How do the leading B2B companies leverage pricing to power a more intelligent approach to commerce in their business? It starts by readying the organization for change. Enjoy this throwback post from June 2019, one of the most popular Zilliant blogs to date:
Merriam-Webster defines the word “excellent” as “very good of its kind: eminently good: first-class.” A common refrain at our annual user conference, MindShare, is that every industry and B2B route-to-market is feeling more pressure. The heat is on to adjust to eCommerce disruption, adjust to a post-pandemic economy, compete in new markets, retain customers and weather unpredictable market changes. Our customers need to perform at a first-class level and are actively working on business transformations, not just for bragging rights, but for survival in the modern economy.
Pricing has to be integral to a business transformation. With pricing excellence, there is immediate potential for revenue growth, margin lift and customer acquisition and retention. If you’re a global manufacturer or distributor that is starting to tackle inconsistent pricing practices and establish best practices that transform your business, you may find that pricing approaches vary at the local level, across business units and at the corporate level. To be eminently good at pricing for thousands of SKUs and customer segments as market conditions rapidly fluctuate, you need to establish leadership. You need a Pricing Center of Excellence (PCoE).
At Zilliant, we have several distribution and manufacturing customers across multiple industries that point to a PCoE as the driving force behind their cultural awakening. We provide the industry-leading price optimization and management software, but the greatest prices are only as good as their adoption. A PCoE establishes pricing best practices, then enforces them and rewards high-level performers across the organization. The objective, goal-oriented PCoE has to be equal parts oracle, therapist, judge, hall monitor and Santa Claus.
Large distributors must work with hundreds of manufacturers across multiple geographies, with varying costs, and yet still consistently keep customers satisfied. And that’s just for one business unit – the complexity is replicated across each functional area of your distribution business. Nothing drives customers away like pricing that doesn’t meet their expectations, so your prices have to be timely and on point no matter what obstacles cause inefficiencies behind the scenes. Explosion of channel complexity is raising costs, as every cog in the wheel takes a piece of profit out.
Given raw material cost volatility, industry fragmentation and the need to sell to distributors, marketplaces and even individual consumers, prices can get out of whack pretty quickly. One building product manufacturer, a Zilliant customer, faces all these challenges as well as internal pressures. What’s the appropriate emphasis for: margin vs. volume, price consistency vs. differentiation, autonomy vs. corporate control? These financial, process and organizational levers have to be addressed rather than constantly disputed.
The only way to settle these differences consistently and fairly is with an objective pricing organization that is untethered from any of the other factions within an organization.
To illustrate the importance of a PCoE, we’ll look at three benefits our customers have realized: Control, Consistency and Accountability.
For our customers who have taken the PCoE route, an immediate gain they report after creating a PCoE comes from standardizing on one pricing platform, like Zilliant Price IQTM. Before there was a PCoE, different business units had their own tools with little governance. One manufacturer had eight separate pricing organizations and seven pricing systems! Now with one pricing group standardized on a single powerful platform, the PCoE controls the Start-Target-Floor prices company-wide and has become the single source of pricing truth.
This control gives them power to reward good behaviors and take action to improve ones that aren’t driving enough margin. They can quickly approve special discounts that may be necessary to win a deal without lowering prices across the board. In organizational cultures that favor autonomy at the business unit or local sales level, the PCoE can provide guidelines and get out of the way, while still tracking performance and compliance through Price IQ.
In their pre-PCoE eras, these customers fell victim to some truly erratic processes. A trigger, such as an announced tariff or a demand surge, would set off a chain of events like the one pictured below.
Pricing professionals often find themselves on an island, trying to keep up with new initiatives from management while losing the ongoing price exception battle with sales. With no strategic voice or enforcement authority, they can be safely ignored. The PCoE, on the other hand, is empowered to establish price policies, pricing guidelines and discount structures. It can approve exception requests or decide not to, justifying its decision with hard data derived from its standard pricing system. Centralizing in this way leads to consistent prices across multiple channels as well as a consistent customer experience.
One Zilliant customer’s PCoE takes accountability and measurement to a new level. This food products distribution giant has proactively taken a disciplined, diagnostic and prescriptive approach over the last decade to refine its pricing methods. As their team told our audience at a recent MindShare, “Excellence doesn’t happen overnight.” This is especially true if the organization is comprised of many distinct businesses (not business units, full-on businesses), and the PCoE’s charter is to help each one implement strategic pricing capabilities.
Without a PCoE, this landscape would be a nightmare to benchmark, compare and hold to account. This company’s centralized pricing team is able to perform an annual assessment to examine each business’s current-state pricing and prescribe improvements. The assessment is based on interviews conducted with employees from sales, finance, supply chain, inventory, and more. This allows the pricing team to get a full picture of the business and apply a consistent scoring methodology to each facet of its pricing capabilities. Then strengths, opportunities and actions are presented back to the business with concrete plans to improve pricing maturity in alignment with business goals. Rinse and repeat across each of the company’s businesses. This is a shining example of how to build a culture of continuous improvement, through accountability and measurement.
We are strong advocates for a PCoE because we’ve seen this concept in action bring about better pricing controls, consistency and accountability as well as sustain best practices on knowledge sharing, process efficiencies and internal transparency that help companies thrive in competitive environments. While your business may not be quite as large or complex as the food products distributor discussed in our last example, you still need the same discipline and rigor around your pricing strategy. As you grow and diversify, pricing has to be integral to that expansion. A Center of Excellence ensures pricing becomes a practice that is constantly evolving and not just a one-off project. Combined with Zilliant’s end-to-end pricing and sales growth tools, a PCoE delivers consistent prices, higher margins, faster quotes, more wins and greater collaboration between teams that used to be at odds.
Don’t just be good enough to keep pace with your industry competitors Be eminently good and a first-class leader by investing in strategic pricing across the board.
Contact Zilliant to learn more about how our technology can help you achieve pricing excellence!