A client recently joked at one of our meetings that if he learned one thing in his 20-year career it is how to use PowerPoint. But have you noticed that PowerPoint is changing. It is getting smarter. Take for instance Design Ideas on the Design menu. Design Ideas looks at your content and suggests a range of design ideas and pre-formats your content in them. In the last six months, one or more slides in every presentation I have produced has been improved by at least 200% with this smart little tool.
Which brings me to pricing. I think the big news in pricing over the next several years will be IT, CPQ and AI powered pricing. My feeling is this will be a step change with big winners and losers. For example, we already see moves to dramatically reduce quote production times from weeks to days. Value and pricing improvements can begin by riding the coattails of these improvements in the sales process. Here are some examples of where this is heading.
Value and Pricing Dashboards
Sales managers, product managers, and finance managers will be able to monitor and manage pricing real time. These will be informed by big data and analytics. Initially these will focus on discounting, but later will expand to include upside measures related to value capture.
Value Pricing Becomes the Norm
Yes, I know it is hard to believe. Think of it this way. Customer Success, Quarterly Business Reviews and other measures of customer value will become increasingly routinized and quantifiable to provide direct evidence of value delivered. That evidence will be used as the fuel that drives increasingly automated and routine Value Based Pricing.
Dynamic Pricing across the Customer Lifecycle
Driven by a shift to XaaS, companies will seek to optimize revenue capture across the customer lifecycle – Land, Adopt, Expand, Renew (LAER). We know that value delivery, perceptions and pricing preferences change throughout. Each stage has its own pitfalls and opportunities. There will be a shift from optimizing individual transactions to optimizing across the lifecycle. This dynamic pricing across the LAER lifecycle will drive the shift to more sophisticated pricing systems.
More Formalized Transfer Pricing Policies
With increased pricing complexity, the time-honored tradition of horse trading between execs to decide who gets the haircut will be too time consuming. In addition, the role of services in the sales process is expanding. Transfer Pricing Policies will emerge to govern who takes the haircut, how much and when.
Customer Centric Offerings and Persuasive Proposals
The economics of XaaS offerings will likely not support continuing sales investments at historic levels. Simultaneously, the sales demands on service organizations will grow. Both require a shift to offerings and proposals that are easier for the customer to understand, and that position offerings and communicate value props with less human intervention.
Let me close with this. Think of the systems and sophistication of measures and controls that govern accounting and finance. Dashboards, metrics, benchmarks and predictive modeling are all routine on the cost side of the house. In the not too distant future, that same rigor will be applied to the revenue side of the house. In this world, unit sales and price achievement will be tracked separately, just as payables and receivables are tracked separately. It won’t happen because die hard value pricers like me want it to happen. It will be competitive forces, market dynamics and systems capabilities at lower cost that push the change. Perhaps most of all it will happen because it is a win-win for customers and the companies that serve them.