Pricing Software Transformation

Part II / II of our series "From Chaos to Clarity: Transforming Your Business with Pricing Software" by Dr. Marcus F. Demmelmair and Kilian L. Fleisch

Our pricing transformation framework consists of five essential steps, preceded by a pricing advisory phase to create situational awareness before deciding on the direction. In the following, we will elaborate on each step to guide you along your journey to pricing excellence.

Step 0 – Pricing Advisory

The primary objective is to develop a pricing plan that aligns with the company's goals. This involves assessing the company's current pricing maturity, including strategy, processes, organization, and systems, while identifying opportunities for quick wins and potential revenue growth. The pricing plan not only serves as a roadmap but also defines future pricing models or methodologies based on product/service characteristics and market dynamics. It encompasses the essential elements of pricing governance, including policies and processes to ensure consistent and aligned pricing decisions throughout the organization. Lastly, pricing adaptation allows for continuous review and adjustment of pricing strategies based on market dynamics, customer feedback, competitive actions, and internal performance metrics, ultimately optimizing competitiveness and profitability. All of these elements are captured within a comprehensive pricing concept or blueprint.

Step 1 – Pricing Software Readiness Check

Before selecting a pricing software vendor, it's essential to evaluate your company's readiness and to determine whether standard tools, such as those outlined earlier, or one-dimensional AI-based Pricing Engines can address the challenges, or whether a full-fledged pricing software solution is necessary. The Pricing Software Readiness Check involves three dimensions: Functional readiness, technical readiness, and data readiness. This process helps identify any potential roadblocks or challenges that may arise during implementation.

Functional Readiness involves evaluating your current pricing processes and workflows to determine how they will be impacted by the new software. This includes identifying pain points and streamlining pricing decisions with the help of the software.

Technical Readiness requires assessing your company's existing technology infrastructure, including hardware, software, and networking capabilities, to determine if they can support a pricing software solution.

You need to consider topics such as data security guidelines, cloud-first IT strategy, or on-premise solutions.

Data Readiness involves evaluating the quality and accessibility of relevant data, both internal and external. You need to analyze data sources, assess data accuracy and completeness, and identify any data gaps that need to be addressed. Additional data sources, such as accepted and declined offers, competitor information, macro-economic data, or real-time data, may be relevant depending on your desired pricing model.

By conducting a comprehensive Pricing Software Readiness Check, you can ensure that your company is fully prepared to implement a pricing software solution successfully. You can take advantage of advanced analytics, simulation, optimization, workflows, and compliance to drive your pricing decisions

Step 2 – Pricing Vendor Selection

Step 2 of the pricing transformation journey is focused on selecting the right vendor to provide the pricing software that aligns with the company's needs. This step requires a thorough evaluation of the different vendors and their offerings, which can be a time-consuming process. Horváth's experienced team can guide companies through this process, providing support and insights to help identify the most suitable pricing software vendor based on specific needs, budget, and goals.

Horváth's vendor selection process includes evaluating key factors such as software features, scalability, integration capabilities, industry and business model fit, vendor reputation, pricing, and customer support. We have clearly defined selection criteria and in-depth knowledge of the strengths and weaknesses of typical pricing software providers, such as PriceFx, PROS, Vistex, Zilliant, and others. Our team uses their expertise to help companies understand how each vendor's software works, the level of customization available, and how the vendor will support the company during and after implementation.

The ultimate goal of Step 2 is to identify a vendor that can deliver the pricing software that meets the company's needs and provides a high level of support and service, ensuring that the company is well-equipped to optimize their pricing decisions and drive business growth.

Step 3 – Pricing Software Preparation

Step 3 of the pricing transformation journey involves preparing for the implementation of the pricing software by defining the functional concept of the pricing structure and strategies along the price waterfall, workflows, customer segmentation, pricing analytics, and reporting requirements. In addition, the organization should be prepared for the upcoming implementation project by defining a clear project organization, establishing a communication plan, and decision committees.

It is important to note that even the most powerful pricing software will not be effective if it's not tailored to the company's specific needs. During the preparation phase, the company should work closely with Horváth and the selected vendor to customize the software's features, functionality, and user interface to align with the company's pricing strategy and business objectives. This may involve configuring workflows, creating custom reports, and integrating additional data sources.

The preparation phase also initiates the change management process, which is crucial to ensuring that employees are motivated and willing to support the pricing transformation journey. The change management plan should identify potential challenges and opportunities, establish clear goals and objectives, and outline communication strategies to keep employees informed and engaged throughout the implementation process. Ultimately, the goal of this phase is to prepare the organization for a successful implementation of the pricing software and ensure that the software is fully aligned with the company's pricing strategy and business objectives.

Step 4 – Pilot & Implementation

To ensure a successful implementation of a new pricing software and strategy, it's important to conduct a pilot implementation in a specific market or business unit. This allows your organization to gain experience and identify potential issues before a global implementation, while also gaining acceptance for the new solution by creating measurable value and celebrating early success. To achieve this, take a comprehensive approach tailored to the needs of the specific market or business unit to identify market-specifics and use a Fit/Gap-approach to meet local requirements. This ensures the software is as local as needed and standardized enough to continuously benefit from technical innovations, reducing costs and complexity.

Since implementing new software can impact workflows and processes, it's crucial to have a robust change management plan in place. This plan should communicate the benefits of the new software, address staff concerns, and manage the transition to ensure a successful implementation. By doing so, your organization can achieve early benefits without running into the danger of endless transformation projects that fail to create visible value.

Step 5 – Global Rollout

To roll out the new pricing strategy and software successfully, integration with existing systems and data sources is crucial to maximize its value. Connecting the pricing software to the company's ERP, CRM, and other systems will streamline data flow and eliminate data silos. Integration with other sales and marketing tools can provide a more comprehensive view of customer behavior and preferences. Comprehensive training should cover all aspects of the new pricing strategy, including the new pricing structure, rebate structure, and any other relevant elements.

Building on the experience gained from the pilot, the internal team should take over more internal responsibility for the transformation. The pricing team and representatives from the pilot can now act as a "Roll-out factory", extending the scope to further business units and regions, which is not only more efficient in terms of required resources but also increases acceptance in the organization.

To ensure the new pricing strategy's performance meets desired results, the pricing team should monitor and analyze its performance while providing ongoing training and support to staff members. The team should communicate the benefits of the new strategy to stakeholders and seek feedback to ensure alignment with business objectives. Continual refinement of the pricing strategy and leveraging the pricing software's capabilities will optimize pricing decisions and drive sustainable business growth.

Unlocking the Potential of Your Business

At Horváth, we understand that implementing a pricing transformation can be a complex process that requires careful planning and execution. That's why we offer expert guidance and support to help your organization navigate this journey and unlock the full potential of your business. Our team of pricing experts has extensive experience in designing and implementing pricing strategies and software solutions for a wide range of industries and businesses. We can help you identify the challenges and opportunities specific to your organization and develop a customized pricing transformation plan that aligns with your business objectives and goals.

By partnering with us, you'll gain access to a range of pricing tools and technologies that will enable you to make more informed pricing decisions, optimize your pricing structure, and increase your profitability. Our comprehensive training and support programs will ensure that your staff is equipped with the knowledge and skills they need to use the new pricing software to its fullest potential.

We are delighted to discuss with you the relevance of these challenges for the further development of your organization. Our team is ready to help you take concrete steps to secure the long-term economic success of your company in organizational terms. Contact us today to learn more about our pricing transformation services and how we can help your business thrive.