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
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.