Rental Services
Equipment Rental companies today face complex pricing challenges due to the destructive pricing practices of “cost plus” and “match the competition”. These policies lead to unnecessary discounts, inefficient equipment utilization, low customer service levels, and ultimately profit erosion. Improving pricing through margin optimization is one of the most powerful ways to improve business and financial performance. PROS pricing software products drive the highest possible ROI and enable industry leading equipment rental companies to achieve Pricing Excellence.
Segmented or differentiated customers, products, and markets, and increasing use of market and competitive data requires equipment rental companies to understand how to deliver real-time data from multiple sources to the marketplace. The ability to execute real-time integrated pricing science can create a sustainable competitive advantage. Additional complicating factors include seasonal demand, complex competition space, effects of uncontrollable factors such as hurricanes and tornadoes, and long service life of rental equipment.
These factors add complexity in making pricing decisions and maintaining a right balance between equipment utilization and customer service levels. It is critical to develop and maintain strong customer relationships while pricing for profitability on a transaction by transaction basis. Equipment rental companies 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 the Equipment Rental Industry
PROS customers in the equipment rental industry achieve Pricing Excellence by using PROS science-based pricing software to stop destructive pricing practices. The most successful Industry-leading equipment rental companies improve profitability and generate a high ROI with PROS solutions in the following ways:
True Estimate of the Opportunity Cost: Seasonality in demand makes it challenging to keep a right balance between idle inventory and lost demand. Correct estimates of the true opportunity cost of a rental enables the rental managers make the right pricing decisions, while enabling the strategic planning managers make the right procurement decisions.
Segmented Pricing Guidance: Segmented pricing guidance establishes floor, average, market trend, target, stretch and maximum prices for each business segment. Not only does it automate the price generation process, but it also ensures that right price is offered to the right customer for the right product at the right time and right location. This helps in preventing profit leaks and avoiding pricing outliers, thereby maximizing the value on every rental.
Aligning Sales Activities with Pricing Objectives: When the sales agents are able to see the effect of their closing the deals at different pricing levels on their commissions and bonuses, it becomes easier to align the sales activities with pricing objectives. This helps shift the focus from maximizing the sales to maximizing the profitability.
Prevent Profit Leaks and Pricing Outliers: Pricing component analysis help understand the true transaction cost, and help avoid profit leaks. Peer group analysis ensures consistent pricing in different market segments.
PROS solves the most complex pricing problems, providing a dramatic ROI. PROS Rental, Leasing, and related Services industry experience includes:
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Global competition, cost pressures, and market volatility are changing the competitive landscape. These changes are leading many equipment rental companies to recognize that operating efficiency and market share do not always guarantee profitability. Equipment rental companies are shifting focus to include scientific analytics, optimization, execution (deal optimization and price optimization) and related science-based pricing software as a way of achieving sustainable returns.
Equipment Rental Industry - Pricing High Value Business Case
Challenge: Sales Managers lack visibility into price-demand econometrics, cost-to-serve, opportunity cost, market or competitive data, and other components at the time the deal or contract is made. This leads to un-scientific ad-hoc pricing practices that are not only vulnerable to profit leaks, but also consume a large portion of the sales manager’s time that could be better utilized in building the business.
Solution: PROS Pricing Software provides increased visibility into all pricing terms and cost-to-serve elements during price negotiations including discounts, technical services, freight, handling costs, payments terms, and other costs of goods sold. PROS high performance science-based pricing software products prevent profit leaks by allowing companies to:
- Evaluate price-demand econometrics, and utilize what-if analysis to model the impact of price changes under consideration
- Incorporate current and future demand forecasts at different levels of asset utilization in computing the opportunity cost of a rental deal
- Derive unique data including pocket price, pocket margin, cost to serve, and other metrics not available in any other system to help create a composite deal score
- Consider relevant market and competitive data at the time of the quote, including the average selling price, market indices, and segment optimized willingness-to-pay
- Evaluate the overall deal attractiveness to facilitate more profitable contract price quotes.
Value: Profit maximization by factoring in the current level of asset utilization, market and competitor prices, price-demand econometrics, current and future demand forecasts, and cost to serve in determining the right price for the right product for the right customer at the right time at the right location. Additional benefits include improvement in equipment utilization, and reduction in the quote response time.
