Finding the right pricing software isn’t an easy process. It requires careful consideration and a structured analysis of business requirements. In part two of our Simon-Kucher Engine series, we explain how to utilize and combine different types of software – including ERP and CRM systems, price crawlers, and retail and revenue management software.
In many industries, software support for pricing has become indispensable. But among the many solutions available on the market, how do you find the “right” pricing software that suits your individual company’s needs?
Standard ERP (enterprise resource planning) or CRM (customer relationship management) systems already provide pricing-related capabilities, but often lack efficient and flexible options for price management and optimization as well as for in-depth analysis. To solve more complex pricing scenarios, it’s recommended to choose industry-specific pricing software. The market is complex, however, and sales and pricing teams need time to explore all the required functions and software options before choosing a suitable solution. To help you get started, here’s a brief overview of key things to consider.
Understanding the limitations of ERP & CRM systems for pricing
Most companies nowadays use either an ERP or a CRM system to support their sales and accounting processes. To a limited extent, these systems provide tools to support price management. Therefore, most companies first investigate whether their existing ERP or CRM system can support the business’s pricing requirements: With these systems, companies can store rules for creating price lists or even customer conditions and then access the information to create quotations or invoices. Consequently, in many cases, it seems intuitive to use the existing ERP or CRM solution also for more complex pricing problems, but this causes a couple of issues.
- ERP and CRM solutions cannot simulate options for price changes across customers
- They do not support efficient workflows for frequent price changes
- They use neither price optimization nor artificial intelligence algorithms
- They do not provide transparency to manage discounts
- They have limited capabilities for pricing analytics and pricing workflows
Therefore, these systems are only sufficient for less complex pricing cases and simple calculation logics. For more sophisticated pricing systems, special software is required.
Gaining a market overview of pricing software
On the journey to select the right pricing software, companies usually face a highly fragmented software landscape. Depending on the type of systems already in place, different types of software solutions are applicable, as shown in the chart below.
|Interests & Premimums
|Discount & rebates
|Deal desk & quoting
So before implementing pricing software, it is often useful to involve a pricing expert who has already implemented such a solution and knows the specific requirements. Another way to verify the suitability of the software is a pilot for a specific market or category. While a certain investment is required, this may be less expensive than committing to a full scope without 100 percent confidence that the chosen solution is the right one.
One-size-fits-all vs. best-of-breed strategy
It’s recommended to decide early on whether to use only one pricing tool or rely on multiple vendors. For example, a common practice is to use price optimization and management (PO&M) software to optimize and manage prices of products as well as configure-price-quote (CPQ) software to handle the quoting process and pricing towards customers.
Depending on the business requirements, careful consideration must be given to whether the additional coordination and implementation efforts justify the extended functional coverage of multiple vendors.
The universal solution: Price optimization and management software
Price optimization and management software (PO&M) is the most common pricing solution, primarily for B2B- oriented companies. This all-rounder for price management offers functionalities for calculating and managing list prices, analyzing and managing discounts and bonuses, and applying price guidance algorithms. With PO&M software, all involved departments can keep track of any information related to prices and price changes. Instead of having information in many Excel silos that can only be accessed by some team members, it offers a unified solution for efficient and effective price management.
The market for PO&M software is diverse, with some bigger players and smaller companies focusing on niche solutions. There are also various specialists for the management of specific off-invoice discounts, an area not always fully covered by classic PO&M providers. Here, functionalities need to overlap with services for financial accounting. It’s important to note that implementing pricing software, especially PO&M software considering all the different prices and mechanisms, can take well over a year in larger, internationally operating companies.
Check out our PO&M solutions at Simon-Kucher Engine.
Customizing prices using configure-price-quote software
Configure-price-quote (CPQ) software provides B2B companies with digital workflows for configuring a product and issuing a quotation for an individual order or contract. This software supports pricing, approval processes, and general quotation creation.
