Beyond spreadsheets: Price management needs dedicated tools; market space still being defined

Despite the importance of price as the determinator of revenue and profit, many companies remain baffled by the complexity of managing the pricing process, and fail to dedicate the necessary resources to the issue. While the outlines of the fledgling pricing software space are somewhat murky, many organizations are ready to improve their pricing programs.


Despite the importance of price as the determinator of revenue and profit, many companies remain baffled by the complexity of managing the pricing process, and fail to dedicate the necessary resources to the issue.

While the outlines of the fledgling pricing software space are somewhat murky, many organizations are ready to improve their pricing programs. This finding was one of several points illuminated by a survey hosted by the Professional Pricing Society (PPS) and Zilliant , a pricing analytics and management supplier.

Results confirm that advanced pricing techniques require more powerful software, but the vast majority of companies still rely on spreadsheets as their primary pricing tool.

“Price optimization is still an advanced concept for many companies,” says Kevin Mitchell, CFO of PPS. “However, there is evidence of an upswing in recognition since 13 percent reported implementing price management software in this survey, while only 5 percent said the same four years ago in a previous study.”

Few survey respondents describe their current pricing processes and tools as very effective, and nearly 73 percent have active price improvement initiatives under way. They also cited improved profits as the primary goal of price management systems, says Mitchell.

“Companies have spent the last decade investing in enterprise resources planning systems and accumulating a wealth of data,” says Mitchell. “They are ready to take advantage of the data and improve the pricing decision-making process.”

The survey was sent to more than 25,000 pricing professionals primarily in manufacturing, distribution, and industrial services. More than 500 companies responded, ranging from small to large organizations.

Ideally, in a steady economy, the goal of price management is to improve both profits and revenues. However, during a recession, many companies lower their expectations.

Despite advances in techniques and tools, most companies still set pricing based on competition and costs.

“Today, many companies are not prepared to increase prices or marketing dollars to improve revenue,” says Narayanan Viswanathan, research director for supply chain and logistics with Boston-based Aberdeen Group . “Companies will continue to optimize costs and profits in the short term, and will focus on growing revenue and market share when the economy improves.”

Since price optimization as a software category is still in its early stages, determining ownership of data can be a challenge, says Viswanathan.

“Sales and marketing and engineering departments all have touch points into pricing, but they typically operate in separate silos,” he says. “When a bill of material is created, the product is given a base price, but then marketing adds features to bump up the selling price.”

Viswanathan says some price management tools are too complex for the average user and require more in-depth knowledge and skills. “There is a real trick to using some optimization systems. It is not as simple as plugging in numbers to a forecasting or demand-planning system,” he says.

Price velocity—i.e., profitability per minute—is another important metric some optimizations systems are starting to include. The price of a product is not only based on cost, but also on how easy it is to make, says Viswanathan. “Prices should be lower for those items that can be made more quickly, which will in turn maximize profit margins.”

The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
Each year, a panel of Control Engineering and Plant Engineering editors and industry expert judges select the System Integrator of the Year Award winners in three categories.
Doubling down on digital manufacturing; Data driving predictive maintenance; Electric motors and generators; Rewarding operational improvement
2017 Lubrication Guide; Software tools; Microgrids and energy strategies; Use robots effectively
Prescriptive maintenance; Hannover Messe 2017 recap; Reduce welding errors
The cloud, mobility, and remote operations; SCADA and contextual mobility; Custom UPS empowering a secure pipeline
Infrastructure for natural gas expansion; Artificial lift methods; Disruptive technology and fugitive gas emissions
Mobility as the means to offshore innovation; Preventing another Deepwater Horizon; ROVs as subsea robots; SCADA and the radio spectrum
Research team developing Tesla coil designs; Implementing wireless process sensing
Commissioning electrical systems; Designing emergency and standby generator systems; Paralleling switchgear generator systems
Natural gas engines; New applications for fuel cells; Large engines become more efficient; Extending boiler life

Annual Salary Survey

Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
The maintenance journey has been a long, slow trek for most manufacturers and has gone from preventive maintenance to predictive maintenance.
Featured articles highlight technologies that enable the Industrial Internet of Things, IIoT-related products and strategies to get data more easily to the user.
This digital report will explore several aspects of how IIoT will transform manufacturing in the coming years.
Maintenance Manager; California Oils Corp.
Associate, Electrical Engineering; Wood Harbinger
Control Systems Engineer; Robert Bosch Corp.
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me