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Pricing & Sales Optimization On A SaaS Platform

Fri, 02/22/2013 - 8:39am
Abbigail Kriebs, Associate Editor

Zilliant provides companies with data-driven guidance, enabling smarter pricing and sales decisions to help businesses make their numbers. The Zilliant optimization platform uses advanced science in its price optimization and sales effectiveness applications to drive measurable financial results for B2B companies. Industrial Distribution had a chance to speak with Greg Peters, CEO of Zilliant, on their offerings and what trends he sees in B2B software and pricing optimization. For more information, visit www.zilliant.com.

ID: What kind of features set Zilliant apart from other B2B data companies?

We provide software-as-a-service solutions to B2B companies by applying advanced science to their data to give actionable pricing and selling guidance.  We provide optimized prices and drive leads for sales reps that exist in their current installed base.

For the product we call MarginMax™, we essentially provide answers for our customers around pricing. We take their data and provide specific prices for customers who are buying specific products in specific geographies, across their entire book of business. We provide very detailed segmentation of a company’s customer base and opportunities, and then determine the elasticity, or sensitivity, to price movement within each segment. When a salesperson is quoting an opportunity to a prospect, we design the price list for specific customers and products in specific competitive environments. We look at a lot of different product-related, order and customer attributes to determine these price segments, calculate the elasticity, and then determine pricing within each of those segments.

If you think about slicing a company’s business into hundreds or thousands of segments and the ability to glean elasticity within each of those segments, it then allows a company to manage its business and drive the business in the manner that they want to. If you know the elasticity, then you know what the response for a particular customer is to price changes: Whether volume will go up or down and how much it will go up or down, etc. For certain segments, companies want to drive market share and drive volume, which leads to one set of answers. There are other companies that want to drive profitability for different segments, which leads to a different set of answers. We take a huge amount of data and boil it down to specific answers that are very actionable for the sales organizations.

ID: In dealing with this much data, how up to the minute is it? Instantaneous, day by day?

It is really up to the specific customer in terms of how often they want to change prices. Some change their prices daily, but I would say most do it monthly or weekly. They don’t want to see that much variation, but the system itself is able to do that. It is really more of how our customers want to manage that in their marketplace.

ID: Zilliant posted extraordinary numbers in 2012, really ramping up the amount of subscribers that you have. Also, profit margins were up for the company overall. Would you say that this is because Zilliant has helped customers to do the same?

It’s really interesting. We have been in the marketplace for a while, ten plus years, and we used to sell our solutions under an enterprise, perpetual software license model for on-premise installments. These were typically multi-million dollar engagements, heavy on the services, and it took six months or more to implement. We were doing very well, but the number of companies that are willing to spend millions of dollars to do this is a relatively finite number. As far as explosive growth and really taking our solution out into the world, that finite number of multi-billion dollar companies really limited us and other companies in the segment. In 2007 and 2008, we made a decision to migrate our solutions to a software-as-a-service model, meaning that we would take on the hosting.  We would stand the software up and have customer success managers that work with our customers to get the most out of the system on a month-in/month-out basis. By doing that, we’ve been able to alter our pricing significantly. Our price points are a fraction of what they were previously. That has allowed us to effectively take best-in-class functionality to a much broader audience and lower the size requirements for our solutions, so that now companies with a few hundred million in revenue can begin to take advantage of this technology. That is, more than anything, what has ramped up our customer acquisition rate and our ability to grow at the pace that we are growing.

In 2007, people were very skeptical about letting data outside of their firewall, particularly pricing data. Today, with the maturity of the cloud offerings that exist, the security is at or better than what most companies have internally themselves. Two things are really driving that: the maturity of the cloud itself has companies much more comfortable letting data outside, and if companies are going to use technology as an innovative leg-up in the marketplace, then they have to get comfortable with the SaaS model. Every software company that is getting funded by venture capitalists is using the SaaS model. If you are running a business, or if you are a big/medium-sized distributor and you want to innovate, then you are going to have to take advantage of the SaaS model. It is cheaper, better and faster, and it’s a win all the way around. It has been interesting to me how much of the setup services we could eliminate or reduce because we own the software stack and we do not have to deal with a unique software stack for every single customer. The efficiency and productivity is a huge win for everybody.

Would you have any advice for one of these smaller companies that might be looking to start a pricing optimization program? Why is it important to have one?

Because it is such a low-margin industry, distribution really requires optimized prices. Pricing is a game of inches, and we don’t typically make huge adjustments because companies’ numbers are way off base. We’re usually making small adjustments, saying “here’s where you need to nudge this up, here is where you can nudge this down,” and by doing that thousands of times over and over again, it adds up to really significant money. Most of our customers get at least a 10x return on their money every single year. It is a very tangible, measureable benefit in terms of adding to our customers’ bottom line.

How did Zilliant first find its way into the industrial segment?

We’ve been in the industrial distribution market since our inception. The initial technology was developed specifically for B2B companies with a high number of customers and a high number of SKUs, which obviously fits really well with the distribution space. Distribution has been a really core vertical for us since inception.

Why do you think that Zilliant has been able to stay in this vertical?

I think it is because we understand distributors, and we understand their business well. Our solution is largely built from the ground up for that vertical, so it’s really a quick win. We have also learned to get our customers started with a trial. We do proof pilots where we implement in one part of the business and not another, so that companies can measure the difference over the pilot period to prove the value and investment going forward.

How do you see Zilliant growing, or what segments do you see it moving into in the future? What is next for Zilliant?

We will continue to be completely focused on the B2B marketplace and the distribution, manufacturing and industrial services verticals. We will also introduce new offerings for those verticals. One of which is already available, called SalesMax™, which works like MarginMax™ but it uses different science to look for cross-sell and retention opportunities. If sales reps are going to make a call on a certain customer, the systems will tell them where the business has tapered off, the purchase history, and what the customer should be buying.

I think that the distribution market, like most, is getting more complex rather than simpler. Sales is certainly getting more complex and harder. Companies have made significant investments in their software infrastructure, and offerings like ours are by far the best way to continue to leverage customers’ investments and the data they already have to improve productivity and product profitability and grow top-line revenue.

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