You need the Right Numbers for Pricing! 👍 Podcast Ep. 66
In this episode, Aidan and Joanna discuss why business intelligence and good data management systems are vital for pricing.
If you can not measure, analyse and slice and dice numbers – it will almost be impossible to perform worthwhile pricing work and optimisations.
Listen on Apple Podcasts Listen on Spotify Listen on Google Podcasts Listen on Stitcher Listen on Amazon Music
TIME-STAMPED SHOW NOTES
[00:00] Introduction
[01:02] What is business intelligence?
[01:56] Aidan explains how old fashioned data systems can affect getting the right number for pricing.
[03:17] Business Intelligence can get good and clean data out of the system but, do they help in getting the right number for pricing?
[05:59] Senior executives sometimes did not see the value in investing and getting a new business intelligence system that can help them to provide the right numbers for pricing.
[08:22] The business intelligence system that’s aligned to your pricing is very strong and reliable.
What is business intelligence?
In today’s episode, we want to talk about something that is often, I supposed overlooked and certainly at the beginning of a pricing project.
But it is one of probably the more laborious tasks that you need to build in a corporation. Before you can start putting in place improvements, optimisations and those sort of things. That is making sure that your data, the data in the company.
Whether it’s sales data from an ERP system, whatever it is. That is clean, it’s usable, it’s excellent. That the best intelligence has the tools or the data available for work to start.
A lot of you probably have heard of the term business intelligence.
It’s become quite widespread now and across a number of industries and firms. Executives and pricing teams are becoming very interested in business intelligence.
But why? Because…
- It informs pricing.
- It informs business strategy.
- And, it informs your response to competitor prices.
If the competitor drops the price you want to know about it. I suppose that’s the reason it’s become quite important. It’s also become important for improving price setting as well.
So there are a number of benefits to understanding a bit more about business intelligence. And its impact on pricing and vice versa.
Nowadays, I think sometimes we feel like we’re being overwhelmed by the amount of data that is available.
It’s been captured by so many devices. Especially now with more technology appearing trucks are recording stuff delivery times anything like this.
But in many corporations, even very famous corporations they still utilise quite old fashioned and unwieldy data systems.
Business systems that make it almost impossible to slice and dice the data. To download, to use to utilise, to manipulate. To get into that data and see what it means to analyse it.
When you’re thinking about something like dynamic pricing. Where prices change could be multiple times a day, could be even every second.
I’ve seen companies downloading data that can take them a week. Just to get a spreadsheet of data into Excel. You’re thinking that if that’s the scenario we’re starting from. Let’s not even discuss dynamic pricing. We’re kidding ourselves, you’re going to go nowhere with this.
It’s the fundamental building blocks is like you got to get the data clean. The old saying and you hear it so many times, “junk in junk out”.
I’ll be honest, sometimes we can’t even get the junk in the systems let alone get it out.
So you have to have a real cold hard look at where you’re starting from. When you realise that you got to play the ball from where it lies. And that’s where you start from.
I supposed there’s that Internal Business focused view of business intelligence and what that is.
And fundamentally a lot of business that’s their own costs base. It’s all focused on their profitability and things like that. It’s not very customer focus, it’s not market focus, it doesn’t tell you much other than that.
So it’s just really providing if you can get good and clean data out of the system. It’s just providing you with one cost base input into the pricing model. Which is still very important to have. Especially when calculating your price floors. But not necessarily the inputs that you need to generate greater price premiums from your products.
You need to look more broadly in terms of the market. You need to look at and even what your competitors are doing.
When I say that there are a lot of pricing teams out there who have built some really good competitive intelligence systems.
Just to extend upon their knowledge of the business intelligence systems. A lot of these are, literally homemade.
They’ve done it themselves just to get a clearer sense of the market. But still, a lot of them as just giving them data on the competitor price points web scraping, things like that.
And from there, they’ve just gone “oh, you know, we’re going to do competitive pricing”.
- Where are we going to fit slightly above or below our competitors?
- Rather than looking at the value differential that they offer, us versus them?
- Why are our customers willing to spend more with our competitors versus us?
Asking those sorts of questions that the competitor intelligence system doesn’t address that. Looking we call that the value differential between you and your competitors.
