What is Deal Management?

April 22, 2021 Team Zilliant

subscribe to zilliant

Deal management, or agreement management, is the business process of setting, maintaining and renewing customer-specific pricing agreements, done in collaboration between a B2B company’s pricing and sales teams. For the purposes of this blog post, we define agreements as the specific price list that a customer negotiates with its B2B vendor, that falls outside of the vendor’s standard price list or matrix. Customer-specific agreements can be long-term and contractual agreements, or simply the discount a customer expects to receive for some period of time on a set of products.

Deal management encompasses every aspect of the agreement lifecycle – from negotiation to creation to updates to renewals. Agreements exists in most B2B companies, but where they are managed run the gamut from manual and ad-hoc to fully automated, centralized cloud-native software systems. These processes are sometimes handled within the more-familiar configure-price-quote (CPQ) software category or managed directly in an ERP, yet agreement management functionality is not a key focus or mature capability within the CPQ software category.  

Read more: Deal & Agreement Management

Agreement Types

Broadly speaking, agreements tend to take one of two forms in a B2B environment – customer-specific price exceptions and customer contracts.

Customer-Specific Price Exceptions

Customer price exceptions are designed to win business from a variety of non-strategic customers. Often, little analysis is done when setting exception prices in a high velocity sales environment. These agreements could cover a large or small swath of products or product categories and there is a rarely a data-driven, systematic process for price review.

Customer Contracts

deal management process

These are reserved for the larger and most strategic customers, the ones who represent a major share of revenue. Often these customers have signed, physical contracts that are negotiated over a long period of time and closely scrutinized internally. The breadth of products and services tends to be massive, and the contract undergoes an annual price review in most cases. Pricing issues that crop up in customer contracts are thus more easily spotted, but sales teams tend to guard these agreements closely and push back on price increases for fear of rocking the boat with these strategic customers.

Watch: Finding & Fixing Margin Leakage in Customer-Specific Pricing

Agreement Management Challenges

As mentioned above, most B2B companies have a deal management process of some kind. The trouble is, most are fraught with complications and woefully inadequate to handle the volume of agreements and speed of cost changes in the market. Here’s a typical scenario:

A large paper products distributor has more than 100 sales reps managing thousands of customer accounts and selling possibly hundreds of thousands of product SKUs. As they go about their day working with customers, each rep encounters sales opportunities in which customers ask for a better price or the rep intuits that a discount is required to win the business. The seller will create a spreadsheet full of line items with special pricing for this customer and get it rubber stamped by the sales manager for approval. The pricing is often set up as a markup over cost, discount from list or as a net price. In some cases, the pricing does not have an end date. Once the prices are loaded into the distributor’s ERP system, they are rarely revisited. This process repeats itself across scores of sales reps and hundreds of customers, creating an administrative nightmare and, worse, a recipe for margin leakage over time.

Not only were the special prices created with little rigor as to their impact on the bottom line, but these agreements also set a pricing precedent with customers and are nearly impossible to govern or mass update inside an ERP system. As Zilliant Vice President, Services Brooks Hamilton is fond of saying: “Most B2B pricing agreements are older than Noah and expire when the sun burns out.”

Other time- and resource-wasting issues that exist in most agreement management processes include:

