Last month, Barrett Thompson, Eric Hills and Rick Chappel presented a Professional Pricing Society-hosted webinar on the importance of reducing price exceptions, price approvals, or SPAs, in your business.
How Too Many Price Exceptions Prevent Strategic Pricing
The webinar kicked off with Zilliant General Manager of Pricing Excellence Barrett Thompson. In his portion, Barrett discussed how exception pricing has become the norm for B2B industrial companies and the unintended consequences it has on your business. For example, when the logic of a million-plus price overrides live in your quoting system, the prices presented to sales reps are consistently “disconnected from any price strategy.”
This poses an important question: As a pricing leader, how can you possibly execute a new price strategy across your business when you have millions of price conditions living in your system from past deals? Is there a way to reduce the magnitude of the records living in your system so you can set smarter price strategies?
Barrett advocated a solution for price leaders that want those questions answered: Use a price optimization tool to deliver the right price upfront. Instead of handling price exception requests as one-offs, apply data science to the transaction data you already have to deliver prices to sales reps that are already aligned to your customers' expectations. By doing so, price exceptions can decrease, empowering pricing analysts to re-focus their time and attention to higher-level strategies that improve overall margin and revenue.
Visualize the Possibilities
It sounds great, but will it work? Next up, Zilliant Chief Marketing Officer Eric Hills served up a customer study, rich with data visualizations, as case and point. The visuals demonstrated how a decrease in price overrides at one industrial distributor led to measurable margin improvements. He also covered the importance of change management when deploying a solution to reduce price exceptions. Tips included breaking the problems that leaders face into incremental steps and implementing a communication plan. He also highlighted how measurement plays an essential role when moving to a “new normal” for the business.
Industrial Manufacturing Case Study
Finally, Zilliant Practice Director Rick Chappel offered more proof points with his case study on one industrial manufacturer that leveraged this approach to increase revenue. Highlights include:
- How the data-driven approach defined the segmentation hierarchy.
- Where they found a balance between data sparsity and granularity.
- What market alignment between renewal and new customers looked like.
- How the pricing model was continually refreshed, ensuring consistent market alignment.
By taking this approach, the manufacturer was able to:
- Reduce the need for negotiation.
- Have measurable ROI that increased sales.
- Produce relevant prices for customers.
Speak Your Mind: When you think about your current price approval process, from when the prices are set to exception requests to customer price acceptance, as well as that process is flowing, is your business experiencing some of the unintended consequences highlighted in the webinar?