Part 2: Does your solution have the key elements to support your organization’s pricing process?
Information gathering, price decision making, price execution, and price evaluation and adjustment are key activities in a successful pricing process. Here, ERP systems will be able to execute, but the other elements are missing for an efficient process. ERP systems don’t offer the depth needed for visualizing pricing factors or running simulations. In addition, these systems lack automation, reporting and history. Without a robust pricing solution, the pricing team is not able to operationally approach and continuously improve the pricing management process.
6. Price Decision Making – ERP systems are only designed to handle transactions, not simulations and visualizations. Unlike pricing solutions, these systems cannot handle complex simulations of multiple factors. Pricing solutions enable simulation and optimization when any factors are changed. This can be performed on a customer-by-customer basis.
7. Price Execution – ERP systems are poor at managing price execution – notifications, approvals and price distribution. Pricing solutions allow user interaction to support daily business tasks with notifications. For example, these solutions provide daily updates on new items to price as well as items that have had a significant cost change or a minimum margin breach. ERP solutions also lack the ability to support approval workflows, which facilitate governance and lower the number of pricing outliners. These functionalities will improve productivity, shorten reaction times and increase customer satisfaction.
8. Price Evaluation and Adjustment – ERP systems struggle with price evaluation and adjustment. They can have some reporting capabilities, but these are not tailored to pricing requirements. Pricing solutions provide the analytical tools that handle price reporting and what-if simulations as well reporting on KPIs. Pricing software can also help drill into the causes of poor performance so appropriate actions can be taken.
9.Information Gathering – ERP systems don’t keep datasets needed for market- and value-based pricing. In addition, pricing history on items is often limited in the audit trail. Pricing solutions maintain datasets needed to set correct prices and store the previous pricing, creating a complete audit trail. This enables sophisticated price methods that drive revenue and profit. In addition, having centralized pricing information is key to process efficiency, especially in larger organizations, where price information can exist in multiple versions and more people are involved in pricing.
By optimizing prices with a pricing solution, companies can achieve revenue increases of 5-10 percent and increase profit up to 15 percent, depending on current margins. Pricing solutions utilize more sophisticated price logic, like market- and value-based pricing, to keep margin leakage under control. In addition, pricing solutions provide the key elements to achieve higher productivity, increased customer satisfaction and less price complaints.
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