Although B2B manufacturers are increasingly using digital technology within their sale process in ways inconceivable in the not-too-distant past, the normal process for updating pricing is still a relic of the 1950s. The key difference is that instead of calculating prices with a pencil in a ledger, analysts now use Excel spreadsheets.
The Problem with the Excel Method
Typically undertaken once or twice a year, the Excel method is still laborious and time-consuming—especially if the analyst seeks to incorporate actual sales history and current demand data to make decisions instead of simplistically applying across-the-board percentage increases.
More important, from a profit management perspective, using Excel for infrequent pricing updates often leads to inventory being undervalued, particularly inventory that is in high demand. Sellers can’t adjust prices in response to changes in the marketplace. For a prime example of this, consider the weeks and months after the pandemic hit. COVID-19 unexpectedly wiped out the supply of so many products, and midsize and small manufacturers often missed the window of opportunity to capture additional profit due to demand spikes because they did not have technology in place to update price in response to changing demand, as large manufacturers often do.
How The Sales Process Is Changing
Due to the increasing pressure to digitally transform the end-to-end B2B sales process, sellers have less ability than ever to command across-the-board price increases. Buyers want a digital storefront and a responsive e-commerce experience. But sellers should view this cost/investment in change as a big opportunity as research shows that leaders in digital transformation find that making customer-specific recommendations to cross-sell and upsell are driving increases in revenue of up to 8.5%.
Although B2B manufacturers have traditionally prioritized technology and data investment toward the supply chain and sales and marketing technology investment has lagged, the intense pressure from buyers to move sales online during COVID has changed investment priorities for many companies. Now as we rebound from COVID, supply shortages, raw material and labor cost increases, pent-up demand, and shipping and logistical bottlenecks are all reasons for B2B sellers to exercise greater discipline and diligence in their pricing, packaging and customer segmentation decisions.
Why Data and Automation Are Key
In a world where an increasing number of buyers may reject automatic price increases, analyzing historical sales and performance data at scale to calculate standard prices and help manage discounting will be critically important, and Excel simply can’t do the job. Sellers will need to invest in a platform that’s powered by machine learning and data science.
Overall, the current low frequency of price and catalog updates, coupled with the lack of sophistication in how prices are calculated, is a huge missed opportunity for sellers. Automating the calculation and publication of data-driven optimized pricing, monthly, weekly, daily or on-demand is an attainable aspiration. While it will be essential to a profitable e-commerce strategy, it should become the only way to manage all pricing—online and off—to account for continuous shifts in supply and demand that affect the perceived value of your inventory.
This should sound somewhat familiar, as companies continuously update their demand forecasts and plans, which trigger automatic changes in their materials and manufacturing plans. Furious has found that sellers can achieve a 5% profit increase from automating their pricing process and instilling good adherence to pricing and discounting policies by their sales teams.
To learn more about how automation can help mid-market B2B manufacturers, reach out to the Furious team at email@example.com.