What Does Your Department Stand to Gain From Pricing Software?
September 26th, 2019 (Updated 03/23/2021) | 6 min. read
By Tolu Oke
Knowledge is power. Having the departments of your company know and use the current prices of your product or service allows them to do their jobs better and more efficiently. This results in an overall good feeling that induces confidence and pride toward the current and future prospects for your enterprise.
Allowing Pricing Software to Help You to Help Your Company
Pricing software is a comprehensive pricing tool that affects the major departments in your business. In a broad sense, raw materials; labor; overhead such as facilities rental, upkeep, and utilities; production costs; advertising; insurance; and the many expenses that owners and managers must take into account while operating a business – these combined determine the price a company charges for its products or services. This is called the “Cost-Plus” method of pricing, the method companies traditionally use. Inversely, pricing can determine the money a company can afford for these same elements that make a business enterprise successful. Smart companies employ pricing software to help them do this.
In order for pricing software to work properly, we must furnish it with the proper information and data. It begins with business rules. These describe your company’s policies and procedures, which take into account the current marketplace but also the demographics of who is buying your product, when they are buying it (the time of year, day, or week), competitors’ prices, demand level, and numerous other factors. This is called “Dynamic Pricing,” which pricing software companies such as Pricefx use along with algorithms and AI to determine best prices.
The Effects of Pricing Software on Various Departments
When a company employs pricing software, it affects each department. Some effects are small, some large. The most obvious department the software affects is IT. How pricing software affects your IT area depends on a number of factors, with the most overriding one being whether the software is a commercial off-the-shelf (COTS) model or a custom-built package. Software engineers write a COTS software package so it can accommodate a wide range of business requirements. As a result, it is “one-size-fits-all” and, by design, cannot take into consideration many of your company’s unique attributes and requirements. Custom pricing software, of which Pricefx is a premier example, makes your company’s unique approach to business, its objectives, its people, and its history a top priority. Custom software accommodates the idiosyncrasies of your IT system and addresses potential problems that can occur during setup, implementation, operation, and any maintenance that is required later. Pricefx consults with your associates about planning an approach and potential methods well before the implementation stage. These include SMEs but also people in other departments that will use the software. And while custom software used to be the privilege of only large companies, today, even smaller companies can take advantage of its benefits.
Major Departments Affected by Pricing Solutions
In addition to IT, pricing software affects the sales department and its personnel because the software not only monitors and adjusts prices according the many factors mentioned above, it also keeps track of sale prices, promotions, rebates, and refund policies. Having the most current figures and information it needs at its fingertips makes it easier for the sales force when talking with prospects and when negotiating sales and placing products.
Accounting also needs the best, most reliable information about pricing to do its job of balancing the books. Obviously, when a person knows how much money is coming in based on current prices, it makes it easier and less stressful to pay the company bills. Confidence and reliability in accounting also produces happy faces at stake- and share-holder meetings.
When a purchasing agent knows the price of your company’s services and products, s/he has more confidence in his/her ability to procure the things your company needs to make its products or provide its service and ultimately, to operate the business efficiently and effectively. This includes buying raw materials, production equipment, office and facility requirements, and the services of outside vendors.
Working hand in hand with Accounting, Management must understand where it stands financially. Knowing the current state of prices helps provide this knowledge and the security it imparts. Management can then look at the overall picture of the company and do its job of providing the direction for the company’s present state as far as its financial soundness but also its business soundness and prospects. A big part of management’s activities and responsibilities is determining where the company is going in the future – the new products or services it plans to introduce, new equipment it plans to buy and implement, and new facilities it intends to build. It also uses pricing data in determining its broad financial status when negotiating salaries and pay scales for the associates it employs and for contractors.
It’s frustrating for customers when they speak with company representatives who do not know what they are talking about. Beyond frustration, it can be confusing for customers and absolutely harmful in the long run for the company. Customer service reps need to have the best knowledge of prices and services to avoid annoyances that can lead to cancelled sales, a bad company reputation, and customers going elsewhere for the products or services they need.
Other departments that must have the most current pricing information are your Marketing, Advertising, and E-commerce areas. They need this data so they can do their thing promoting the company’s product or service with sale prices, rebates, promotions, and digital marketing. Imagine the confusion and problems it would create if they did not have the correct information they needed. You may be in this situation now, and it’s not a pretty picture.
To a lesser extent perhaps than other departments, Manufacturing and Production benefit from having the most current pricing data. This information can be important when it comes to determining production runs. Your production manager has to know what’s hot and what is not when s/he schedules the manufacture of an item or part because the price of that item or part is often what makes it hot (or not).