Pricing Software ROI: When Can You Expect Tangible Benefits?

As you contemplate an investment in price optimization, management, or CPQ (Configure, Price, Quote) software, a crucial question looms large: What kind of return on investment (ROI) can you realistically anticipate? Without a clear answer, securing budget allocations, obtaining executive buy-in, and addressing pricing-technology-related solutions to your revenue and margin challenges may remain elusive. At Pricefx, we understand extremely well the significance of this quandary and have extensive experience assisting our customers in unraveling the potential payback associated with pricing software ROI. This knowledge empowers them to not only track the success of their investment but also garner the necessary support for their procurement decisions.

In the realm of pricing improvement projects, numerous key performance indicators (KPIs) come into play, encompassing metrics like win rates, resource optimization, and deal cycle durations, among others. However, in this article, we will home in on seven other important pivotal factors that exert a direct impact on your bottom line, achieving ROI ASAP, driving revenue and influence profit improvements. By delving into these core elements, we aim to shed light on when and how you can expect to witness tangible benefits from your pricing software investment.

But first up let’s define ROI exactly, how it is different to total cost of ownership (TCO) in a pricing software project and why it is important to know the difference.

How is ROI Different from TCO (In a Pricing Software Project)?

What is ROI?

ROI is a fundamental concept in the pricing software landscape, serving as a vital metric to evaluate the effectiveness of your investment.

ROI measures the gains generated from your pricing software compared to the costs incurred. It is typically expressed as a percentage, calculated by dividing the net gain (profits) by the initial investment (costs).

 

In the context of pricing software, ROI reflects how efficiently the software enhances your pricing strategies, boosts revenues, and improves profitability.

It provides a clear picture of the value your pricing software delivers to your organization. The faster the ROI, the more successful your investment is in generating a substantial return compared to what you initially put in. Evaluating ROI is crucial in justifying the expense of pricing software and making informed decisions about its adoption and optimization.

What is TCO?

On the other hand, the total cost of ownership (TCO) in the pricing software landscape encompasses all the expenses associated with the software throughout its lifecycle. This includes not only the initial purchase or licensing costs but also ongoing expenses such as maintenance, training, and support.

While ROI focuses on the benefits generated, TCO accounts for all the costs incurred, helping organizations make informed decisions regarding the overall financial impact of the software.

 

TCO is crucial in ensuring that the expenses related to pricing software do not outweigh the returns it delivers, providing a comprehensive perspective on the true cost of adopting and maintaining such a solution.

By considering both ROI and TCO together, businesses can make informed decisions that balance the financial investment with the expected returns, leading to more effective and sustainable pricing software strategies.

For those wanting to check more information on TCO, please check the handy article below, or carry to learn about more ROI and when you can expect to experience tangible benefits:

How Long Until I Begin to See ROI on My Pricing Software?

The most honest answer is ‘that depends’ for ROI time on your chosen pricing software, what steps your organization may have followed, and the internal practices your business may have established to give your pricing software solution the best possible chance of success in the shortest possible time.

Please note that the ROI times published below in this article are based upon information available to the public, including information gathered from publicly available reviews, rankings, and testimonials.

We suggest you also undertake your own research in combination with the information supplied below to reach your own decision.

 

Other company trademarks are owned by those companies and not by Pricefx. Similarly, the “G2” trademark is owned by G2, and references to G2 are not intended to suggest affiliation with or endorsement by G2.

 

Nothing in this article is intended to suggest any affiliation with or sponsorship by companies other than Pricefx.

That said, according to the independent reviews received by the real users of the top 4 enterprise-level pricing software and submitted to G2, the world’s leading business software review platform, indicates that (depending on the pricing software used) between 22 %to 46% of pricing software users achieve ROI within the first 12 months of their Go Live, whilst as many as 55%to 69% achieve ROI within the first 2 years of use.

However, let’s examine the especially crucial factors that could potentially help you achieve ROI ASAP and finish at the lower end of those ROI times, rather than the upper limits.

7 Factors to Accelerate Your ROI ASAP with Pricing Software

Remember pricing is a journey, not a destination. Whether you are just starting or already well-versed in the pricing game, there are 7 critical factors that can help you expedite your Return on Investment (ROI) when utilizing pricing software. In no particular order, let’s dive into these factors:

Factor 1: Data Identification, Quality and Availability

The identification, availability and quality of data can significantly impact the effectiveness of your pricing strategies. To ensure you maximize your ROI with pricing software, consider the following:

• Assess the availability of accurate and up-to-date data, as it’s crucial for making informed pricing decisions.
• Implement data quality checks and cleansing processes to eliminate errors that may affect your pricing outcomes.
• Explore the integration of data sources and data enrichment tools to enhance the depth and breadth of data available for analysis.

