High-Tech Manufacturing
High-tech manufacturers face increasingly complex pricing challenges due to the destructive pricing practices of “cost plus” and “match the competition”. These policies result in unnecessary discounting, pricing erosion, and quoting below breakeven prices. Improving pricing is one of the most powerful ways to improve business and financial performance for high-tech companies. PROS margin optimization software products drive the highest possible ROI and enable industry leading high-tech companies to achieve Pricing Excellence.
Channel specific and segmented strategies, product configurations lifecycle stages, and end manufacturer requirements create a complex pricing environment. In order to better optimize pricing to segmented channels, customer and markets, high-tech manufacturers must deliver real-time data from multiple sources to sales managers; making sure pricing data incorporates services costs, purchase volume, product mix, customer demand volatility, inventory, frequency, and other factors. It is critical that customer needs are met while remaining profitable on a transaction by transaction basis. Industrial manufacturers are at a competitive disadvantage if sales, marketing, finance, operations, and management have limited visibility into pocket price and pocket margin, lack a uniform pricing strategy, practice unscientific ad-hoc pricing, and lack relevant and timely data.
Pricing Challenges in High-Tech Industries
PROS customers in high-tech achieve Pricing Excellence by using PROS science-based pricing software to stop destructive pricing practices. The most successful high-tech manufacturers improve revenues and generate a high ROI by addressing complex pricing problems including:
Lack of visibility into true profitability over time: Sales Managers need adequate negotiation tools providing critical data including cost to serve, willingness to pay, current market climate, customer price history and other relevant benchmarks not currently available in price negotiations.
“One size fits all” pricing: Actionable differences in customer segment purchase behaviors allow pricing based on customer value or product end use creating incremental revenue. In addition, systematically tracking wins and losses (win-loss tracking) and incorporate feedback into pricing decision improves long-term competitive pricing and improves profitability.
Manual limitations: Prices change more frequently than ever with calculating the impact on existing customers and contracts a further complication. Manual price updates require significant effort with dependencies on spreadsheets and error prone manual processes. Breaking these limitations simplifies guideline enforcement and improves revenue.
Multiple channels and segments: The many pricing possibilities across channels, bundles and configurations are simply too great to keep track of manually. Companies lack a systematic way to sort through pricing alternatives or scientifically evaluate the customer buying behavior and segment attributes that lead to optimal pricing. Channels may keep the manufacturer at arms-length from the end customer, further muddying data.
Complex terms and pricing conditions: Multiple sources of revenue leakage exist between the price and the bottom line. And even when the price and terms are agreed, companies frequently have difficulty tracking customer compliance to contract terms.
PROS solves the most complex pricing problems, providing a dramatic ROI. PROS high-tech manufacturing industry experience includes:
|
|
PROS helps high-tech manufacturers take advantage of price improvement opportunities by providing insight into price performance, enabling strategic pricing decisions at the segment level, and optimizing sales guidance and decision support to the field. By eliminating profit leaks, uncovering hidden price improvement opportunities, providing sales people with better negotiation tools, and optimizing prices across segments, PROS customers leverage the power of pricing.
Industrial Manufacturing - Pricing High Value Business Case
Challenge: At the time the deal is negotiated, the sales force needs visibility into the interplay of relevant profitability components such as price, rebate, customer cost to serve, and portfolio impact. A lack of accurate data results in destructive pricing practices such as discounting of valuable service items and “matching the competition” without true understanding of deal profitability. Without PROS Pricing Optimization Software, products, customers, contracts, and deals which appear profitable may in fact be net negative, loss-generating activities.
Solution: PROS Pricing Software provides increased visibility into all pricing terms and cost-to-serve elements during price negotiations. Common elements can include (but are not limited to): surcharges, volume discounts, rebates, packaging and freight allowances, special services, promotions, payment terms, and costs of goods sold. PROS science-based pricing software products prevent profit leaks by allowing companies to:
- Identify and correct destructive pricing trends and quantify the pricing improvement opportunities
- Locate poorly performing customers and segments and drill down to identify and correct root causes of poor pricing performance
- Understand demand behavior across segments
- Provide field decision support tools that increases sales’ confidence in system prices, empowering them to negotiate the best price and terms
- Monitor market dynamics and pricing performance to enable faster response to problems and opportunities
- Utilize what-if analysis to model the impact of price changes under consideration, and compare waterfall elements to benchmarks, targets, and other reference groups
- Evaluate the overall deal attractiveness with unique, system-generated metrics such as deal score to facilitate more profitable contract price quotes
Value: Increased margins are generated by the ability to identify waterfall differences and act on corresponding pricing opportunities across divisions, regions, products, or any other business entity. Better pricing decisions are made through visibility into the localized waterfall effects from specific cross-segments of the business.
