Everything you do as a company matters, but for many customers, it comes down to one question. What does it cost? Learn more in this post.
The problem: you may not have a straightforward market. If you work in B2B, for example, you can offer extensive discounts on bulk purchases. You may have different prices for different customer segments. You have to factor in your costs, as well as the expectations of the market.
How do you arrive at a price point that makes sense for you and your customers? It begins with implementing pricing optimization software that does the work for you.
What Is Pricing Optimization Software?
Pricing optimization software is a platform or set of digital tools designed to come up with the best product pricing for your customer segments. To accomplish that, the software may use survey data, historical customer transactions, and other inputs to gauge the best price. Pricing optimization software can then predict sales results. It can often simulate customer behavior according to different customer segments, as well.
The result: pricing that goes beyond a one-size-fits-all sticker. This solution allows you to customize your pricing for specific buyers. You can optimize pricing for specific segments, experiment with new price points, and create negotiation systems for your salespeople in the field.
How Pricing Optimization Software Works
Think of pricing optimization software as an elastic waistband: it helps you create prices that fit every time.
Most of the process is automated once you get the software up and running. How does it work? Most optimization software will do the following:
- Running analytics—including surveys and customer transactions—to identify the ideal price points for specific customer segments
- Running simulations to predict sales results, creating an ideal price point that most customers will find agreeable
- Profitability analysis: your software should be able to predict profitability for different price points, giving you a sense of the context for each option
- Competitive analysis. After all, you aren’t pricing in a vacuum. Your software should take into account the pricing from the competition and how that makes your sales fit in the marketplace
How to Use Pricing Optimization Software
On the surface, it might sound like pricing optimization software has one goal: finding the right price to maximize sales. And that’s certainly part of it. But pricing optimization software does much more than help you settle on a specific number. It creates a dynamic pricing environment that can help you access new segments of your market you might have previously struggled with.
Consider some of the following use cases for pricing optimization software:
Self-serve options. Today’s consumer is increasingly satisfied with self-serve options. They can use digital wallets to make payments with ease. Pricing optimization means that when you do offer these self-serve ordering features with your own eCommerce needs, you’ve optimized the price to minimize friction.
What does this mean? Your pricing optimization software can help you arrive at a price point that minimizes any objections when a customer tries self-serving. The result is more sales and less stress on the customer.
Dynamic pricing in the field. What if a salesperson is close to making a large sale with a client? And what if that same client asks for specific pricing contingencies based on the cost of the overall order? A good salesperson can adapt on the fly. But they also have to be accurate.
Pricing optimization software makes it possible for a salesperson to log in, check the analytics, and estimate a price on the spot.
Changes for B2B/B2C dynamics. Price changes can feel inconsistent without optimization. Your audience—and your competition—changes depending on the types of sales you make. Make sure that you input the proper competitive information for other prices in your field to get a sense of what your optimized pricing point will be. Since B2B sales and B2C will completely change the context, you need software to pull together your data and provide you with the estimations to give you confidence that you’ve created an ideal price point.
The Benefits of Pricing Optimization Software
One final question: why bother? Isn’t it possible to use your gut-level intuition to come up with the ideal pricing point for your products?
Simply put, there are several benefits to pricing optimization that make the process worth it:
- Improving the bottom line. Pricing optimization helps you find the ideal medium between profitability and competitive pricing that will inspire sales.
- Precision. Consistency is key here. With pricing optimization software in place, salespeople will have a single source to turn to if they want to generate quotes for customers.
- Confidence. Pricing can be tricky to determine. With optimization software handling the analysis, you can be confident that your pricing is reasonable, competitive, and helps to promote growth.
Price changes can be some of the trickiest things to manage as a business. But with the right tools in place, you can largely automate the process of pricing while boosting your ability to make sales.