Pricing technology Why choosing the right pricing technology component is important

Companies that can leverage their data analysis capabilities have a competitive edge in sales negotiations and marketing effectiveness. The same applies for the pricing space. The power of pricing comes from a good pricing strategy, translated in optimised price setting and swift price execution. In general this mix will only be successful when a technology component enables this. In its 21 May 2009 report Forrester research recommended Pricing & Profitability Management Technology as a key driver for value: CIOs: Suggest Pricing and Promotions Technology to Drive Value.. But the key question remains: What price technology is needed to capture the value for my company? How to determine the right technology component? Many companies when looking at price technology face the challenge of finding the right one. Where to start since many options are available from basic spreadsheets to advanced specialised pricing software.

When determining the right technology component besides the typical assessment criteria such as functionality fit, user friendliness Deloitte proposes some guidelines below to ensure you come to a best fit solution. The combination of all of them should help you to build a decision tree in your selection process (see example illustration below). Guideline 1: Consider the initial investment These are challenging times and IT budgets are limited. When building a business case for your technology investment, therefore consider not only the overall investment but look at it incrementally. Some technology will require heavy investment upfront (e.g. Enterprise packages or specialist pricing software); other will shift their cost balance to a later point in time or spread it (e.g. cloud computing). Depending on your companys financial situation, this may play an important role in your decision process. Pricing projects should by nature be self-funding, but time is required to realise that payback. Therefore combine it from the start with concrete pricing actions that support your business case.

Guideline 2: Limit the time to market How much time to market can you afford? What is your competition doing? Do you see your customers are getting smarter in pricing? Depending on your industry particular situation, you might or might not have a lot of time to realise first results. Pricing projects can be extremely complex, involving a lot of business, technical and integration discussions. Having an application custom build will require more time than going for an off-the-shelve solution. This is why we always recommend a step-by-step approach. ry to realise insights first maybe even just by T leveraging/consolidating the information already around. These first analyses will bring you more clarity on the pricing potential and strengthen your business case for investment. Limiting the time to market can be achieved with e.g. a cloud computing solution. Guideline 3: Leverage your current IT architecture How does the current application landscape look like? If the sales force needs deal guidance and you already have a CRM system, than why not work out the quote engine within your CRM application? If pricing analytics is what you need then why not leverage on your available business intelligence (BI) solution? The more complex your pricing need or if you are lacking existing system capabilities, the more you will evolve to a specialised pricing software on top of your current systems. Any company will have to see if in view of the need they can live with the pricing functionality embedded in their enterprise package, or if a custom pricing application built on e.g. a business intelligence solution is more appropriate.

Guideline 4: Determine the Functional scope What is the exact need: Analytics, administration, deal support, optimisation? Is a company looking for insights, than a (basic) analytical tool will do. Is good pricing reporting needed than other choices should be made than when a company is in need of a price management and / or optimisation tool. Fact is that to capture the most value the analytical capability should rather be far-reaching than limited. Also, who is requesting pricing information: finance, pricing office, product management, marketing or sales? Since pricing is at the core of a company, often a combination of the above is required. This means a company will need multi-access / multi-approval built in, making custom built solutions sometimes costly or hazardous. Do a functional map and map with available systems, but ensure 1 pricing database. Do not oversize the solution from the beginning but go for a scalable approach in view of your ambitions. Guideline 5: Take into account the Pricing Maturity of your organisation Where is the pricing function embedded in the organisation? Can it weigh on sales decisions? You might well as pricing officer come up with very solid pricing improvement actions (e.g. target pricing), if the sales people do not follow up on your advice (and they will have very good reasons to do so!) you will not be able to capture the value behind them. A much related point is data quality. To get the most out of any investment in pricing technology a company needs to ensure a data integrity culture. Most companies only start considering data quality as part of the ongoing project activities. It is wise though to do an upfront investigation on data quality and availability. Taking these steps at the verge of a project will allow you to take the right investment decisions. Many pricing technology projects struggle with delivering the value put forward in the business case because of data quality and data availability issues. More than in any other domain, in pricing, data analysis (knowledge) is power! Make sure the solution fits the maturity of your organisation and that data is trusted. If the overall maturity is low, investing in specialised pricing software is not the best option.

What is the exact need: Analytics, administration, deal support, optimisation?

Guideline 6: Dont oversee the specificity of your business The airline industry and hotel business require yield management concepts. Chemicals and some manufacturing businesses require flexible cost calculation components. Food and retail require trade terms management. All companies have their specificity to the business. Not all technology solutions can support the right processes or provide the right functionalities. Custom build solutions might therefore be tempting at first but might prove very hard to upscale afterwards. When talking to service and technology providers, take the time to explain the specificity of your business. You might be surprised to what solutions are already available. The below matrix can be used as a guide in choosing the right technology component. Evaluation matrix for a client ++: best fit Low initial investment Limited time to market High leverage of current IT architecture Large functional scope High Pricing Maturity Address specificity of your business spreadsheet models ++ ++ + -

All companies have their specificity tothe business. Not all technology solutions can support the right processes or provide the right functionalities.
Conclusion Any company seeking value through price technology should first look to put in place the right process and tools to handle its pricing complexity. You also dont fly a plane without knowing the basics of aerodynamics. A step-by-step approach, where you leverage as much as possible your existing landscape, is often the one bringing the most long term value. custom build applications + + ++ cloud computing ++ + ++ + + specialised pricing software + + ++ ++ ++

ERP/CRM + ++ + + +

Pricing technology Why choosing the right pricing technology component is important

Contacts
For more information, please contact: Koen De Staercke Partner kdestaercke@deloitte.com + 32 2 749 59 12 www.deloitte.com/be/pricing Marc Abels Director maabels@deloitte.com + 32 2 749 56 70 Bjrn Willemsens Director bwillemsens@deloitte.com + 32 2 749 56 93

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