While the business world outside our organizations undergoes rapid transformation, with our competitors honing their pricing strategies and tactics, we often resist accepting the inevitable. Instead, we tend to stay occupied with our internal affairs, clinging to outdated practices. Humans, by nature, are risk-averse, even though we may pride ourselves on resilience. We often find comfort in our familiar routines and hesitate to step out of our comfort zones. Organizations exhibit similar tendencies. Even when confronted with imminent changes that could potentially harm us, we tend to ignore the signs and continue with business as usual. But what if conventional wisdom is flawed? What if we need to embrace a new normal and adopt a different mindset and accept that our old ways of price setting for profit may have vanished and been replaced altogether different than what we currently have in place?
Over the last decade at Pricefx, we have been working together with large-scale enterprise businesses just like yours to assist them in realizing their unique pricing niches and hidden pathways to extra profit with the use of innovative pricing software technology.
In this article, we will explore the world of profitable price setting using pricing software, delving into its key benefits, and providing real-world examples that demonstrate its effectiveness.
Price Setting for Profit: Using Pricing Software to Get There
As you found your way to this article, it is evident that you and your business are considering the implementation of a pricing software solution, such as Pricefx. That’s excellent news! By taking this step, you are actively exploring avenues to enhance your pricing strategies and boost your operating margins.
Here’s an interesting fact you might not know: Even a seemingly small 1% increase in your prices can have a significant impact, elevating your operating margin by up to 11%. To delve deeper into this concept, watch the informative video below, which provides a detailed explanation of how this intriguing phenomenon works.
The effectiveness of pricing software solutions is not based on magic.
Pricing software plays an integral role in maintaining pricing accuracy, streamlining the pricing process, and assisting in the identification of optimal price points for your goods and services, ultimately driving profitable growth.
However, it is essential to note that achieving the full potential of these solutions and realizing an 11% margin improvement requires more than just implementing the software and expecting immediate results.
Your pricing journey should be seen as long-haul journey. Profitable price setting is a never-ending ongoing process rather than a one-time setup, necessitating continuous monitoring and adjustment for sustained success.
Let’s check out some of the factors to consider and how some companies successful use the technology to set prices for profit.
Enhancing Profitability: Key Factors and Real-World Examples
Implementing pricing software is a game-changing move for businesses looking to achieve profitable price setting. By leveraging advanced analytics, data-driven insights, and automation, businesses can optimize pricing decisions, streamline price management, and adopt dynamic pricing strategies. Real-world examples demonstrate the tangible benefits of pricing software, from maintaining a competitive edge to implementing value-based pricing and precision in dynamic pricing. However, successful implementation requires careful consideration of data quality, training, change management, and continuous monitoring. Embracing pricing software as a strategic tool will empower businesses to set profitable prices and drive long-term profitability in today’s competitive business landscape. Let’s dive in a little deeper to the factors for consideration that pricing software brings to the price setting for profit table;
1. Efficient Price Management
Price management can be a complex and time-consuming task, especially for businesses with extensive product portfolios and multiple pricing tiers. Pricing software streamlines this process by providing centralized control over pricing data, allowing for efficient management, tracking, and updating of prices across assorted products, customer segments, and channels.
Price Management Efficiency for Profit – Retail Example – MediaMarktSaturn
MediaMarktSaturn is the leading consumer electronics retailer in Europe, operating more than 1000 physical stores and selling its products online in 14 countries across Europe. Here are some of the ways that MediaMarktSaturn uses Pricefx to organize its pricing and set optimized and profitable prices as a result
Automated pricing: MediaMarktSaturn uses Pricefx to automate its pricing strategy. By using Pricefx’s automated pricing software, MediaMarktSaturn was able to adjust prices in real-time based on demand, competition, and other market factors. This helped MediaMarktSaturn remain competitive in the market and maximize profits.
Competitive analysis: MediaMarktSaturn uses Pricefx to analyze its competitors’ prices and adjust its own prices accordingly. By analyzing its competitors’ prices, MediaMarktSaturn can offer competitive prices to its customers and remain competitive in the market. MediaMarktSaturn is not only now ‘matching’ its prices with those of its competitors but is also flourishing by aligning its own online and offline prices too, meeting the needs of its customers all while establishing a holistic, 360-degree view of their buying habits.
To learn more on how MediaMarktSaturn also uses price elasticity modeling, scenario analysis and real-time analytics to set prices for profit, check out the full case study by clicking on the image below:
2. Dynamic Pricing Capabilities
One of the key advantages of pricing software is its ability to implement dynamic pricing strategies. By leveraging real-time data and market insights, businesses can adjust and set prices dynamically based on factors such as geographical or jurisdictional differences, demand fluctuations, inventory levels, or competitor actions. This ensures that prices remain aligned with market conditions, maximizing potential for profit.
Dynamic Price Setting for Profit in Action in Manufacturing – Owen-Illinois Glass
Owen-Illinois Glass is a Fortune 500 company specializing in container glass products, is a large global business operating in 20 countries. The organization uses Pricefx pricing software to administer a data-driven global pricing strategy giving them the power to price and quote quickly and accurately yet still reflects regional needs where required, which their previous pricing solution could not provide.
It also gives their salespeople access to the information they need at their fingertips to be able to get the most out of every contract and interaction. Having access to this level of pricing insight means that every deal is being quoted with the margin maximized at levels suitable for that region.
