The pandemic jolted the world, forcing businesses to re-examine what digital transformation means to their bottom line. A dynamic pricing strategy has become a must-have for staying afloat.
Dynamic pricing emerges as a key strategy in the wake of COVID
Many industries had a reactionary response to the pandemic, wondering if they should drop prices to stay in business. The first move for many companies was to reduce costs, but this is a short-term strategy.
It’s clear that setting the right price is critical to survival during this time so others looked into options. In the first weeks of the pandemic, research from G2 showed that pricing software searches increased by 75%, quote-to-cash software by 48%, and CPQ by 22%.
As they prepare for a future marked by so much uncertainty, many companies are moving fast. But they’re going in blind because they don’t have the right pricing strategies set in place. This results in an ineffective pricing process, which leads to lost sales and, ultimately, watching the competition pass them by.
Improving business agility is achieved by boosting pricing insight, speed, and acumen. Here are three ways to achieve business agility with pricing.
Dynamic pricing strategy: Focus on profit drivers
Steer away from performing analysis, optimization, segmentation of prices and margins with general-purpose business intelligence tools – including Excel. Pricing-specific technologies can bring meaningful insight into profit drivers across the realm of your business, including each product, customer, salesperson, down to the transaction.
For example, in manufacturing, businesses should be able to evaluate real-time margin analysis of top products, services, and customers. This strategy will keep businesses focused on profit drivers rather than low-margin distractions. In the COVID era, focusing on the right path is crucial.
Don’t take the black-box approach to dynamic pricing
Businesses are not like scarves, where one size fits all, yet they should also be cautious with getting caught in overly complex “black box” pricing. These can lead to lost deals or leaving money on the table. Work with a full transparent dynamic pricing strategy, whose optimization is powered by AI and machine learning and provides a “clear box” approach to optimization.
Successful machine learning and data science techniques include optimized pricing strategies, segments, volumes and margins, with real data-driven price management. AI can work for you by providing sales staff with optimal prices or guidance for each quote or individual transaction.
Better agility for a better bottom line
Businesses need a systematic way of managing a number of factors, including price lists, frequent price changes, and contracts. Without these, businesses are prone to act slower than the competition in making important changes to cost and demand.
Dynamic pricing is not new, but it’s now more important now than ever. In our constantly changing market, businesses must keep up by continuously adjusting prices in response to supply and demand. Dynamic pricing gives businesses better control of pricing strategies because of a keen eye on real-time pricing trends across the industry.
Modern dynamic pricing tools provide alerts in changes in competitor prices, a clear picture of supply and demand of specific products, giving an opportunity to maximize revenues with optimized prices.
This is an opportunity to view the business from a granular level, giving a little more flex to business agility and another nod to the bottom line.
The companies doing well today have agility – the ability to respond to market changes rapidly. An agile business can respond appropriately to changes in the market, supply and demand shifts, supply chain breaks, new regulations and, yes, even global pandemics.