Price volatility challenges are on the rise for many businesses. Advanced manufacturers and managed service providers are not exempt.
Disruption is ultimately the cause of price volatility.
Price volatility results when assorted factors and market conditions drive frequent and significant fluctuations in prices.
Supply costs are one factor that may affect the price that an enterprise charges for any given product. However, supply costs are likely a symptom of other forces at work within the marketplace. These forces are disruptive in nature, and that disruption affects prices.
Disruption is ultimately the cause of price volatility.
Volatility Driven by Disruption
When companies bring products to market, they fix the price for those products based on many factors. These include:
Supply Chain Efficiency
Supplies and part availability and cost directly affect the cost of the product. Disruption within the supply chain drives instability, uncertainty and perceived risk for the downstream elements within that chain that depend upon those parts and supplies.
Advancements in the technology used to make the product, deliver it or the functional technology within the product itself all impact the cost and value of the product. Advancements or improvements in manufacturing or production technology may result in downward pressure on the cost of the product itself. Conversely, technology may improve the functionality of the product itself, which will have a positive effect on the perceived value of the delivered product.
Overseas supply sources, markets and distribution channels are subject to the disruption occurring within the political entities affecting the sourcing of supplies or sale of the product into any given geographical unit.
Regulatory agencies, both domestic as well as those operating in other jurisdictions, can impact the price of any product through costs and risks incurred in complying with regulations affecting supplies, processes and the product produced.
On a local scale, as well as within larger economic units, the inflationary forces at work will eventually require some periodic adjustment to all products. These forces can be especially burdensome when they become highly dynamic.
Demand-driven markets, especially those driven by stylistic or trend-based factors, are quite sensitive to sudden changes in demand, which will require some reaction in terms of prices charged for those products.
Almost any of these factors and in many cases, many of these factors working in assorted combinations, will drive instability in the cost structure that supports the price of products.
All of these forces are continually at work and continually pushing and pulling costs and prices up or down. Remaining competitive within your market requires the ability to quickly and aggressively react and adjust prices to reflect whatever new reality is driving those costs and prices.
In earlier times when we were less connected and less interdependent, pricing could be managed with much less frequency than is required today.
Product managers and business managers could fix prices for a full year. Price lists could be printed and distributed throughout sales organization or among customers, and budgets could be designed around predicted sales at those prices.
Any issues resulting from some disruptive force that required an adjustment to a price could be handled via a memo to the field or pricing supplement produced on a monthly basis.
Today, disruptive elements are more common and move too fast to wait until the end of the month or certainly the end of the year to address. Additionally, larger enterprises are frequently dealing with multiple geographies. Each market is confronting unique disruptive factors meaning pricing pressures are highly variable within each market.
Pricing is not only a moving target; it is multiple moving targets each of which requiring individual consideration and maintenance.
CPQ to the Rescue
Technology offers a number of aids in tackling the pricing challenges associated with volatility and disruption. Managers still have to make the business decisions regarding what the price of a product is across all the selling geographies, customer classes, marketing bundles and volume purchases.
However, the mechanics of maintaining those prices, publishing and enforcing them or making sure pricing policies are followed in the trenches can be automated in many cases.
Without effective discount management of the pricing function, there is considerable danger of pricing becoming a “deal of the day” or a “get what you can to close the deal” process. CPQ helps sales and business managers retain control of the discount process.
Configure price quote (CPQ) technology also provides a powerful tool for the enterprise and is designed to help fields sales and self-serve customers easily find the correct price for almost any item regardless of complexity or configuration.
Four Ways CPQ Helps to Tame Price Volatility
- Maintains Multiple Price Lists – CPQ allows the enterprise to maintain multiple price lists that reflect customer class (national account, GSA or other segment) or geographic location. International customers will get quotes based on their country pricelist in their own currency denominations. This provides control of pricing for individual market segments.
- Supports Complex Discount Structures – Special customer classes, volume pricing, step-up and step-through pricing as well as promotional discounts associated with marketing or sales campaigns. Discount management is maintained at the appropriate management level and enforced at the point of sale.
- Centralized Management of Pricing – CPQ provides a single point of access to increase or decrease prices globally or individually. Changes are automatically propagated throughout the sales organization as well as relevant back-office systems. No more interconnected, error-prone spreadsheets and no more laborious keyboarding pricelist adjustments into multiple systems.
- Discount Control – There are times when special discounts are justified. But those are business decisions that should include input from several sources. If a special situation evolves that warrants a discount as a way to achieve a defined business objective, override authority can be provided that will allow your systems to accept a special one-off price when authorized.
CPQ keeps your pricing processes consistent and in alignment with your business objectives. It simplifies the management of complex prices within complex organizations.
Price Volatility: CPQ Helps Maintain Control
When disruptive forces result in pricing volatility within the marketplace, CPQ helps you maintain control through an array of tools designed to ease the burden of pricing complexity and to automate critical maintenance processes.