Since sales departments today usually work with a CRM system, CPQ solutions are often integrated into these systems. In industrial goods, pricing takes place as part of the quotation process. Therefore, many PO&M providers also offer CPQ solutions. And vice versa, CPQ providers have included certain price management functionalities in their solutions.
Simon-Kucher Engine also provides software for pricing in quoting processes that connect to both CRM and CPQ systems. Check out our solutions here.
Exploring dynamic pricing: Revenue management software
Airlines and hotel booking sites were the early adopters of dynamic pricing as an effective solution for yield and revenue management. Due to the high volume of data and complex pricing mechanisms, the whole travel industry relies heavily on developing pricing engines that keep up with the booking situations at any time and day.
In ideal cases, the software predicts the demand and supply over weekdays, weekends, and holidays to forecast the capacity of planes or hotel rooms.
The various types of retail pricing software
Retail pricing software is designed to meet the demands of retail and e-commerce, offering broad solutions for retail-specific problems that range from shelf pricing to various discount offers.
A specialized group of providers offer solutions for retail-based dynamic pricing. Often, these providers employ data scientists and use artificial intelligence to predict the sales volumes of a product in predefined situations at alternative prices. With the help of such forecasting models, prices can be optimized considering various events and circumstances.
The last group of vendors are consulting companies that have entered the market with their specific retail pricing solutions. These platforms support the analytical and strategic approaches of consultants and extend their value chain toward implementation and pricing execution through software.
Simon-Kucher Engine has also recently launched a retail pricing solution that will be widely available soon.
Specialized requirements: Financial services pricing software
Due to different pricing and business models, the landscape for financial pricing software varies greatly from other pricing solutions. Different types of data such as account balances, interest rates, as well as movements within the portfolio are analyzed as part of the price optimization process.
Check out our pricing solution for banks: Dynamica | Deposits.
Price crawlers: Understanding how competitors’ price their products
Crawlers, which collect competitor data and prices off from the iInternet, often are a prerequisite tool for pricing algorithms, especially in the dynamic pricing space. Most vendors of such software are specialists in this field of application, with the market branching out into two different business models:
Price information: providers store and sell data collected from the internet
Web scraping: providers offer software that allows a user to crawl and collect specific (online) pricing information
Using web scraping techniques, some crawlers target the most common e-commerce websites like Amazon or eBay; others can also search and read prices from industry- specific portals. However, various competitor prices are only available on individual websites, and not in the common e-commerce portals. So, for extracting this information, a configurable web scraping option is required.
The pricing analyst must then define the web address (URL) as well as the area where the desired price information is located, and then configure rules for reading out this information. With these configurable web scraping solutions, price managers gain a lot of flexibility to capture price information, but (unfortunately) these solutions must be regularly updated when the target portals change their page structures.
When evaluating crawling software, data reliability and timeliness of the data provided should rank among the key criteria. Often there are several prices for the same product on different target websites or even within one website, which makes the collection and correct assignment for the crawler more challenging. There are a couple of price crawlers that rely on an additional layer of artificial intelligence to manage the most frequently fluctuating prices.
Advice on in-house development
For some use cases, in-house development makes more sense and can also be more cost-effective than commercial software. Since many companies consider their business cases to be very specific, in-house developments enjoys widespread popularity, but also requires the “right” specialist among the employee knowledge-pool.
Another example for useful in-house tools is available for companies that only require price analytics. If they also have an in-house data team at hand, then developing their own pricing dashboards using internal business intelligence tools makes most sense. This approach allows for precise customization and does not require investments into data integration or new software tools.
“Low code” platforms may be an option for developing custom pricing software. They provide the building blocks to create and maintain simple pricing tools. With such platforms, sales departments can map approval workflows or deal desk functionalities.
The general problem with in-house developments, however, is that companies not only have to take care of developing the software but also the maintenance and updating process.
At Simon-Kucher Engine, we provide standard software and develop custom low code applications. We also maintain and update these for our clients. Check out our services here.
Stay tuned for the next parts of our series on pricing software, where we will look at the different challenges and best practices for implementing and rolling out a pricing software.
Want to know more? Get in touch!