A strong focus on data quality and availability will enable your pricing software to deliver more accurate and reliable insights, ultimately leading to a faster and more substantial ROI.

Factor 2: Alignment with Business Goals and Customer Needs

To expedite your ROI, it’s vital to ensure that your pricing strategies align with your overarching business goals and cater to your customers’ needs. Consider these aspects:

• Regularly review and update your pricing strategies to ensure they reflect your current business objectives.
• Continuously assess customer preferences, market trends, and competitor pricing to adjust your strategies accordingly.
• Leverage your pricing software to tailor your offerings to customer segments, enhancing customer satisfaction and loyalty.

Factor 3: The Flexibility of Your Chosen Solution

Your choice of pricing software can make or break your ROI. In today’s dynamic markets, the ability to adapt is paramount. The last thing you want is to embark on a lengthy implementation project only to find that your solution is rigid and unable to keep up with changing demands.

To ensure your pricing software stands the test of time, ask yourself these essential questions:

• If you start with pricing analytics, does the solution offer additional capabilities for the future?
• Is the software provider innovative and committed to staying competitive in the long run?
• How easily can you integrate the software with other IT systems without compromising its quality?

A flexible, adaptable solution can save you valuable time and resources while securing a more significant and sustainable ROI.

Factor 4: Your Company’s Level of Pricing Maturity

Just like an intricate dance, pricing strategies require both finesse and skill, and understanding your position in the pricing maturity spectrum is key.

We encounter companies at various stages of pricing sophistication and maturity, and while some companies may be well on their way to pricing prowess, most fall within the early stages of pricing maturity.

Here’s the scoop: the less mature your organization is in terms of pricing, the greater the untapped potential for pricing improvements and profit generation. It’s akin to unearthing hidden treasures in the world of pricing.

 

Even the most sophisticated companies view pricing as an ongoing journey rather than a final destination. This mindset is especially critical in today’s turbulent times, where flexibility in pricing strategies and tactics can be a game-changer, offering a competitive advantage to those who embrace it.

So, whether you’re just starting your pricing evolution or already a seasoned player, understanding and leveraging your company’s pricing maturity level is a fundamental factor in accelerating your ROI with Pricefx Pricing Software. The path to pricing excellence is a dynamic one, and recognizing your current position is the first step toward unlocking its full potential.

Factor 5: Your Organization’s Willingness to Change and the People Involved

Change is inevitable, especially when implementing new pricing strategies. Without effective change management, even the best pricing software may struggle to provide its full potential ROI. Poor change management can lead to subpar results and even poorer user adoption of your pricing software solution across your team.

So, how can you navigate change successfully and ensure a smoother transition? Consider these tips:

• Secure executive priority and buy-in to lead organizational change.
• Prioritize the needs of application users, such as your sales and customer service teams.
• Begin with small, incremental changes within a larger vision.
• Reward and praise those who adopt the new processes and technologies.

By effectively managing change within your organization, you will significantly enhance your chances of achieving a swift and successful ROI.

Factor 6: Influences on Your Pricing Power and Gross Margins

Your ability to influence pricing power and gross margins depends on several key factors. These factors, while numerous, have a substantial impact on your pricing strategies:

• Level of direct competition: The more competitive the market, the less pricing power you have.
• Product commoditization: Specialized or proprietary products grant more pricing power.
• Pricing transparency in your industry: More transparency reduces pricing power.
• Complexity of your pricing structure: A sophisticated pricing waterfall with multiple levers often means more pricing power.
• Price variability across your customers: Greater variability can indicate more pricing power.

Factor 7: Price Optimization for Maximum ROI Potential

Regardless of the company’s maturity level in pricing, optimization remains the cornerstone for achieving the best ROI with pricing software. The less mature a company is, the more potential they have for growth, yet even highly mature companies can unlock great ROI by applying price optimization effectively. Price optimization is the key to refining and maximizing the efficiency of your pricing strategies, ensuring they are finely tuned to deliver the best outcomes. By embracing optimization practices, regardless of your company’s current pricing sophistication, you can unearth hidden value and consistently enhance your ROI with a quality pricing software solution.

Understanding and leveraging these factors can help you make informed decisions when adjusting your pricing strategies to optimize your ROI.

Great! That is ROI Organized, But How Do I Track the Impact of Pricing Software on My Margins Too?

Now you know how and when you should begin to see tangible benefits to your ROI numbers on pricing software, you will probably also want to know how a quality pricing software solution can also add to your company’s bottom-line profit and margins.

If you would like to learn more and get a feel for where the award-winning Pricefx pricing software could potentially take your margin numbers, check it out for yourself on our free Margin Lift Calculator:

However, if you are ahead of the game and you have completed all your calculations, talk to a pricing expert today to get started on your pricing software journey.