Pricing Challenges in Petroleum
The sale and pricing of petroleum products is dynamic and complex. Prices
are volatile, negotiations are complex, margins are thin and market
transparency is mixed. Petroleum marketers faced a broad
range of pricing challenges:
- Proliferation of Pricing Entities: Too many pricing
possibilities to keep track of manually
- Manual Limitations: Too much effort and time to
update prices, and don’t have time to consider impact on
existing customers and contracts. Excessive manual data
entry
- Complex Pricing: Difficult to update formula-based prices
- Price Elasticity: Lack robust tools for estimating
elasticity and customer price sensitivity
- Price Testing: Difficult to plan, execute,
and evaluate price tests
- Pricing Process: Pricing decisions made based on “gut
feel” rather than consideration of relevant data
- Negotiation Tools: Sales people don’t have
adequate tools to negotiate confidently with customers. Cost
to serve, willingness to pay, current market climate, customer
price history and other important information are not incorporated
into price negotiations
- Alerts: Don’t get proactive and timely alerts
based on important changes in pricing environment
These challenges commonly lead to opportunities to dramatically
enhance business results by addressing them with proven processes,
tools, and pricing science. Before a rack price is posted
or term deal quoted; cost, inventory, market and other data must
be converted to usable information and made available to support
sales and marketing.
Market volatility and the changing competitive landscape have made
pricing more challenging than ever; and have lead many companies
to recognize that operating efficiency and market share do not
always guarantee profitability. More and more, companies
are shifting their focus to include pricing and price management
software as a way of achieving sustainable returns.
PROS Pricing Solutions for Petroleum Products
PROS is a leading provider of pricing and revenue optimization
software to the to the global petroleum industry. Our solutions
are configured to allow wholesale, commercial, and marketing organizations
improve financial performance by enabling better pricing and management
of sources of value leakage. By using our software products
and services, customers gain insight into their pricing strategies,
optimize their pricing decision making and improve their business
processes and financial performance.
PROS solutions for Petroleum support a broad range of functionality
necessary for pricing the spectrum of petroleum and petrochemical
products, including:
- Commercial Fuels: gasoline, distillates, biofuels, marine,
and aviation
- Lubricants: automotive/trucking, aviation, food industry, greases,
industrial, marine, and metalworking products
- Bitumen / asphalt
- Coatings and emulsions
- LPG
Our products implement advanced pricing science which includes
optimization, segmentation, forecasting and statistics. Our innovative
science-based software products utilize enterprise data from traditional
enterprise applications, often augmenting it with real-time and
historical data and using the combination to analyze, execute and
optimize pricing strategies. Each day, thousands of wholesale
and commercial marketers use these systems to support spot, and
contract pricing. We also provide a broad range of services
that include analyzing a company’s current pricing process,
facilitating organizational change management and developing and
integrating tailored software implementations.
To meet the many pricing challenges across the Petroleum Products
markets, PROS provides a comprehensive suite of pricing software
tools, including Analytics, Execution, and Optimization.
With PROS Pricing
Analytics tools, decision makers
can:
- Identify and correct destructive pricing trends
- Locate and correct poorly performing customers and segments
- Drill down to identify root causes of poor pricing performance
- Evaluate and quantify pricing improvement opportunities
- Understand demand behavior across segments
- Monitor market dynamics and pricing performance to enable faster
response to problems and opportunities
With PROS Pricing
Execution tools, decision makers
can:
- Set up more profitable pricing and discount guidelines based
on defined pricing strategies
- Provide decision support tools to the field to support better
price negotiations. Visibility of key deal terms,
customer sensitivities, and market context
- Enforce pricing guidelines by systematically managing pricing
exceptions and approvals
- Eliminate pricing errors by ensuring that negotiated prices
are communicated correctly to ERP systems
- Improve time-to-market of price changes
With PROS Pricing
Optimization tools, decision
makers can:
- Optimize price points based on best available inputs, including
forecasts, business rules, and constraints
- Use advanced analytics to guide better pricing decisions, considering
price-demand relationships, including zones of indifference
- Understand customer or segment price elasticities and customer
indifferences or cluster customers into segments based on purchase
behavior
- Minimize pricing mistakes by evaluating what-if scenarios
- Forecast demand and demand response using a library of forecasting
algorithms that support a vast number of business scenarios and
that consider appropriate variables
- Automate price optimization routines for massive data sets
PROS systems may be delivered to support a single product or business
segment or as a dynamic, enterprise wide tool for global deployment.
Proven Results
PROS customers have reported hundreds of millions of dollars of
incremental revenues and profits from the use of PROS Pricing Analytics,
Execution, and Optimization tools. By eliminating profit
leaks, uncovering hidden price improvement opportunities, providing
sales people with better negotiation tools, and optimizing prices
across segments, PROS customers have been able to leverage the
power of pricing.
Case Study: One of our customers
is a global integrated manufacturer of petroleum products and operates
hundreds of distribution terminals across the U.S. Our customer
experienced difficulty gaining visibility into the price-demand
relationships in its business, because doing so required hundreds
of different prices to be calculated and disseminated in a short
span of time. While the customer had the necessary raw data,
the customer did not have the ability to process this information
in a timely manner and therefore could not evaluate the effectiveness
of pricing decisions. Our analytics and optimization software
products automated pricing recommendations and forecasts of next
days’ demand at relative price points and competitor price
postings for each distribution terminal. As a result of implementing
our software products, our customer experienced a significant decrease
in sales volume volatility and realized increased profits in the
distribution terminals business.
To learn more about the opportunities to achieve
Pricing Excellence, please contact info@prospricing.com or
call our sales team at +1 713-335-5277.
Industrial
Manufacturing | Chemicals | Petroleum | High-tech
Manufacturing
