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10.03.08 Increase Revenue With Price Optimization Software  By Jim Berkowitz Here are just a few excerpts from a comprehensive article by Marshal Larger about the growing pricing optimization software marketplace, The Price Is RightYou Hope: Here's a testimonial you may wish to consider: “Price optimization software is a confidence-builder, it sets the floor price and target price, and proves a deal's value from the start. It's a big win-it can take an entire business up a couple of margin points. Ease of use is excellent. Turn it on and it works.” That's Wyatt Aasen, director of planning and analysis for industrial coatings manufacturer PPG, talking about the value price optimization software brought to his company. And here's another tidbit: “Through 2010, price optimization technology will have a more direct impact on increasing revenue or margins than any other CRM technology.” That's from the 2008 Gartner MarketScope for Price Optimization and Management. Statements like these are becoming more common in the B2B arena. Price optimization software is more powerful and easier to use than ever before, and it can have immediate and far-reaching benefits for its users. But if that's so, why aren't more companies taking advantage? “In retail, travel/hospitality, etc., companies have long been aware of the ability to maximize profit,” Hills says. Room prices, flight tickets-goods that have value that expires after a certain point in time-were easier to handle with price optimization. “In other verticals, like manufacturing, the sense was always that negotiations made optimization too complex,” he says. “We cracked the code on optimizing negotiated prices.” A few things had to fall into place before pricing software could truly take off-and even then, it was hard to spread the gospel. “We developed a solution, and six or eight initial customers saw considerable returns, but it took them a while to become reference customers,” says Eric Hills, vice president of marketing for Zilliant. “There's a secret-sauce aspect. We do have a challenge getting customers to talk openly-price optimization is a real competitive advantage. But awareness is growing fast.” According to Hills, Zilliant now has as many as 50 companies with price optimization solutions in production.
Fortunately, the CRM industry and the analysts who watch it are beginning to devote more resources to price optimization. The Gartner MarketScope referenced above estimates the total worldwide revenue of the market for B2B pricing software at $150 million as of 2007, and it's growing at 30 percent per year. In fact, according to another report, Gartner considers price optimization and management the single most beneficial technology in the sales sector-the only one rated “transformational”-albeit one that won't enter the mainstream for five to 10 years. Gartner's research includes early ratings of some of the larger contenders in the pricing space. “Early” is the operative word, though; Gartner's five-column rating chart, which ranges from Strong Negative to Strong Positive, has no vendors mentioned at either end. PROS, Vendavo, and Zilliant were the only vendors rated Positive (one step from the top); Oracle-Siebel, Servigistics, and Vistaar Technologies rated Promising (the middle column). “The potential for this market is significant, because defining and defending optimal prices is a fundamental imperative for enterprises responsible for producing returns for stakeholders,” the MarketScope states. Traditional approaches-such as the management cabal tweaking its spreadsheets-aren't getting the job done anymore, and the software capabilities are finally there for businesses in almost every industry. Offerings in price optimization software, the report concludes, “have evolved sufficiently to appeal to a broader audience of enterprises that are considering IT measures and are seriously concerned with systematically improving pricing practices and strategies to increase margins and sales.” Comments
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