I suppose in all of this when you think about business intelligence. And this is what the new version of business intelligence is. It’s looking at multiple inputs and then getting that together in a sort of data template.
So then you can utilise those inputs. To understand what your customers are willing to pay within your price-setting process. And then tweak it or otherwise known as optimisation. Optimising prices correctly by different segments.
So you know that the price that you’re setting is reliable and you can be confident in them. It’s not just simply cost-based pricing.
I think we covered some of these topics. We covered it in the previous episode about what a CEO should know about pricing.
One of the things I’ll say about data in the company is…
- Is your company a data-driven business?
- Is it run by hunches and just experience and gut feel?
- And, is that how sales and marketing are working or is the data provided?
- Or, is it a value culture where senior executive meetings, business meetings, leadership meetings the numbers are being discussed as evidence?
- Is it purely our sales went up because it rained more this month?
These sort of things which to some extent, we see in every company. And of course, sometimes rain and weather can influence sales. Of course, it can. But it can’t always be used every month. And it can’t be used in that regard. So if the data is not there.
One thing I’ll say is it is often the CEO or the senior executives that they’re so far removed from data manipulation.
Digging through spreadsheets sitting there late at night trying to rectify numbers. Reconciling the numbers trying to make it all add up. They’re so far removed from it. They don’t even see the value in it to some extent. And, they don’t see the value in investing in it and getting a new system.
One other thing I’d say about this and I’ve seen this many times in corporations. Big IT departments have invested years and years over time in building in host systems, big proprietary systems. Systems that are supposed to be tailored to their business.
In many instances, they’re just completely useless, they’re completely junk.
But there’s just a fixed cost fallacy whereby they spend so much money on them. And there could be SAAS service available straight out of the box. Developed by experts’ listed on the NASDAQ all that sort of stuff. They can make one and you can rent it for whatever, 100 bucks a month.
But there’s often a great reluctance to move towards these things.
The problem with the existing system, it keeps rolling on rolling on.
And there’s more money spent on it more patches. It never gets rectified never gets fixed. But it’s sitting on the balance sheet and the corporation.
It is sitting there is as a multi-million dollar asset in the business. But fundamentally if you want to get rid of that system. You’ve got to write it off as a loss because you recognise is not actually an asset anymore. It’s worthless, in many instances is even a liability.
So that’s one of the reasons why I think these things happen.
So you hear about first-mover advantage. I think in many instances in many companies nowadays their second-mover advantage. If you are the last of the blocks you could be ahead of the game.
I supposed if you want to get your pricing aligned to the market and you want to achieve business goals. And you’ve got metrics in place and you’ve got targets to hit, that will make sense.
What you do need behind that is a business intelligence system that’s aligned to your pricing.
That aligned to marketing and sales efforts. Having old schools sort of metrics in place. Or inputs that are running into old archaic systems and flowing out is basically rubbish.
Then rubbing your head thinking, how can I use this in terms of price analysis knowing full well that most of it is junk? That’s not really going to serve you well. Or even giving you help when your executive or your boss or the CEO asks you. Is this price correct?
Fundamentally, you’ll know deep down it’s not and so will they. So in the business case for great data, a great business intelligence system that’s aligned to your market and industry and pricing is very strong.
But it has to be done in terms of the so what for executives so they can really understand how it will drive the ROI on pricing and the whole IT capability discussion.
Because a number of businesses at the moment are going through major IT transformation. Especially with digital becoming more popular. Both in terms of the channel to market. People prefer to buy online and prefer the pricing that’s offered.
So all of these teams are very critical to the back end of all of that. Which is, what inputs are you going to use to set your prices? This is the business intelligence discussion.
So, if you want to know a little bit more about business intelligence if you’ve got it right? what’s happening in other industries? Then feel free to download some free guides and reports from our website at Taylor Wells.com.au. We’ve also got some useful information on the homepage about pricing technology as well.
For a comprehensive view on building a great pricing team to prevent loss in revenue,
Download a complimentary whitepaper on How to Build Hiring Capability To Get The Best Pricing Team
〉〉〉 Contact Us for a FREE Consultation〉〉〉
