Pricing Dinosaurs Face Extinction after the Pandemic Asteroid
In the industrial space, most companies are pricing dinosaurs.
We all know the story of the dinosaurs. These gigantic, lumbering creatures ruled the earth 66 million years ago, inhabiting every continent on the planet. Then, an asteroid struck earth. The dust and debris from the strike vaporized in the atmosphere and oceans, resulting in massive climate change. The dinosaurs, like 75% of the species at the time, could not adapt, and died out in a massive extinction event.
What does a pricing dinosaur look like?
First, sales reps heavily discount deals of all sizes. Pricing exception processes designed to control discounting usually end up wasting time, as discounts are ultimately approved over and over. List prices are updated two to four times per year, using time-consuming, manual processes. Much of this time is wasted as well, as deeper discounts and concessions offset planned price increases. Indeed, for many, even understanding the final price a customer paid can be difficult, as it requires untangling a web of discounts and off-invoice rebates.
These companies have known that change was coming. E-commerce has been on the rise.
Ultimately, it would lead to replacing opaque pricing with transparent pricing. Some companies looked to change by building large pricing teams and equipping them with complex pricing software. But even that approach is still fundamentally manual and slow. And for over 75% of industrial companies, pricing is a manual process with zero software support whatsoever.
For industrial players, the COVID-19 pandemic was the asteroid strike.
It wreaked havoc on supply chains and disrupted workforces. And pandemic relief packages and monetary policy have resulted in inflation levels not seen in 40 years. Like the dust and debris from the asteroid, the pandemic has changed the ecosystem for industrial companies.
The pricing dinosaurs are floundering in this altered landscape.
As supply costs skyrocket, they are scrambling to adjust prices to preserve their thin margins. But their lumbering processes for updating prices were not designed to be executed quickly. The result is emergency pricing actions that become all-consuming fire drills. As inflation climbs, these fire drills are becoming more frequent, and more disruptive to business operations. Worse, it is unclear how much of the planned pricing increases are even being realized. Many are lost in a sea of one-off concessions and discounts.
Industrial companies must realize that these effects are not transitory.
The e-commerce evolution is accelerating and will make pricing more transparent, and more dynamic. Dynamic pricing is the new normal. Customers will expect clear pricing, and sales reps need pricing and product substitution and upsell recommendations in real-time. Pretending otherwise is simply burying your head in the sand.
It's time for the pricing dinosaurs to adapt, or face extinction.
The first step is for sales reps to stop negotiating every price. Most actually dislike the haggling anyway, and appreciate doing away with those uncomfortable conversations. The right pricing analytics can deliver reps market-based prices that are tailored by customer. And eliminating the pricing exception process reduces time-to-quote. The second is to move from gut-based, manual pricing to pricing automation. Dynamic pricing is here to stay. The ability to update prices with the push of a button will be table stakes to doing business in this new era.
Saving the species will bring a new era of growth and efficiency.
For inspiration, look to the 25% of species that survived the extinction event all those years ago. Many species adapted rapidly to survive and thrive in the new ecosystem. Smart industrial players are already adapting with pricing intelligence software that updates pricing automatically and delivers pricing and product recommendations to sales reps in the CRM. These adaptations are driving revenue and margin growth, reducing time-to-quote, and eliminating time-wasting pricing exception workflows. For those who confront their new reality and commit to modernize pricing, the dawn of the new era looks bright!