Simplifying the B2B pricing tools landscape
Typical status of pricing tools at B2B companies
All B2B companies usually have some tool, even if Excel based, for ‘Price Management’ and a tool for ‘Configure-Price-Quote’. Some companies may not need the ‘configure’ module.
However, most B2B companies do not have tools for ‘Price Optimization’ or for ‘Sales Growth’ analytics. Some B2B companies may conduct ad hoc price analyses – usually in Excel to set the price policy for the next budget year. ‘Price Optimization’ is increasingly an important driver to deliver superior financial returns. (Read more here). However there is no silver bullet ‘price optimization’ tool in the market. You still need a careful assessment of available pricing tools and select one that can generate highest incremental RoI.
Criteria to choose B2B pricing tools for your company
Leading vendors offer their pricing tools in a SaaS model across each of the 4 categories explained above. Migrating your existing ‘Price Management’ and ‘Configure-Price-Quote’ to 3rd party SaaS tools can bring several benefits such as faster quotes, reduced errors and simpler governance. However, please conduct a thorough RoI assessment before you sign up to new SaaS tool(s).
For ‘Price Optimization’ and ‘Sales Growth’ analytics, 3rd party SaaS tools need not be your only option. B2B companies can also consider building bespoke open-source based tools for their analytics needs. Open-source based tools can offer the same or better analytics capability as 3rd party tools, at a fraction of the cost. Open-source based tools also offer greater flexibility to process data spread across functional silos in a B2B company.
Following questions can help you decide whether to use open-source based or 3rd party tools for ‘Price Optimization’ and ‘Sales Growth’ analytics.
Q1. Is the annual revenue of your business unit < $200m?
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 just may not generate enough payback.
If your business is a part of a multi-billion dollar group, then the <$200m threshold applies to each distinct business unit. A distinct business unit is one with its own set of product and service offerings, pricing policy and underlying data.
If your business unit revenue >=$200m, then proceed to the next question.
Q2. Does your data sit across systems or require a cleanup?
B2B companies can generate high impact, personalized customer insights by combining sales data with data from CRM, Customer Service, Marketing and Operations systems. (Read more here). However, all this data is often present in separate legacy systems. You need a bespoke cleanup and transformation of this data before you can combine and analyze it. Even if you plan to use the data just from Sales and CRM systems, you still need bespoke transformation. E.g., to fix data gaps and errors before you can combine and analyze it.
After combining the data, you still have to go through an exploration and learning process with data. This involves sifting through the data to discover specific data points that offer the best price improvement insights.
As with many B2B companies, if your data also sits across multiple systems then you can pilot your pricing analytics with open-source based tools. Open-source based tools are a quick and low-cost way to support data cleanup, exploration and discovery. The pilot will help you zero-in on which data to use, and how to clean, combine and analyze it. The pilot can also help you determine the RoI of analytics driven insights. You can use this RoI assessment to establish investment thresholds for a 3rd party SaaS tool before you sign up for it. If the SaaS tool is more expensive, you can scale up your open-source based tool instead.
If the data you plan to use for analytics is all cleaned up, 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 analyze is already accessible to 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, please conduct a thorough RoI assessment. Please consider the frequency of use, number and location of users in the RoI assessment.
If you have any further questions on pricing tools vendor landscape, RoI assessment, or using open-source-based tools, please submit your email id below.
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.