Pricing Technology Myth vs. Reality

Pricing effectively in B2B has never been easy. But today, increases in pricing transparency, information access, and global competition are conspiring to make a difficult task even more challenging. For many companies, memories of the last downturn are all too clear. And as a result, most are focused on driving efficiency and productivity to maintain financial health. In this situation, pricing technology would seem to be the right solution at exactly the right time.

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© 2014 MindBrew, LLC. All rights reserved. This publication may not be reproduced or distributed in any form without MindBrew’s prior written permission. This publication contains the opinions of MindBrew’s research and editorial organizations and should not be construed as statements of fact. The information contained in this publication has been obtained from sources believed to be reliable, however MindBrew disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. The opinions and information expressed herein are subject to change without notice. P R I C I N G B R E W R E S E A R C H R E P O R T Seven Myths and Outdated Beliefs That Are Causing Companies to Fall Further and Further Behind MYTHVSREALITY Pricing Technology Pricing effectively in B2B has never been easy. But today, increases in pricing transparency, information access, and global competition are conspiring to make a difficult task even more challenging. For many companies, memories of the last downturn are all too clear. And as a result, most are focused on driving efficiency and productivity to maintain financial health. In this situation, pricing technology would seem to be the right solution at exactly the right time. After all, pricing has more leverage on profitability than sales volume or operating costs. And technology has long been a proven source of efficiency and productivity gains. So the combination seems ideal. SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. Pricing Effectively in B2B Is Becoming More Challenging 47% 53% YES NO SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. The potential of pricing technology is clearly being recognized by many B2B companies. In the last decade, adoption and utilization of pricing technology has grown significantly in response to increasingly difficult market conditions. In a recent PricingBrew study, a full 47% of the B2B companies surveyed indicated that they were currently using pricing technology to: Model and analyze pricing data Segment and optimize prices Manage quotes and contracts In the same study, the companies who utilize pricing technology also reported experiencing less pricing pressure than those who do not. While this certainly bodes well for the users, what about the others? Pricing Technology Utilization In B2B Has Been Growing Does Your Company Use Pricing Technology? At PricingBrew, we interact with tens of thousands of B2B companies across a variety of industries. We conduct practitioner surveys and interviews to uncover and report on the most effective B2B pricing practices and capabilities. And we’ve made it our business to stay up-to-date on the latest trends and developments in the pricing technology landscape. Given the benefits that the pricing technology users report, we wanted to understand more about those that aren’t using it: Why aren’t these companies using pricing technology? What are the factors that have been holding them back? What do the technology users know that others may not? 47% 53% YES NO Does Your Company Use Pricing Technology? SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. So Why Are These Companies Sitting on the Sidelines? Surprisingly, the common causes of inaction we’ve identified aren’t based on current organizational, technical, or financial realities. The pace of technological change and development over the last 3-5 years has made it very difficult to keep up and stay current. As a result, many of the non-users are simply misinformed about key aspects of the pricing technology landscape as it exists today. In effect, these companies are being held back by perspectives and views that may have been accurate just a few years ago, but have since been nullified by technological evolution and advancement. Seven of these pricing technology myths and misconceptions are very common...and costly. SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. Many Companies Hold Outdated and Inaccurate Views Some companies believe that only the largest companies can benefit from pricing technology and that their company is simply too small to warrant it. Because they could afford to fund the initial R&D, multibillion dollar companies were indeed the driving forces behind the development of the first major pricing solutions. However, the efficacy of pricing technology is less about scale and more about complexity. And large companies certainly don’t have an exclusive on having to price lots of products to lots of customers. Our research shows that while the larger companies still represent the bulk of the pricing technology user- base, utilization amongst smaller companies is growing quickly. It’s Only for Giant Companies...We’re Too Small for It SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. PRICING TECHNOLOGY MYTH #1: 35% 33% 17% 15% $5+ Billion $1-$5 Billion $500M-$1B $250M-$500M Pricing Tech Users: Size of Business Some companies are under the impression that their industry is so unique that there’s no way pricing technology could help. They see companies in different industries reaping the benefits of pricing technology. Rather than being encouraged and motivated, they simply say, “Yeah...but our industry is different.” But no industry is immune from the problems that pricing technology is designed to address. And no sector operates without buyers and prices. Our research confirms that the use of pricing technology isn’t limited to a handful of industries. We see adoption and utilization across 14 different B2B verticals---from high-tech and building products to education and agriculture. SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. It’s Only for Certain Industries...And Our Space Is Different