Pricing transformation means completely changing the way a company sets its prices, using new digital tools and technologies to make better pricing decisions. This process aims to set prices that accurately reflect the perceived value of products or services, dynamically respond to market competition, and maximize profitability.
Leveraging software solutions, businesses can ensure they are setting optimal prices for each transaction, considering factors such as customer demand, market trends, and competitive landscapes.
In today's rapidly evolving business landscape, pricing transformation has become a critical priority for organizations seeking to stay competitive and maximize profitability. As market dynamics shift and customer expectations evolve over time, companies must adapt their pricing strategies to keep pace. Pricing platform provider Omnia Retail has joined forces with Horvath, the international management consultancy with a focus on transformation and digitization, to share insights on the key elements of success we observe in businesses that have successfully undergone a pricing transformation. Drawing on our combined expertise in pricing software and strategies, we've identified seven key pillars that can help businesses successfully navigate this crucial process:
- Articulate the potential value and impact of pricing transformation on the company's top line
- Develop a compelling business case that outlines both short-term wins and long-term strategic benefits
- Quantify benefits by running a proof of concept (POC) where you A/B test the effectiveness of your pricing strategies
- Ensure that pricing objectives are aligned with overall business goals and strategy
By making pricing transformation a C-level priority, companies can ensure that the necessary resources, attention, and support are allocated to drive meaningful change.
Successful pricing transformations are not solely a business initiative or an IT project; they require seamless collaboration between both domains. Our experience shows that when both the business and IT sides feel ownership, a well-developed pricing strategy will take shape and can be effectively implemented. We suggest to consider the following:
- Establish cross-functional teams that bring together business expertise and technical knowledge
- Ensure clear communication channels between business stakeholders and IT professionals
- Develop a shared understanding of pricing goals, challenges, and potential pitfalls
- Leverage technology as an enabler of pricing strategies, not just as a tool for implementation
Remember, introducing pricing software alone does not solve pricing problems. It's the synergy between business acumen and technological capabilities that drives true transformations.
While pricing transformation is often a long-term journey, it's essential to maintain momentum by focusing on major achievements and celebrating quick wins along the way. To do so, we suggest the following:
- Build confidence in the transformation process
- Demonstrate tangible value to stakeholders early and fast (e.g. the aforementioned POC)
- Generate enthusiasm and buy-in across the organization
- Secure ongoing support and resources for the initiative
To achieve this:
- Start with an isolated part of the business. E.g. one category or 1 geographical location. This allows for a quicker ROI and lower time investment. Successful pilots then typically serve as boosters for global roll-out.
- Identify high-impact areas where pricing improvements can yield significant results such as focussing on highly dynamic product groups, Key Value Items (KVIs), and high runners.
- Use available technology in steps. First automate the more tedious tasks to free up time, then use that time to focus on developing commercial strategy in more depth.
- Celebrate and communicate successes internally to maintain motivation and engagement as a transformation needs to be sold internally as well in its early stages.
Any improvement in pricing should pay for itself. By delivering on quick wins, you can cross-finance the journey and support fast achievements, creating a positive cycle of improvement and success.
External consultants and software partners can kick-off a pricing transformation. They will generate value quickly but it’s crucial to internalize pricing know-how within your organization. Both for adoption and continuity, dedicated resources are critical. This ensures long-term success. We suggest following steps to internalize pricing knowledge:
- Invest in training and development for your team
- Document how you develop and execute your pricing strategy
- Encourage knowledge sharing and best practice dissemination across departments/teams/countries
- Use a proper pricing platform that enables collaboration & knowledge sharing within your organization
- Develop a pipeline of pricing talent within your organization
By making a pricing transformation program truly yours, you build internal capabilities that will drive continuous improvement and adaptation to market changes.
Pricing transformation should not be an "ivory tower" exercise conducted solely at headquarters. To ensure success, it's crucial to involve local teams and incorporate diverse perspectives from across your organization. We suggest the following to include local teams:
- Engage sales representatives in target markets to gather on-the-ground insights
- Seek feedback on conceptual and design ideas from front-line employees
- Involve top performers from various regions in the transformation program
- Conduct pilot programs in select markets to test and refine pricing strategies
By going out and involving sales reps in markets, you can get valuable feedback, test ideas, and create a more robust and effective pricing transformation program.