By Takin Babaei-Oracle on Oct 28, 2013
Overview: Price Analytics helps companies understand how much of each sale goes into discounts, special terms, and allowances. This visibility lets sales management see the panoply of discounts and start seeing whether each discount drives desired behavior. In Price Analytics monitors parts of the quote-to-order process, tracking quotes, including the whole price waterfall and seeing which result in orders. The “price waterfall” shows all discounts between list price and “pocket price”. Pocket price is the final price the vendor puts in its pocket after all discounts are taken.
The value proposition: Based on benchmarks from leading consultancies and companies I have talked to, where they have studied the effects of discounting and started enforcing what many of them call “discount discipline”, they find they can increase the pocket price by 0.8-3%. Yes, in today’s zero or negative inflation environment, one can, through better monitoring of discounts, collect what amounts to a price rise of a few percent. We are not talking about selling more product, merely about collecting a higher pocket price without decreasing quantities sold. Higher prices fall straight to the bottom line.
The best reference I have ever found for understanding this phenomenon comes from an article from the September-October 1992 issue of Harvard Business Review called “Managing Price, Gaining Profit” by Michael Marn and Robert Rosiello of McKinsey & Co. They describe the outsized impact price management has on bottom line performance compared to selling more product or cutting variable or fixed costs. Price Analytics manages what Marn and Rosiello call “transaction pricing”, namely the prices of a given transaction, as opposed to what is on the price list or pricing according to the value received. They make the point that if the vendor does not manage the price waterfall, customers will, to the vendor’s detriment. It also discusses its findings that in companies it studied, there was no correlation between discount levels and any indication of customer value. I urge you to read this article.
What Price Analytics does: Price analytics looks at quotes the company issues and tracks them until either the quote is accepted or rejected or it expires. There are prebuilt adapters for EBS and Siebel as well as a universal adapter. The target audience includes pricing analysts, product managers, sales managers, and VP’s of sales, marketing, finance, and sales operations. It tracks how effective discounts have been, the win rate on quotes, how well pricing policies have been followed, customer and product profitability, and customer performance against commitments.
It has the concept of price waterfall, the deal lifecycle, and price segmentation built into the product. These help product and sales managers understand their pricing and its effectiveness on driving revenue and profit. They also help understand how terms are adhered to during negotiations. They also help people understand what segments exist and how well they are adhered to.
To help your company increase its profits and revenues, I urge you to look at this product. If you have questions, please contact me.
Master Principal Sales Consultant – Analytics, Oracle Corp.
Will Hutchinson has worked in the business intelligence and data warehousing for over 25 years. He started building data warehouses in 1986 at Metaphor, advancing to running Metaphor UK’s sales consulting area. He also worked in A.T. Kearney’s business intelligence practice for over four years, running projects and providing training to new consultants in the IT practice. He also worked at Informatica and then Siebel, before coming to Oracle with the Siebel acquisition. He became Master Principal Sales Consultant in 2009. He has worked on developing ROI and TCO models for business intelligence for over ten years. Mr. Hutchinson has a BS degree in Chemical Engineering from Princeton University and an MBA in Finance from the University of Chicago.