Pricing Resources
Success Story: $4 Million Improvement in 28 Days
Introduction
In 28 days, the aftermarket division of a major auto manufacturer realized $500,000 in revenue improvement by implementing PROS Scientific Analytics and making their first 80 price changes. After moving an additional set of products to competitive levels, another $4,700,000 in revenue improvement is now in process as new prices go into place. In this environment where expenditures are closely scrutinized, this PROS customer has made it clear that pricing is a top priority and a strategic initiative capable of improving margins and creating short-term positive cash flow gains.
Historical Pricing Environment
Prior to using PROS, the company focused on two primary pricing problems:
- Margin target cost-plus pricing
- Impact of competitive data
Cost-Plus Pricing Problems
The cost plus pricing model focused on a single corporate dictated gross margin target. This target was applied to virtually all product lines. Some “market” pricing was offered based on dealer request because “their prices were too high.” When market price based changes were made, no price adjustments were made on other parts to offset the margin loss.
No Insight into Competitive Prices
The company lacked insight into competitors’ prices, resulting in out-of-market prices. The customer needed to not only understand its market position, but also to react to market changes more quickly to capture time sensitive profit opportunities. This inability to make operational their competitor data led to further complications:
- Delayed notification of competitive price moves
- Inability to react to competitors’ price changes, result in lost revenue, volume and margin
Pricing Improvement Plan
The PROS Pricing Solution Suite (PPSS) gave this customer the ability to capture time-sensitive profit opportunities that result from market changes while preventing profit leaks. PROS 30-Day Analytics focuses on opportunities to correct competitive pricing. PROS Price execution system effectively makes operational their competitive data; allowing pricing executives to focus on granular pricing strategies that move from value-destroying ad-hoc strategies to Pricing Excellence with PROS.
PROS Solution Delivery Framework
The Solution delivery Framework (SDF) captures best practices learned through PROS’ 200+ deployments. This customer was able to follow the workflow created by PROS to:
- Rank pricing margin opportunities
- Review competitive landscape
- Conduct advanced analysis
Results
Following the best practices SDF, $5.2 million of pricing margin opportunity was identified and action taken in under 30 days. PROS Scientific Analytics identified areas where a “market leading” strategy was not being implemented and where pricing was lower than competitors. In addition, PROS allowed Product Line Managers to price with confidence using Real-Time Integrated Science; replacing ad-hoc pricing by “folklore.”
Additional Pricing Case Studies
Manufacturing
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 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.
Distribution
One of our customers is a building products distributor that employs approximately
750 sales people with full pricing autonomy quoting tens of thousands of prices
everyday. With tens of thousands of products marketed and sold across multiple
U.S. regions, our customer found it difficult to aggregate and analyze timely
market data to implement effective pricing. Our software products were implemented
to provide key market and cost information, market pricing benchmarks and customer-specific
decision support during real-time negotiations. This allowed costs and profitability
to be accessible at the time of quote. As a result of implementing our software
products, the customer improved sales force productivity, reduced variance
across regions, increased deal capture percentages and increased profits.
Services
One of our customers is a global car rental company that maintains a fleet
of hundreds of thousands of cars across multiple classes and makes. Our customer
faced significant pricing challenges in executing demand forecasting, analyzing
the relevant opportunity costs of fleet movements and optimizing profit opportunities
at the local level. Our software products provide demand forecasting, pricing
optimization and insight into fleet management terms to deliver integrated
recommendations on pricing, distribution and fleet acquisition. As a result
of implementing our software products, our customer improved its return on
assets, reduced fleet idle capacity and recaptured its investment in our software
products in the first year after completion of implementation.
Airlines
One of our customers is a global passenger airline that serves diverse, segmented
markets in multiple countries and across multiple currencies. Due to the complex
nature of the airline industry, the customer faced a variety of extremely challenging
pricing demands, including managing seating inventory and setting millions
of real-time prices everyday. Our software products allowed our customer to
perform real-time seat inventory optimization by market segment, monitor and
analyze passenger traffic flows and optimize revenue across its entire network.
As a result of implementing our software products, our customer achieved improved
seat utilization rates across multiple routes, optimization of segmented pricing
and generated increased profit.
Key Criteria for Selecting a Pricing Vendor
- Vendor Financial Viability
- Understanding 3rd Party Agreements and how they can influence a recommendation and viability
- Existing Customer Relationships - are they substantive
- Customer References
- Why an On-site Visit is Important
- Vendor Product Evaluation
