Manufacturing.net: Manufacturers: Go Beyond The Status Quo With Dynamic Pricing Science
April 6, 2017
By Kevin McCraw
Selling in the automotive and industrial industries is far more sophisticated than it was even five years ago. Companies are now able to manage massive volumes of data — and with greater raw computing power than ever before — which is enabling a new level of precision that was previously unthinkable.
While price volatility, increased market risk or shifts in buyer behaviors can all erode margins, companies in the automotive and industrial industries can still grow sales, even during times of economic instability. Today the industry is adapting to new ways of doing business, powered by a shift to modern commerce and dynamic pricing science. While many manufacturers have implemented e-commerce strategies and CRM systems to adapt, the inability to dynamically price at market speed remains their biggest obstacle to gaining a true competitive edge.
Manufacturers have historically focused on relationship-based sales processes and the post-transactional experience to maintain a steady customer base. With the success of companies like Amazon — and their ability for self-service, instant pricing and relevant upsell offers on the spot — B2B customers are beginning to expect those same experiences in the B2B world.
For example, one of the major sources of friction in today’s buying process is the internally focused approval cycle. Traditional commerce models are typically characterized by intuition, opaque pricing, delays and inconsistencies across channels. In many instances, automotive and industrial manufacturers bring a “company in control” mindset to their interactions and negotiations with customers, requiring all deals — large and small — to go through an extensive approval process, largely centered on financials and with pricing as the long pole in the tent. Negotiation becomes a competitive sport, measured all too frequently by how low a company is willing to slash prices. While pricing is a critical component that ensures companies are profitable, buyers are seeking more. Today’s consumers demand a new approach — one that’s frictionless and personalized, and delivers a precision-based sales experience.
To discover what makes manufacturers unique, Hanover Research surveyed more than 100 industry leaders and found “fair pricing” and “quote turnaround time” to be the most common points of frustration for their customers. The survey also revealed that customer dissatisfaction with pricing — that results in numerous price iterations — was the biggest factor in slowing quote turnaround.
The Hanover study reveals key findings about the sales process:
- 82 percent of manufacturers believe price negotiations that lengthen quote turnaround time have resulted in lower win rates and lost revenue.
- 42 percent of manufacturers believe quote turnaround time is one of the top three factors customers find most frustrating about the sales experience.
- Only 29 percent of manufacturers give customers a discount or credit when a quoting process is slow or inaccurate, while 56 percent simply apologize and move on.
Whether companies offer a discount or not, a slow quote process can negatively impact the overall buyer experience and put manufacturers at a significant disadvantage. To stay ahead of the industry’s evolving and competitive landscape, manufacturers need to provide a timely and consistent sales experience to each individual consumer to succeed:
- Create the Right Offers – Create the right offer to the right customer at the right time by treating each buyer as a “segment of one.” Personalized, customized offers based on the intelligence gained from algorithmic analyses create more impact in competitive market segments.
- Efficiently Deliver Pricing to the Field or End Customer – Optimized pricing can only be effective if both the sales team and the channel are empowered to access and use price recommendations. Tools that allow companies to deliver pricing to sales at the time of quote and extend the same capabilities and experience across all direct and indirect sales channels are essential in creating a consistent experience no matter where or how customers buy.
- Track and Analyze – Companies need systems to assess hundreds and thousands of internal and external factors and data points to create the deepest segmentation, understand customer buying patterns and identify meaningful correlations.
- Ensure Speed – Modern commerce moves at the speed of business, which means automotive and industrial suppliers and distributors need to respond with precision and consistency across all channels. According to Forrester Research, 50 percent of deals are won by the vendor that responds first. Static, outdated quoting that was once designed to protect margins translates today to lost revenue. Dynamic pricing science delivers what modern commerce requires — speedy, financially sound deals that are consistent across channels.
The lynchpin to achieving these goals lies within dynamic pricing science, powered by algorithms and context-aware, machine-guided learning. By embracing dynamic pricing as a foundation of how they sell, manufacturers will be able to synchronize their pricing strategies across channels in real-time and present the right price to the right customers at the right time. When cementing a business in science-driven commerce, companies can capture opportunities that were previously lost without risking revenue leakage or sacrificing margin from inconsistent end-of-channel pricing.
The cost of maintaining status-quo selling processes is too high to ignore, and many industries will be disrupted by the uneven pace by which they rise to this challenge. Modern commerce is emerging as the key strategy for responding to changing selling landscapes — creating a sales experience that accelerates deals, increases win rates and improves customer satisfaction and loyalty.
To learn more about how to meet modern commerce expectations in the manufacturing industry visit our website: https://www.pros.com/manufacturing-sales-experience/
Kevin McCraw is Director of Strategic Consulting for Automotive & Industrial Manufacturing at PROS.