To learn more about how the Owen-Illinois sales teams now enter negotiations with full visibility of the increased margins, while their pricing software also provides the company, as a whole, with an unprecedented level of transparency, check out the full case study by clicking on the link below:
3. Pricing Strategy & Price Optimization
Pricing software enables businesses to optimize their pricing strategies by conducting scenario analysis, price elasticity modeling, and value-based pricing assessments. It provides valuable insights into the impact of price changes on sales volume, revenue, and profitability, allowing businesses to fine-tune their strategies for maximum profit impact.
Price optimization, on the other hand, refers to the process of setting prices based on consumer demand, market trends, and other factors. By doing so, businesses can ensure that they are offering the right products at the right price, which can help them attract and retain customers.
One of the most significant benefits of price optimization is that it can help companies increase their profitability. By setting prices based on consumer demand and market trends identified using automated pricing software, businesses can ensure that they are not overpricing or underpricing their products. This can lead to increased sales and profits, which can help retailers grow their business.
Another key benefit of price optimization is that it can help organizations remain competitive in the market. In today’s fast-paced business environment, consumers are increasingly price-sensitive, and businesses that fail to offer competitive prices risk losing customers to their competitors. By using software-informed optimized price setting techniques, companies can ensure that they are offering prices that are competitive, which can help them attract and retain customers.
Pricing Strategy & Price Optimization in Food & Beverage – Danone Brazil
Danone Brazil is a leading multi-local food and beverage company building on health-focused and other fast-growing categories in the large Brazilian market. Danone Brazil uses their Pricefx solution for deep price strategy analysis, create price fluctuation simulation and leverage price optimization across their product.
To learn more about how Danone Brazil uses Pricefx for analytics, to experiment, test, create simulations and deliver outstanding pricing outcomes, check out the full case study by clicking on the image below:
4. Price Setting to Eliminate Margin Leaks
Pricing software plays a crucial role in leveraging price setting to eliminate margin leakage for businesses. With advanced algorithms and data analysis capabilities, pricing software can help identify areas of potential margin leakage and implement effective strategies to address them. By analyzing pricing data, market trends, and customer behavior, the software can identify pricing gaps, inconsistencies, and inefficiencies that contribute to margin leakage.
What’s more, pricing software enables businesses to establish and enforce dynamic pricing rules and strategies, ensuring that prices are set at optimal levels to maximize profitability. It helps identify opportunities for price adjustments, such as discounts, promotions, or bundle offerings, to drive sales and increase margins. By automating price updates and monitoring competitive pricing in real-time, pricing software empowers businesses to stay competitive in the market while maintaining healthy profit margins.
Eliminate Margin Leaks in the Chemical Industry – Stahl Holdings
Pricefx has enabled Stahl to establish a centrally managed logic and approval workflow with auto-generated prices that can be overridden or adjusted. It supports the team in setting pricing for over 2,250 products to be sold to almost 1,500 customers.
With all the information held in one place, processes and market reactions are much faster. Approval and price list updates now only take a few minutes, closing the potential for unwanted margin leaks. What would have taken the administrative team days to calculate now takes just a few hours. No more manually combining multiple elements, connecting complicated tables or extracting information from someone’s head.
By freeing up this valuable time, the pricing team can work on quality, the dependability of their pricing, and the continuous improvement and optimization of the tool itself.
Learn more of what Pricefx pricing software does for Stahl in the full case study, by clicking on the image below:
Other Price Setting Use Cases for Profit
These closing examples further illustrate how profitable price setting can be leveraged in the manufacturing, chemical, and distribution industries with pricing software. By adopting data-driven pricing approaches and utilizing pricing software tools, businesses in these sectors can effectively set prices that drive profitable growth and maintain competitiveness in their respective markets:
Dynamic Pricing for Chemical Industry: Adjust prices in real-time based on factors like raw material costs, seasonality, and market demand. By analyzing data on supply chain, competitor pricing, and market conditions, chemical manufacturers can optimize pricing strategies to navigate fluctuations and maximize profitability.
Contract Pricing for Manufacturing and Distribution: Use pricing software to manage complex pricing structures, discounts, and rebates associated with long-term contracts and agreements. This ensures accurate and consistent pricing, minimizing errors and margin leakage. For example, a manufacturer supplying products to a large retailer utilizes pricing software to manage pricing terms, track discounts, and reconcile invoice discrepancies.
Automated pricing software solutions can optimize your products at different channels and locations, including tracking a myriad of factors including customer history, competitor pricing, past sales volumes, and supplier pricing. When your business has access to intelligent pricing insights like these, it will make your organization’s price setting much more targeted and precision-like on the pathway to profit.
But how do you know which the best pricing software is to meet your organization’s unique set of business goals? Check the article below to check off your options:
Phil Anderson is currently VP Sales – EMEA at Pricefx. Over the past 12 years, Phil has developed vast experience in price optimization and sales effectiveness solutions sales for Pricefx and other pricing software companies. He delights in assisting customers to make their numbers, with data-driven solutions that convert revenue, profit and go-to-market objectives into actionable guidance such as price recommendations and sales opportunities, while driving top- and bottom-line growth. On the weekends, you will find Phil spending quality time at home with his wife and two children, as well as coaching U15 kids' soccer, and generally relaxing with a couple of beers.