management: 7 Ways It Can Save You Time & Money
February 6th, 2023 (Updated 03/09/2023) | 9 min. read
By Ken Edwards
Remember the good old days of 2019 when the world was a simpler and more predictable place? Boom! Then along came Covid-19. Before we could draw breath and recover from that bump in the road, the rate of increases and wild price fluctuations of the raw materials involved in your company’s production then went on a manic rollercoaster ride on the back of Russia’s invasion of Ukraine. What has transpired for your business over these last few years is that to maintain the integrity of your profit margins, the need to become more proactive in setting your prices and managing and maintaining your price lists has become crucial. Pricefx is now seeing companies execute 5 to 10 times more price changes than they previously did back in 2019. As a result, this article on “Price List Management: 7 Ways it Can Save You Time & Money” should assist your business in developing a strategy to plug any margin leaks and become more time effective in your price list administration.
At Pricefx, as a next-generation pricing software vendor, we have spent 10+ years answering diverse kinds of pressure points that our customers feel regularly. That can include assisting them in managing through times of sudden and extreme change and supplying them with technological solutions to make their businesses more efficient and profitable.
So, without any further ado let’s look at the 7 ways efficient price list management and proactive price list updates are important to your company’s profitability and smooth-running procedures, and how pricing software can help you to solve any price list updating headaches you may be experiencing.
7 Ways Proactive Price List Management Can Assist Your Business
Failure to update your price lists regularly can be costly. Marginal improvements in pricing will almost always have a more significant impact on your profit figures than marginal improvements in sales numbers. Instead of only asking yourself, “How can we increase sales?”—your business also needs to be asking – “How can we create value through a more accurate pricing approach?”
Frequent updates of your price lists —whether your company is involved in manufacturing, service, distribution, retail, or any other sector — can help ensure you are reaching a wide audience, increasing margins, and maximizing your bottom line.
With that in mind, let’s look at the top 7 ways proactive (rather than reactive) price list management can make your business more efficient and profitable.
1. Proactive Price List Management Allows for More Accurate Pricing
Standard manual pricing processes (in Microsoft Excel for example) for your products are simply too slow to accommodate the current rapid rate of change. If you have tens of thousands of SKUs to update daily, weekly, or even monthly, the chances of getting them done on time and accurately are little to none.
Manual price list updating cannot keep up with the current rapid cost changes. If your price list updates are taking up to 2 or 3 months to complete, then the chances are rapid raw material price changes are leading to margin leaks for your company.
What’s more, it will be easier to anticipate the business impact of pricing changes with the better visual display of pricing software. There will be clear visibility of where you are losing margin when items are priced too low, or where you are losing revenue because items are priced too high. Pricing software and how it enables superior price list management will improve the way that your organization understands your company’s pricing ‘sweet spots’ for your goods and services.
2. Automated Price List Management Enables Real Time Pricing
Changes to your benchmark pricing, pricing rules, promotional pricing, customer pricing and exception pricing can be made in minutes with the user-friendly workflows of automated pricing software.
There will be no need to wait for price supervisors to return from vacation while precious profit margin slips between the cracks. Before he or she heads off to their well-earned holiday, if your pricing manager has set up an approved ‘pricing corridor’ (between your high and low sales points) with your pricing software as guidance for your sales team, sales will keep turning over and profit will keep rolling in thanks to the automated price list approvals proactively put in place beforehand.
3. Price List Management provided by Pricing Software runs on Data, not ‘Gut-Feel’
The automated price list management that next-generation, cloud-native pricing software allows for data-based decisions based on prices your customers have bought at previously combined with the prices that you have established that have made your business money in the past.
As a result, with automated pricing software, you are bound to make better, more accurate, more confident, and more informed price list update decisions. Developing a thorough understanding of your customers through data to support your intuition instead of relying on second guessing yourself is critical.
Learn Here About Getting Your Data Ready for Pricing Software Implementation
This means analyzing your own historical data on how your prices have changed, why they have changed, and how your customers have reacted, all supplied in dynamic real-time.