  • Significant time spent in updating agreements: When agreements need to be updated, the pricing team typically emails spreadsheets with recommended pricing updates to the sales team. The sales team then modifies the numbers and passes the spreadsheet back to the pricing team for approvals. It is not uncommon for this process to include multiple internal negotiation rounds, making the process of updating prices for cost pass-through a very challenging, long and tedious exercise before being presented to the customer.
  • Volume commitment compliance challenges: Some customer agreements are tied to volume commitments from the customer, yet when agreements are locked away in spreadsheets and ERP systems, companies lack a systematic approach to monitor and enforce volume commitments.
  • Sub-par initial price setting: Priced in haste and with winning the deal as the primary motivating factor, prices tend to be set below pricing floors and inconsistently across customers, causing widespread pricing dispersion and misalignment.
  • Set-and-forget conundrum: Price exceptions are often created without end dates and/or set in net price terms at a fixed dollar amount. As costs rise over time, margins are squeezed. This is compounded by a lack of regular review or automated insights into agreement health.
  • Administrative issues: These agreements tend to live in a variety of systems, on hard drives, or in email inboxes. There is no easy way to quickly locate and mass update; it’s a customer-by-customer process.
  • Clashes with pricing strategy: As more and more B2B companies attempt to adopt corporate pricing strategies and invest in better pricing tools, a consistent hindrance to their success are exception prices, as they fall outside the pricing team’s control and are often misaligned with the go-to-market pricing strategy.
  • Difficult to update: Given the volume and frequent undermanagement of agreements, simply knowing how many agreements exist in your business and how profitable they are is nearly impossible. When prices need to move, an agreement-by-agreement, line-by-line change is costly, time-consuming and error-prone.
  • Inability to set prices at different thresholds in the product hierarchy: Your strategy may call for setting a certain product margin at the product category or SKU level. Dispersed agreements and manual processes limit the level of granularity you can achieve.

Read more: Why B2B Manufacturers Need Both Intelligent Pricing and Deal Management

Deal Management, Reimagined

Increasingly, B2B manufacturers, distributors and services companies conclude that status quo deal management processes are no longer feasible and seek a better approach. Best-in-class deal management solutions can centralize all agreements, ensure new agreements are created at prices that reflect the customer relationship and margin goals, provide a mechanism for mass updating agreement lines, and facilitate seamless communication between pricing, sales and end customers.

deal management software

Here’s how forward-thinking B2B companies are proactively and intelligently managing agreements across the entire deal lifecycle:

Deal Creation

Upon the creation of a new agreement, it’s an imperative to ensure there are pricing guardrails and streamlined workflows in place. Sales reps can’t possibly know how each price change they make impacts profitability, especially as the number of lines in one agreement often measures in the hundreds – they need reliable price guidance at the time of deal creation. Sales managers and the corporate pricing office must ensure any requested price changes that fall outside of acceptable margin or pricing targets are quickly routed for approval.

To ensure agreements meet both corporate strategies and customer expectations, B2B companies deploy modern deal management solutions to provide their commercial teams with actionable and intelligent pricing recommendations.

Communicating Price Changes

Not only do sales teams need to be alerted to price changes, but they also need context and justification to be confident delivering those changes to customers. A better process starts with the pricing team, which needs to be proactive in its approach to communicating necessary agreement price changes to the sales team at scale. This means removing manual processes and focusing sales on the most impactful price changes.

An investment in a centralized agreement management solution that seamlessly connects to ERP systems and price management software provides immediate returns. No longer are these teams having to rely on spreadsheets to catalog agreement data, execute price changes or decipher customer profitability.

Pricing teams can instead communicate agreement price changes in an automated, scalable fashion, only bringing sales reps’ attention to specific lines within agreements that need to be updated, or specific agreements that are about to expire. This in turn empowers sales reps to better communicate with their customers, improving the health of each buying relationship. The best deal management solutions include configurable action cards for sales reps, so they can easily be alerted to renew agreements, make price changes and follow up in times of low volume compliance.

Managing Existing Agreements and Renewals

B2B companies are dealing with an influx of cost changes. As the speed and frequency of cost changes accelerates, it is imperative that companies have a means to systematically update pricing within customer agreements and quickly disseminate them to the sales team for action. Gone are the days of meticulously combing through ERP records to change each customer agreement line-by-line, one at a time. 

A reimagined approach to managing existing agreements and renewals includes a configurable dashboard with action cards to alert sales reps when specific agreements need their attention or review. Whether an agreement is nearing expiration, a customer has failed to meet a volume commitment, or a pricing department is requesting price changes on specific agreement lines due to cost changes or other pricing objectives, sales reps are directed to which agreement lines are impacted across customers. Updates can be made en masse across agreements  or agreement by agreement, submitted for approval, if necessary, and synced back to an ERP system. Additionally, problems with existing agreements, such as missing end dates and net price terms, can be quickly diagnosed and rectified.

