Dynamic and Intelligent pricing – an opportunity for Swiss manufacturers to differentiate

Achieving top and bottom-line growth are a challenge for many manufacturers. Smart pricing strategies, which rely heavily on speed and accuracy can help organisations to have a competitive edge and recover value. Speed is vital in determining whether customers stay and purchase with you. Complex products with many different specifications and configurations can slow down the Configure, Price, Quote (CPQ) process and result in less capacity to address the customer’s needs. Automated pricing solutions are an extremely effective way to reduce this complexity, speed up the process and ensure a streamlined and more agile sales organisation.

According to Peter Vickers, Deloitte Partner and industry lead for Energy, Resources & Industrials,

Finding out customers’ ‘willingness to pay’ is important in all industries but can be especially challenging for manufacturers who produce and maintain a multiplicity of products. Marketing and selling complex products effectively across a differentiated customer portfolio can be difficult as final prices may be higher or lower than a customers’ willingness to pay.

One way to improve pricing accuracy is through ‘dynamic pricing’ solutions. This results in faster growth, better margins and capturing potential revenue more effectively. It also helps manufacturers to decide which products add value to their portfolio, and in turn which products or features they should be investing in.

Dynamic and intelligent pricing is a fairly new concept in Switzerland

Pricing is a very important topic for manufacturers in Switzerland. Most manufacturers are very good at knowing how much a product costs because they have systems for that. However, they are less skilled at understanding and managing the price.

Overall, the market in Switzerland does not appear to be mature enough yet to switch to dynamic pricing. According to Josselain Prost, an experienced CRM and Digital Marketing Director at Deloitte,

However, there has been a positive shift in this regard in recent years, a phenomenon that has accelerated with COVID-19 and more recently in the context of the war in Ukraine and increased threats of cyberattacks.

, says Josselain Prost.

But pricing is even more difficult in large, decentralised organisations where sales are generally decentralised. Companies are always confronted with the topic of global pricing and global pricing governance, both of which need good data. In such cases companies would need dynamic pricing in response to the market. Research points to the fact that there is definitely a need for dynamic pricing but not too many examples of where it is done yet in Switzerland. Peter Vickers summarises,

Fragmented ERP systems are hindering pricing transparency

Process automation and optimization always comes up in the context of ERP transformations. If you think of CRM as the front end, ERP is the back end – CPQ bridges across because it touches sales for the CRM but also interfaces with the ERP for costing and pricing. Usually because of the fragmentation of their ERP, companies often have a fragmented configurator landscape as well. As a result, it is very difficult for them to have an integrated CPQ platform.
Even in companies with global price lists, the governance of sales versus that price list can be a real pain point. There needs to be a degree of local freedom and the question arises how you govern that with transparency. Companies need that level of visibility and many of them don’t have an integrated platform for CPQ.

Manufacturers really want to have centralization of how they price and how they manage products and pricing and how they distribute products to the market. This requires the right strategy that accelerates the time to quote but is also connected to margin. It will be important that sales people are using the latest and correct version of pricing.

From a pricing perspective, companies generally don’t have the maturity yet to adapt the price. They are aiming to control the price so that the price they sell at is the right one and aggressive enough in the market especially when you address a global organisation. More control and advanced pricing and based on ensuring the company is doing the right matching and sitting at the right price.

What to do?

• Harmonize ERP: ERP transformation is key to achieve future dynamic and intelligent pricing. Companies that are planning a pricing harmonization ideally should run an ERP harmonization before or in parallel. Both topics are highly intertwined and often the ERP harmonization is a driver to achieve optimization and transparency of CPQ in pricing.
• Create pricing transparency: Dynamic pricing solutions, such as pricing process automation or AI-enabled pricing, can help to improve pricing accuracy. This involves, for example, applying data science models to historical data and identifying which customers attach greater value to your products, as well as which features customers value and which they do not. This means you can confidently go to market to the right customers with the right products and at the right price.
• Holistic customer integration: Some leading manufacturers are integrating their dynamic and intelligent pricing in platform solutions to give customer direct access and provide a better customer journey. For example, customers can enter a system through a portal and can do their own configurations. They can give their requirements, automatically configure a solution for these requirements and get a price and can place an order directly. They can even enter the ERP to understand the order status.