With costs fluctuating from one day to the next and customers’ purses tightening due to the rising cost of living, you know you must take action to ensure you’re pricing competitively while protecting margins.
You are well aware of how important a lever pricing is and you’re curious about how pricing software might help. Would it really bring substantial benefits? And if so, how? Which type of pricing software would provide most value to your business?
At Pricefx, one of the world’s leading pricing software vendors, we have helped hundreds of businesses over the last 10 years in selecting and customizing the technological tools they require for pricing in their unique business in order to meet their specific goals.
In this article, we walk through each type of pricing software and explore what it does, how it does it, and the benefits it brings. It is important to note that when we talk about “types” of pricing software we are referring to how they might be colloquially referred to and their functionality.
But first, let’s define what price management software actually is.
What is Price Management Software?
Many of our customers come to us hoping our pricing management software will be a magical pricing cure, always ready with the right answer as to how to price their products. They’re mistaken as to what pricing management software is.
It is not a kind of pricing witchcraft churning out price prophecies. Rather, it is a platform packed with intelligent tools with which you can execute your own pricing strategies.
To truly extract the value of price management software, you need two things: data (product, customer, sales and transactional) and clear business objectives.
With good quality data and specific business goals, price management software can help you transform the former into the realization of the latter. It will help you contextualize your data by bringing in external inputs (like market and competitive data) and allow you to layer it with business logic. It is the combination of good data and business logic working together that enables price management software to fuel your organization’s endgame.
What are the key benefits of all price management software?
PricingAutomation: All that time usually spent sifting through emails looking for the pricing spreadsheet (hopefully the latest version) and manually inputting essential pricing data (hopefully correctly) can now be spent doing value-add pricing tasks, like strategizing and optimizing.
Increased Accuracy: Removing manual input eradicates human errors and, assuming your input data is of a certain quality, the system will produce accurate prices for each product, customer, region, special contract etc. in a flash.
Greater visibility: With accurate reports and visibility of the entire waterfall, you’ll also gain an unprecedented overview of your pricing and insights into where you’re losing margins or revenue due to prices being too low or too high. Risks are mitigated and opportunities are leveraged.
Eradicated siloes: Not only does price management software bring multiple data sources together to become your business-specific mega brain that helps you build intelligent and relevant pricing strategies, but it also ensures that no human in the company heads off to Bermuda for two weeks each spring leaving a vacuum where their brain used to be.
Long story short, price management software elevates your capacity to add more levels of complexity to your pricing and weaponizes your data to produce more profit and protect more margin over time without the headaches of error-prone data input.
So now that we understand what the overarching term pricing management software covers, let’s dive deeper into the various types of pricing software and what each is used for.
5 Types of Pricing Software and What They Do
1. What Is Price Optimization Software?
Price optimization is not just about finding a good price for your product but finding the right price for the right customer in the right market segment. Your product’s value is intrinsically linked to your customer’s perception of the value it brings them and is therefore different for each customer. If you are unable to detect those nuances, then you are missing out on margin where customers would have paid more, or on sales where customers want to pay less.
Price optimization software works by analyzing a wide range of internal and external data to work out where the perceived value of your offering lies and then recommends price points (or ranges) based on your customers’ willingness to pay. And it does so in such a way as to optimize your chosen function/s, which could be anything from maximizing profits to minimizing total cost to serve.
You can use price optimization software to increase margins, volume, revenue, or market share; to drive customer behavior; and to identify a healthy supply-demand balance.
What Are the Benefits of Price Optimization Software?
Best Strategy Identification: It helps you determine the best pricing strategies to use with specific product and customer groups, to work out how best to combine products, to establish regional or seasonal strategies, and to plan discounts and promotions.
Pricing Based on Willingness to Pay: By understanding and leveraging the willingness to pay of your customers, you can capture more margin from those who will pay more and more sales from those who’ll pay less to dramatically boost profitability.
Continuous Improvement: With all pricing data, history, and analytics stored in one place for continuous improvement over time, price optimization software puts you on a journey towards pricing excellence, giving you a better overview of all your pricing data, and guiding you towards better pricing strategies and successful outcomes.
More Accurate Pricing Decisions, Faster: The best price optimization software is enhanced by Artificial Intelligence (AI) and Machine Learning (ML), assisting you in making accurate and fast pricing decisions and confidently outline pricing strategies that your teams can get behind.
2. What is Pricing Analytics Software?
Pricing analytics software is rarely ever a standalone piece of software. It is usually a key part of price management software. Business Intelligence tools or Tableau can provide analytics but not in the way pricing software can.
Pricing analytics software typically helps you turn data into informed pricing decisions and consider two foundational key metrics specifically:
The pricing waterfall: A pricing waterfall is a visualization tool that clearly shows the journey your price takes from your list or base price to your pocket price and identifies how specific factors and the cumulative effect of discounts and rebates are impacting your profitability.
