Read this before buying a B2B pricing tool

How do you choose which tool to use and with what features?

The Pricing software landscape is getting increasingly crowded. Today, there are over 50 pricing products and solutions from the leading vendors alone. All vendors promise a rapid deployment due to SaaS delivery, and all offer analytics / machine learning / AI to deliver a superior pricing impact. So how do you cut through this complexity and choose the right pricing tool(s) for your organisation?

Simplifying the B2B pricing tool landscape

We reviewed 50+ pricing tools across 10+ leading vendors. Comparing these tools and their features can appear overwhelming if you are at the begining of your tool discovery phase. This is because, at the first glance, the tools may appear to have overlapping features across the vendors and because the tools also have different nomenclatures. However, from a functionality point of view, all these tools can be mapped across 4 categories as illustrated below.

‘Price Management’ tools are used to store and govern price policy, discounts and authorization matrix. ‘Quotation’ tools are used to create, price and communicate quotes to prospects and customers. Depending on what a company sells, it may also have a ‘Configuration’ tool to support quotation.

‘Price Optimization’ and ‘Sales Growth’ analytics are a new breed of tools that use advanced analytics / machine learning / AI to generate customer-product specific recommendations on target price. Depending on the nature of your business and the end market dynamics, these tools may need to used real time or just a few times a year. 

Typical status of pricing tools at B2B companies 

All B2B companies usually have some tool, even if Excel based, for ‘Price Management’ and depending on the company context, also have a tool either for ‘Quotation’ or for ‘Configure-Price-Quote’.

On the other hand, most B2B companies may not have tools or standard processes for ‘Price Optimisation’ or for ‘Sales Growth’ analytics. At best, B2B companies conduct ad-hoc pricing and sales growth analyses – usually in Excel to set the price policy for the next budget year. 

Criteria to choose your pricing tools  

Leading vendors offer their pricing tools in SaaS model across all the 4 categories explained above. Migrating ‘Price Management’ and ‘Configure-Price-Quote’ to 3rd party SaaS tools can bring several benefits such as faster quotes, reduced errors, simpler governance, etc. We however recommend that you do not take these benefits as a given and conduct a thorough RoI assessment before signing up to new SaaS tool(s).

On the other hand, for ‘Price Optimization’ and ‘Sales Growth’ analytics, 3rd party SaaS tools need not be the only option. B2B companies can also consider building bespoke open-source based tools for their analytics needs. This is because open-source base tools can offer the same or better analytics capability as the 3rd party tools, at a fraction of the cost and with a greater flexibility to process data residing in functional silos. 

The following criteria can help you to choose between open-source based vs. 3rd party SaaS based tools for your ‘Price Optimization’ and ‘Sales Growth’ analytics needs.

Q1. Is the annual revenue of your business unit < $200m? 

If you are part of a multi-billion dollar group, the <$200m threshold should be tested for each distinct business unit within the group. A distinct business unit is one with its own set of product and service offerings, pricing policy and underlying data. 

If the business unit revenue is <$200m, then an open-source based tool can be the most cost effective and flexible option even in the long term. A 3rd party SaaS tool may not generate enough payback. 

If your business unit revenue >=$200m, then proceed to the next question.

Q2. Does the data that you plan to use for analytics sit across systems and/or require a cleanup?

B2B companies can generate high impact, personalized customer insights by combining sales data with other data such as CRM, Customer Service, Marketing, Operations etc. Bespoke data cleanup and transformation is needed to combine this data that typically resides in silos across systems. Even if you plan to use the data just from Sales and CRM systems, bespoke transformation e.g., to fix data gaps and errors, may still be needed before the data can be meaningfully analysed. 

In such scenarios, it may be faster and more cost efficient to pilot your data exploration and analytics using open-source based tools. The pilot will help you to finalise which data to use, and how to clean, combine and analyse it. The pilot can also help you to postpone investment in a 3rd party tool until you measure the true impact of the analytics driven insights. You can use this ‘true’ impact to better evaluate the RoI of a 3rd party SaaS based tool before signing up for it. Based on the evaluation, you may also choose to scale up your open-source based tool.

If the data that you plan to use for analytics is all cleanedup, integrated and ready to use, then proceed to the next question.

Q3. Do you already have 3rd party SaaS tool for ‘Price Management’ and/or ‘CPQ’? 

If you already have 3rd party pricing tools, and if all the data you want to analyse is already accessible in those tools, then piloting with add-on analytics modules from your existing pricing tool vendor could be the quickest way to proceed. However, before committing to invest in the tool, we would recommend a RoI assessment that also considers the frequency of use and size and location of users.

To conclude… 

Investing in a 3rd party SaaS tool for ‘Price Management’ and ‘CPQ’ is usually beneficial – subject to an attractive RoI. For ‘Price Optimisation’ and ‘Sales Growth’ analytics it is prudent to run an analytics pilot before committing to a tool. Open-source based tool may be an attractive option for the pilot unless you already have all the data readily accessible in a 3rd party SaaS based pricing tool. 

If you have any further questions on pricing tools vendor landscape, tool RoI assessment, or using open-source-based tools, please submit your email id below

 

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About the authors:

 

Kedar Gharpure is the Director of B2B Growth Consulting Ltd. He has served business heads of several Fortune 250 and Private Equity owned B2B companies on growth strategy and commercial transformation.

 

Vidya Ranade is the founder of Decodexis, a company that provides bespoke analytics and consulting services to clients in marketing & sales, operations and R&D.

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