PRICING TECHNOLOGY MYTH #2: We’ve also found that companies have a limiting belief that pricing technology is only for certain business models. Manufacturers will conclude that because they sell through channels and are removed from the ultimate customer that pricing technology would be of little use to them. But here again, wherever there is a buyer being offered a price, pricing technology can help improve and optimize those interactions. While distributors and retailers were indeed the primary users of pricing technology in the past, our research shows growing utilization amongst manufacturers. These manufacturers are clearly tired of sending their margin dollars downstream. SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. It’s for Retail and Disties...But We’re a Manufacturer PRICING TECHNOLOGY MYTH #3: 11% 52% 37% Services Manufacturing Distribution & Retail Pricing Tech Users: Type of Business When many companies explored pricing technology years ago, they discovered massive, on-premises software “suites” that required 18- 24 months to install and integrate. Not having the stomach for that sort of disruption, many simply said, “No thanks.” And thinking nothing has changed, many have stayed away ever since. Today, on-premises software suites are largely a thing of the past and all of the major pricing technology vendors have made the switch to software-as-a-service (SaaS). Built for rapid deployment and painless integration with existing systems, today’s SaaS solutions can be up-and-running and generating results in just a matter of weeks. SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. Implementation Is Too Disruptive and Time-Consuming PRICING TECHNOLOGY MYTH #4: Holding some companies back is the belief that if they implemented pricing technology, they’d need to hire a lot more pricing people just to manage the new systems. This is a perplexing misconception as technology can improve speed and efficiency and often reduces, rather than increases, the need for additional headcount. Recognizing how technology can enable human resources to “scale” themselves, companies with very small pricing teams are leveraging pricing technology to accomplish what even the largest pricing teams can’t hope to accomplish manually. According to our research, nearly a third of the companies making use of pricing technology have no more than five pricing people. SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. We’d Need a Large Pricing Department Just to Manage It PRICING TECHNOLOGY MYTH #5: 31% 23% 21% 25% 1 to 5 6 to 10 11 to 25 26 or More Pricing Tech Users: Size of Pricing Team Even just a few years ago, pricing technology required a multimillion dollar investment. So it’s not too surprising that many companies still believe this to be the case. And while pricing technologies can be expected to generate significant ROI, returns are irrelevant when you simply do not have the money to invest in the first place. Today, however, the investment picture looks very different. As vendors have moved to SaaS delivery, they’ve also embraced subscription pricing to reduce the upfront investment and align the ongoing costs to the benefits. The most sophisticated pricing technologies are now within reach for the cash-strapped companies that need them most. It’s So Expensive... There’s No Way We Could Afford It SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. PRICING TECHNOLOGY MYTH #6: Amongst the companies not using pricing technology today, there is a shocking lack of urgency. To their way of thinking, it doesn’t matter when they get started and they can hold off until they have no other choice but to act. The problem, however, is that there is an experience curve with pricing technology---i.e. the longer you use it, the more effective you become. And those who are currently using pricing technology (many of whom are likely to be competitors) are not standing still, waiting for others. As our research shows that nearly 60% of current pricing technology users plan to take it even further, the capability gap between the “have’s” and the “have not’s” can only get wider. SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. We’ve Still Got Plenty of Time to Get Caught Up PRICING TECHNOLOGY MYTH #7: As companies tend to be secretive about their pricing, it’s easy to miss the fact that pricing technology is becoming much more ubiquitous and mainstream in B2B. Companies large and small, across a broad range of industries, are using pricing technology to improve their performance and gain advantage. For others, however, inaccurate views and outdated beliefs about pricing technology are keeping them on the sidelines and causing them to fall further and further behind in the capabilities race. Don’t let myths and misconceptions hold you back. In just the last few years, the technology landscape has changed dramatically. So even if you’ve looked before, it’s time to look again. THINK AGAIN SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission. Myths Are Costly... the Reality Is Much More Profitable To further the advancement of best practices and innovation across the global business community, free distribution of this research report has been generously underwritten by: SOURCES: PricingBrew PricingPulse and SellingBrew SalesPulse Studies © Copyright MindBrew • May not be used or reproduced without permission.  A range of B2B topics from segmentation and analytics to value-based pricing and pricing technology.  A variety of resources from case studies and research briefings to step-by-step tutorials and video guides.  Exclusive monthly webinars on topics suggested by our community of subscribers.  Expert interviews with top consultants and real-world pricing practitioners who’ve “been there, done that”.  Training courses covering value-based pricing, sales team adoption, and strategic pricing processes. © Copyright MindBrew LLC May not be used or reproduced without permission. The PricingBrew Journal gives you and your team on-demand access to an ever-expanding treasure trove of proven practices, timely research, real-world strategies, and expert insights. GET YOUR FREE CATALOG www.PricingBrew.com Best Practices for Better B2B Pricing