This article explains how electronic components manufacturing firms can improve quote response and price approval time with optimized pricing and automated negotiation.
Improving Quote Response and Approval Time & Price Quality in Electronic Components Manufacturing
In electronic components manufacturing, winning a deal can often hinge on how quickly the company can respond to a quote request from customers or partners. Of course, the high rate of innovation, fast product lifecycles, varying price list, rebate and discount structures, and the emergence of eCommerce for channel partners and customers alike, each pose unique hurdles to reducing quote turnaround time.
Certainly, the impacts of the COVID-19 pandemic have only further disrupted this complex status quo. The impacts of which have been considerable in terms of pricing as well as the importance of a seamless customer and partner experience online. Early in the pandemic, Thomas Lah, executive director and executive vice president at the technology association TSIA, reported nearly 90 percent of respondents to a recent TSIA survey indicated that they see themselves making changes to pricing or product offering as a response to COVID-19.
Further research from the group bears this expectation out, indicating that promotional pricing was, in fact, quite common in the early days of COVID-19, with 62 percent of survey respondents indicating that they had issued some form of promotional pricing to incent purchases amid the pandemic’s unprecedented disruption.
However, enterprising electronic components manufacturers have an opportunity to not only adjust pricing as a response to the next market trigger, but instead transform their entire approach to price setting and negotiations to improve both quote response time and quality. By doing so, they stand to remove the inherent friction in the buying process and hold the line on margin even as a potential recession looms.
The Price Approval Paradox in Electronic Components Manufacturing
Within electronic components manufacturing, particularly with manufacturers of low-configured products that sell direct or through the partner channel, the pricing environment looks a bit like this:
- List pricing with MSRP is in place and typically defined in the marketing department
- Finance teams might include pricing managers to analyze special deals as they arise against customer financials to approve or set deal-specific pricing for one customer
- Sales and Sales Ops, finally, might be responsible for the approval of pricing exception requests as they arise from customers and partners alike
- Additionally, customers and partners may have access to a self-service portal where they can register new deals as well
While this process has been working well, over time the inherent complexity of the number of product SKUs and customer counts has ballooned. Each of which can skyrocket into the realm of hundreds of thousands or perhaps millions in businesses that also have a consumer element. With a disjointed approach to how prices are created, negotiated, and approved, ensuring each price is aligned to market realities becomes impossible.
Without prices that are aligned to market conditions, including product type, product hierarchy, customer volume, order size, customer size, geographic implications and competitive dynamics, to name a few, customers and sales reps find themselves coming back to the respective teams to ask for better pricing. To manage this influx, companies put in place manual approval processes for these deals as they flow through the approval queue. The rationale here is to get an expert’s eyes on each pricing exception request, and while well-intentioned, this process bloats to an unmanageable level.
For example, one electronic components manufacturer came to the realization that its pricing exception approval team comprised 10 people and required six levels of approval!
Paradoxically, the status quo of price-setting and approval ends up creating more problems than it set out to solve in the first place. With complicated pricing approval and order processes and a lack of good, reliable pricing guidance, an already cumbersome process is prone to human errors in judgement and calculation. The outcome is a large administrative overhead cost from a process perspective and pricing that fails to meet the P&L targets of the business.
Electronic components manufacturers stand to significantly improve the pricing accuracy by deploying advanced price optimization to set market-aligned prices with artificial intelligence and give pricing teams the control and flexibility they need to make surgical price moves when necessary.
The Role of Automated Negotiation in the Pricing & Approval Process
In addition to the benefits of improving the process itself, electronic components manufacturers have a significant opportunity to apply automation to the pricing and approval process.
Instead of cumbersome processes, exposed to human error from start to finish, enterprising company leaders can blend the art of negotiation with the science of data-driven decision making and leading technology. The outcome of this approach – Intelligent Automated Negotiation – automates internal and external negotiations in a more intelligent manner.
From a technology perspective, the approach connects leading price optimization, price management, and revenue intelligence solutions to your existing internal and customer-facing applications via a real-time pricing engine.
The outcome is an automated approach that sets pre-defined rules on what prices can be auto approved without human intervention – giving sales reps, partner resellers and customers the flexibility to negotiate within a range of prices that still maintain necessary margin levels, while routing for approval quickly and efficiently when needed.
With Intelligent Automated Negotiation in place, electronic components manufacturers stand to vastly reduce the friction within the deal process for customers and partner resellers alike.
Enterprising electronic components manufacturers have an opportunity to not only adjust pricing in the short term, but also inject intelligence into their approach to price setting and negotiations to improve both quote response time and quality. By doing so, they stand to remove the inherent friction in the buying process and hold the line on margin.Continue reading "Improving Quote Approval Time & Price Quality in Electronic Components Manufacturing"