The margin bridge/ breakdown: This is a report showing the gap between your budgeted and actual sales as well as an explanation for it.
If you have clear goals and understand your desired outcomes, pricing analytics software will enable you to drill down into the numbers, discover the profit points for your business, and make better decisions across more levels, assisting you in improved segmenting customers and products and putting together better quotes.
Pricing analytics software consolidates your data and enables you to analyze every aspect of your pricing strategy to learn how and where to improve prices and to identify untapped opportunities that will increase your margins and profits.
What Are the Key Benefits of Pricing Analysis Software?
A Single Source of Truth: Your pricing analytics solution can become your sole source of scalable pricing truth, unearthing your pathway to increased profitability. What’s more, it’s accurate and automated.
Drill-Downable Data: You can maximize profitability with analysis insights and optimize prices across your entire product line. What’s more, it will help you fix price misalignments or price leakages.
Upgrades Your Pricing Team: Replace the hours spent collating data from across departments and regions and calculating prices manually with pricing analytics software that does it all automatically, freeing the team up for more strategic tasks.
Predicts The Future: Predictive models use past data to predict the future of price with greater accuracy, providing invaluable guidance as to what you should or should not do with your prices, discounts, and promotions.
3. What Is Configure Price Quote (CPQ) Software?
CPQ software automatically generates quotes for orders and sends them through an automated approvals process to dramatically accelerate quote turnaround times and accuracy. Price recommendations can even be personalized to the customer via advanced artificial intelligence based on historical data and customer preferences.
Configure Price Quote Software gives you a better understanding of your customers’ needs, which is vital in personalizing your offers and closing more deals.
What Are the Key Benefits of CPQ Software?
Reduces Sales Cycle: Automated quotes and approvals enhance customer experience as you can get back to them in a timely manner.
Rebates can be highly complicated and, if not well understood and closely monitored, can become a leak to the profitability of your biggest deals.
Rebate Management Software helps you create, manage, and monitor all your rebates, promotions, and special off-invoice pricing from one place and to deliver on customer claims in extensive sales channels setups.
What Can You Do with Rebate Management Software?
Define Winning Agreements: Set up and manage rebate agreements with ease. Easily monitor progress and execute pay-outs through your ERP (Enterprise Resource Planning) system. Find everything in one place and automate claim validation against approved quotes or pricing rules.
Achieve Holistic Visibility: Easily monitor how your customers are progressing with volume, value and product level agreements and ensure faster payouts when due.
Gain Confidence Around Rebates All discounts and rebates look good on paper. But the data tells a different story. Calculate rebate impact (now and in the future) to ensure a profitable scenario. Use the data to transparently explain your offers to customers and clarify why you’re not happy with those offered to you.
Better Use of Resources: By automating processes, you free up time in pricing, finance, purchasing and commercial departments, increasing productivity for use in other areas.
5. What Is Ship & Debit Software?
Off-invoice incentives and ship & debit programs play a key role in the successful sale of bulk goods and can offset changes in the market. When executed properly, this process is a win-win for all concerned. But executing it properly is easier said than done.
Ship and Debit Software helps you manage ship & debit claims to guarantee long-term savings and customer satisfaction. It helps you implement a quick and efficient claims management process that will improve transparency, decrease turnaround time, and eradicate errors and miscalculations.
Not only does it streamline the claims management process, which is important for optimal trust and reduced financial risk, but it gives you the ability to automate and validate ship & debit claims to ensure smooth running of processes and timely fulfillment.
What Are the Key Benefits of Ship and Debit Software?
Reduced manpower (and risk!): No more manual checking and double checking the numbers on an Excel spreadsheet where errors could end up losing you millions.
Decreased turnaround time: Avoid delays due to the sheer amount of paperwork and calculations required by streamlining and automating processes.
Improved trust: Poor claims management processes can damage the relationship between channel players, sometimes breaking contracts entirely.
Decreased risk: Eradicate the potential for bogus claims to make it through the off-invoice reconciliation process.
Tidier Budgets: Avoid budgeting complications due to unprocessed claims from previous fiscal years.
It’s Time to Leverage Pricing Software
So, as you can see, there is a pricing solution for every pricing problem out there.
Whether you’re looking to boost revenue, protect margins, increase profits, enlarge market share, or simply better understand what is going on with your prices, price management software is your next step. Now you just need to figure out which one is right for you!
Idrissa Diop has over a decade of experience in pricing. As a Solution Strategist at Pricefx, Idrissa helps companies to improve their pricing processes, profit, and growth with software. His expertise ranges from defining a pricing strategy to pricing strategy audits and competitive analysis.