Read More: Retaining Share in Ambiguous Market Conditions

Streamlining Approval Process

Often, regional sales managers can help to catch customer agreement pricing that needs to be adjusted to meet margin targets, and while helpful, serves as another block in the flow of pricing updates. Here, the process can also be smoothed and expedited with deal management. Before price changes necessitate a managerial review, sales reps can now review the health of each agreement as it is created. The ad-hoc price change with little visibility into margin impact is replaced with intelligent price guidance at the time of deal creation.

Rules can be implemented that trigger approval processes if an agreement price dips below a pre-defined margin target or pricing floor. When these occur, modern deal management software makes it easy for sales reps, managers and deal desks to review and approve agreement price changes, complete with an audit trail.

Read more: Managing Deals When Demand Patterns Go Wildly Off-Script

Reimagined Deal Management Example

The sales operations team at a global print, packaging and facilities solutions company was dealing with an increase in the frequency and intensity of cost changes coming from its thousands of suppliers. It could no longer rely on manual processes to update prices as costs changed, nor effectively deliver pricing guidance for agreements. As the bulk of its business is transacted on customer-specific agreements, the importance of accounting for cost changes quickly is significant. The company needed a way to automate the price change and agreement management processes. 

The distributor implemented Zilliant Deal Manager™ to facilitate real-time communicationb2b contracts between pricing analysts and sellers. Deal Manager empowers the company to conduct a wide variety of automated campaigns across millions of agreement lines and scale it across different warehouses, regions and sales leaders. The system seamlessly integrates with Zilliant’s price optimization and management solutions to efficiently update agreement lines with prices that consistently meet corporate objectives.

“We are committed to understanding our customers’ needs and providing solutions that add value. The Zilliant platform helps our team deliver AI-enriched guidance to sales representatives that is customized to the unique circumstances of each customer interaction,” said the company’s vice president of field initiatives and sales enablement. 

Read more: Effective Deal Management Strategies: Global Distributor Solves for Cost Increases & Sales Communication Challenges

Benefits of Deal and Agreement Management Software

Companies that adopt intelligent deal and agreement management software report major benefits, including:

  • Recapturing margin leakage: Replacing manual spreadsheets with centralized cloud-native software helps maintain and improve the profitability of customer agreements and contracts.
  • Removal of guesswork: Sales reps will know immediately which agreements need to be addressed and how. When creating new agreements, pricing guardrails are provided at the point of creation.
  • Elimination of the dreaded “set-and-forget” conundrum: No longer will agreement pricing be created and filed away with no systematic means to update them as prices need to change.
  • Simplified processes: Pricing teams have a systematic approach to update customer price agreements, even en masse, quickly and as often as needed. Sales reps have intuitive pricing guidance, line by line, when updating agreements to stay on target. Pricing teams and sales managers receive only the agreements outside of pre-determined pricing bounds, reducing internal backlogs. This streamlined approach significantly reduces how quickly updated pricing agreements can reach the customer without sacrificing margin or the customer’s expectation with respect to a fair price.  
  • Bringing new sales reps up to speed faster: By providing new hires with a deal envelope and guidance on how to set agreement prices, they will be better equipped to make more profitable decisions. Agreement line-level margin signals make it easy for new reps to see when they are pricing outside of margin bounds and can adjust accordingly without intervention or setting prices too low with customers.
  • More informed decision-making: Embedded visual analytics provide sales with the context they need to make the right pricing decisions, including why price changes are recommended, the health status of the customer relationship and the overall profitability of each agreement.

Read more: Mitigating Sales Workforce Shortage in Building Products Manufacturing

Watch: Zilliant Deal Manager - Powerful Agreement Management Solution

To reimagine deal and agreement management in your business, contact a Zilliant expert today.

Previous Article
MindShare Customer Showcase: Taking Your Zilliant Pricing Program to the Next Level
MindShare Customer Showcase: Taking Your Zilliant Pricing Program to the Next Level

Next Article
Guest Blog [KBMax]: Why Dynamic Pricing Matters in B2B eCommerce
Guest Blog [KBMax]: Why Dynamic Pricing Matters in B2B eCommerce