It's never been more important to have the right tools and software to support your future pricing decisions. The Global Pricing Study 2016*, conducted by Simon-Kucher & Partners and the Professional Pricing Society, shows that nearly twice as many of the "best" companies use customized tool or software solutions to support their pricing functions. As much as a third of the "rest" have no specific software support for pricing, whereas only 13% of the "best" companies have not yet invested in pricing solutions.
Interest in pricing software is increasing, especially amongst the "best" companies. Between 2014 and 2016, the share of "best" companies using customized tools and software solutions increased from 25% to 45%!
Some of these companies use highly customized software tools, while others use off-the-shelf solutions. Neither is clearly or always better than the other. Both can work well, if correctly implemented. However, there is usually an optimal solution for each given case, be it a standard system or an application developed from scratch. Finding out which one to choose is the first major hurdle that companies must overcome on the road to pricing excellence.
What pricing software can do... and what it can't
Pricing software, like many other types of enterprise software, is sometimes seen as a cure-all solution – the solution for every pricing problem. And while modern software solutions for pricing boast an impressive array of functionalities, such as real-time pricing of goods using multiple internal and external factors, or smart optimization algorithms based on artificial intelligence and machine learning, they cannot solve all pricing problems.
Through our project experience, we have compiled a list of the most important things a pricing solution can do for you, and the corresponding pitfalls.
There are many risks when implementing such software, but also many benefits. What's essential is to manage expectations and be aware of these risks.
One final word of caution: it is crucial to have the basics in place before implementing a solution. As mentioned above, pricing software is not a substitute for a good pricing strategy and the "best" companies understand this. According to the Global Pricing Study 2016, the "best" companies place higher importance on having the right organization, support processes, and methods in place, to proactively steer pricing.
That’s why, compared to the "rest", 44% more of the "best" have a dedicated pricing function in place. In addition, 25% more of them have clear pricing processes, and 27% more have methods to support pricing.
*About the Global Pricing Study 2016: A total of 2,186 companies from over 40 different countries and 25 industries participated in the Global Pricing Study 2016. Respondents, of which 38 percent were C-levels, answered questions on their pricing strategies, price pressure, and the competitive environment. The study takes place every two years and is the only one of its kind.