By employing speedy dynamic pricing, you are empowered to pass on material and production ingredient cost increases on to your customers rather than wear them yourself. And when it is time to decrease prices again, you will be in front of your competitors rather than following them.
4. Automated Price List Management Will Align Your Departments Organization-Wide
With automated price list management, you will facilitate the creation of transparency and compliance around your pricing strategy that can ultimately drive coordinated price list updates across your entire organization. That means you will be concentrating your company’s efforts towards driving to the same organization-wide business goals, which is a powerful yet often under-rated lever to building a more profitable business.
By having pricing discussions early and often with team members across all your departments—especially sales, marketing, customer success, and product development – those company-wide conversations on pricing can assist in all team members developing a better understanding of their unique roles in pricing and get your organization working in sync as a lean and efficient pricing machine.
5. Great Price List Management Optimizes Price Simulation
Consider this – can your business be confident in the fact that discounting will at the very least protect your profit – and/or hopefully increase it? On the other hand, situations may occur that it might even be more profitable to sell fewer products at a higher and sustained price over the long-term, rather than to sell more at a lower price.
But how can your organization know for sure?
One of the keys can be to optimize your pricing decisions with automated price list management and get to a point where you can be sure you are achieving the highest price possible whilst still supporting revenue and profitable growth through pricing simulations.
Much quality pricing software on the market today allows you to simulate how decreasing or increasing your prices can potentially affect your desired business outcomes, not to mention how to price optimally for different markets or geographies. With pricing software, as your sales history is at your fingertips, you can easily identify the areas of margin leakage and rank areas of the greatest opportunity and attend to them.
6. Price List Management Aligns Corporate and Operational Business Goals
Your C-Suite executives will set the overall business objectives for your organization and that will influence your pricing strategy. However, updating your price lists in a timely fashion may be a critical factor in the successful execution of that strategy.
For example, if your online retail company intends to price-match competitors on everything in a competitive pricing strategy, real-time price lists will be necessary.
Likewise, if your organization offers a unique good or service that enables you a value-based pricing strategy that will also require real-time price list management. On the other hand, if your business is looking to introduce a range of new products into the marketplace at razor-thin profit margins until the new products take a foothold in the marketplace, those prices will also need to be managed upwards quickly to risk leaving profit on the table when the eventual demand surge comes.
What’s more, the technology will log all the price changes going on behind the scenes, giving you the power to question what has happened previously, and keep them all as records as to the rationale of individual pricing changes.
7. Early Planning for Price Transitions with Existing Customers Maintains Good Relationships
Maintaining quality relationships with your current customers is extremely valuable and naturally, you will want to show them that you care. Consequently, proactive price planning through real-time price list management and communicating how your company’s price adjustments will affect your customers is a massive part of developing quality long-term business relationships.
For example, if you only recently signed a big contract with a new client, increasing your pricing only a month or two after signing it may not be the best way to cultivate that blossoming business relationship.
Consider using your pricing software to track and set realistic timelines for contract renewals and/or excluding new clients from sudden and unexpected price list increases.
If you use the price list management technology to establish a precedent of crystal-clear communication of price changes straight out of the gates, it can be an invaluable asset in effectively explaining any price increases in the future while simultaneously maintaining valuable customer relationships.
Update Your Price Lists Regularly to Maximize Your Bottom Line
Now you know 7 ways that proactive price list management can save your organization time and money. Although your company might not necessarily need to change prices every second, the information above shows that your organization should be updating its pricing as often as your business requires and allows for, and as often as your customers need.
Frequent updates of your price lists —whether your company is involved in manufacturing, service, distribution, retail, or any other sector — can help ensure you are reaching a wide audience, increasing margins, and as a result, maximizing your bottom line.
At Pricefx, we are proud to offer an innovative pricing software solution that makes it possible to continually monitor all the variables that might affect your company’s pricing choices.
If you are looking to learn more about the complete capabilities of price management software (beyond its price list management capability) and how you may be able to use it for your business, check out our recent Ultimate Guide to Price Management Software article: