Four ways to simplify complex pricing management with CPQ.

basic information

Factors Affecting Product Pricing When companies introduce products to the market, they determine the product's price based on many factors. These include the following: - Supply Chain Efficiency The availability and cost of supplies and components directly impact the product's cost. Disruptions within the supply chain can lead to instability, uncertainty, and perceived risk for downstream elements that depend on those components or supplies. - Technological Advancements Advancements in the technology used for manufacturing and delivering products, or in the functional technology of the products themselves, all affect the cost and value of the product. Improvements in manufacturing and production technologies may reduce the cost of the product itself. Conversely, technology can enhance the functionality of the product, positively impacting the perceived value of the delivered product. - Geopolitical Factors In the case of overseas sources, markets, and distribution channels, political events occurring in that area or economic constraints resulting from them may affect the sources and sales of products.

Price information

- Dynamics of Regulation Regulatory agencies can influence the prices of all products through the costs and risks associated with complying with regulations that affect supply, processes, and the products being produced, including those operating not only domestically but also in other jurisdictions. - Inflation/Deflation Whether on a regional scale or within larger economic units, the forces of inflation will ultimately necessitate some form of periodic adjustment for all products. When these forces become very dynamic, the burden, in particular, increases significantly.

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Applications/Examples of results

- Variability of Demand Demand-driven markets, especially those influenced by factors based on styles and trends, are quite sensitive to sudden changes in demand, necessitating some response regarding the prices imposed on products. - Variability of Costs Most of the aforementioned factors, and often many of these factors interact in various combinations, destabilizing the cost structure that supports product prices. The forces of all the factors mentioned so far are constantly at work, continually pushing costs and prices up or down. To maintain market competitiveness, it is essential to have the ability to respond quickly and proactively to whatever new realities are driving costs and prices up, and to adjust prices accordingly.

Detailed information

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  CPQ Supporting Price Management In previous times, the connections between various factors in the market were weak, and the degree of interdependence was low, making pricing much simpler and less frequently managed than it is today. For example, product managers and sales managers would fix prices for a year, distribute printed price lists to the entire sales organization or customers, and design budgets based on sales forecasts at those prices. Issues requiring price adjustments due to some strong external factors could be handled with memos to the field or monthly price supplements. However, today it is more common for disruptive and strong external factors to be involved in influencing prices, making it too fast-paced to wait until the end of the month or year to address them. Furthermore, large companies often deal with multiple regions, each facing its own disruptive factors, causing price pressures to fluctuate significantly within each market. Pricing is not only a moving target but also multiple moving targets, each requiring individual consideration and maintenance.

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  Technology provides many support measures to address pricing challenges related to volatility (price fluctuations) and disruption (price destruction). Nevertheless, managers must make business decisions about how to price their products across sales regions, customer classes, marketing bundles, and bulk purchases. However, the mechanisms to maintain, publish, implement, or ensure that pricing policies are adhered to in the field can often be automated. Without effective discount management in the pricing function, there is a significant risk that pricing will become a makeshift process of "the day's transactions" or "doing what it takes to close a deal." CPQ helps sales and sales managers control the discounting process. The technology of CPQ also provides powerful tools for businesses, designed to enable field sales and self-service customers to easily find the right price for almost any item, regardless of complexity or configuration.

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  Four Ways CPQ Simplifies Price Management - Management of Multiple Price Lists ― CPQ can manage multiple price lists that reflect customer classes (national accounts, GSA, and other segments) or geographical locations. International customers receive quotes based on price lists in their local currency. This allows for control over pricing for individual market segments. - Support for Complex Discount Structures ― Special customer classes, volume pricing, step-up pricing, step-through pricing, and promotional discounts related to marketing or sales campaigns. Discount management is maintained at the appropriate management level and implemented at the point of sale. - Centralized Price Management ― CPQ can increase or decrease prices globally or individually from a single access point. Changes are automatically reflected across the sales organization and related back-office systems. There is no longer a need for error-prone interconnected spreadsheets or the cumbersome task of adjusting price lists across multiple systems.

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  - Discount Management - There are cases where special discounts can be justified. However, this is a business decision that requires information from multiple sources. If a special situation arises where discounts can be justified as a means to achieve defined business goals, the system can accept a special one-time price when approved by providing override authority. Summary CPQ makes the pricing process consistent and aligned with business goals. It simplifies complex price management in intricate organizations. Price fluctuations are managed by CPQ CPQ helps maintain control even when pricing becomes unstable due to disruptive forces in the market, thanks to a set of tools designed to alleviate the burden of complex pricing and automate critical maintenance processes. How was that? If you would like to learn more about CPQ, please feel free to contact Shinkom.