A Year of Predictable Unpredictability
Predicting uncertainty could be seen as a cop-out. After all, Nostradamus didn’t become famous for shrugging his shoulders. Yet for distributors in 2019, the “year of uncertainty” talk is proving to be prescient. Challenges outside of your control abound, including erratic and compounding tariffs, inflation costs, government shutdowns and more.
Steady growth across all sectors this year can still be expected, according to a recent industry-wide survey conducted by Baird (respondents from each industry sector estimated an average growth margin of around 4% for 2019). However, trends suggest that we’re at a later point in this growth cycle. Thus, as a pricing manager you must focus intently on the factors you can control to mitigate the rising number of elements you can’t.
With this in mind, there are several emerging trends that are shaping the future of price management for distributors. We’ll identify these trends below and explain why pricing managers everywhere need to plan accordingly.
Trend # 1: The “Planning for Uncertainty” Paradox
When unforeseen events can render your costs and market pricing obsolete at a moment’s notice, how can you be proactive? Pricing managers face tremendous pressure to provide sales with a coherent pricing strategy at all times. Yet too many are handcuffed in the face of change due to a reliance on disjointed data and multiple static, outdated spreadsheets. It’s imperative to have a single source of truth at your fingertips when dynamic pricing changes are the norm. The right plan and toolset will make pricing data your most vital asset, rather than a constant headache.
Pricing managers of course recognize the imminent need for a more granular, data-driven approach to pricing. Such a plan is necessary not only to find opportunities to be proactive in the market, but also to truly understand and justify the consequences of each pricing decision. Manual forecasting and blanket increase strategies won’t cut it, as there are too many factors, line items, and customized contracts to interpret when planning for the unknown.
In a recent blog post, Bruce Merrifield of WayPoint Analytics identified a common mistake pricing managers make in lieu of a true, comprehensive plan:
There’s nothing more powerful than, “Buy low and sell high,” says Merrifield. The problem is, often distributors will simply raise prices by a percent or two and call it a financial management plan. “They’re thinking, ‘I can keep everything I’m doing the same, but just sneak up the prices here and there and I’m going to make more money.’” But this practice is a distraction from the ultimate goal of service value innovation and productivity, he warns.
To reach that elusive goal, your strategy must include implementing the right technology. The time is now to unlock your data and combat all this uncertainty, especially as digital commerce becomes more and more ubiquitous.
Trend #2: Digital Migration and The Rise of e-commerce
Customers have always expected negotiations and transaction to be seamless and personalized. This expectation has only been amplified in the era of digital commerce. It’s now possible and in some cases preferable for B2B users to make buying decisions online the way that individual consumers do. Look no further than the rapid growth of Amazon Business as a proof point. While it’s unrealistic to expect to compete with Amazon from a technology perspective, it’s high time to adopt a digital strategy that will differentiate you from traditional competitors in the distribution space. E-commerce technology has become more cost-effective and delivers the customer experience necessary to stand out in 2019.
All this is not to say that sales reps are becoming obsolete in the industry - quite the opposite, in fact. Field sales is a strength that Amazon can’t mimic and in a digitized world, sales reps are empowered to do their jobs even better.
With exceptional data, sales teams can instantaneously present and justify more informed pricing at each stage of negotiation. Rather than “winging it” on an ad-hoc basis, your teams can be selling based on real and trusted data. Over time, this creates more satisfied customers who are confident in the reps they are dealing with, as well as better margins for your business.
Trend #3: Price Management Tools are a Must
As we’ve covered, your pricing data is already out there. The questions are: who owns it, where is it stored, where is the latest version and why is it so time-consuming to roll out important changes? It’s obviously one thing to have the data, but quite another to consolidate, organize, and leverage it. Your life as a pricing manager will improve exponentially by turning data from a foe into a friend. Everyone wants to ditch the spreadsheets and the manual processes, but how do you transform a process that’s so ingrained? Enter the world of price management solutions, which are now more advanced, easier to use, smarter and more affordable than ever before.
For instance, Zilliant Price Manager allows you to centrally create, manage and update price lists in one user-friendly and highly customizable console. It is that elusive single source of truth. Now you can simulate what potential outside factors will do to your bottom line and incorporate a rules-based approach to setting prices in a way that keeps you competitive. With manual tasks and the game of “pricing data hide and seek” a thing of the past, you can dedicate your time to pricing strategy. This is essential to turn pricing teams and sales into true aligned partners equipped to do battle against an uncertain market.
Sales reps can meet their customers confidently with transparent price lists in their back pocket. They now have the opportunity to understand how pricing is established, making them better equipped for negotiations out in the field. With pricing as their strategic partner, reps know exactly where pricing decisions came from and how to justify any price or contract changes with their customers.
The results will be astonishing once your sales reps understand the “why” behind your pricing strategy. Before that can be accomplished, you as a pricing manager need to understand it first. Price management software closes that knowledge gap for everyone.
The Bottom Line: Are You Trending Up?
2019 is shaping up to be a transitional year in the industry. Thanks to unpredictable industry factors and higher expectations from customers who want to buy more items digitally, it’s more important than ever for pricing managers to prepare for uncertainty by taking a more data-driven, granular approach to pricing.
As e-commerce trends drive transactions to more digital channels, more sophisticated price management tools are now necessary for a number of reasons. These tools can outpace manual efforts by a wide margin, while allowing you to more accurately adjust pricing at scale. This not only provides more accurate forecasting, but also frees up time for pricing managers to focus on strategy as opposed to digging through multiple spreadsheets and other outdated documentation just to stay above water.
Furthermore, price management tools offer accessibility and transparency for sales reps, who will in turn be better equipped to handle contract negotiations and pricing suggestions. The right training by and partnership with pricing managers gives sales reps the ammunition they need in an ever more competitive world. The bottom line? Better data means better pricing; better pricing means happier customers (and reps); happier customers means more long-term success.
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