19 Feb Pricing Scalability for Business: Implementing Lead-to-Cash Solutions
Introduction
Pricing strategy is a critical component of Revenue Cloud implementation. Businesses that update product prices regularly due to external factors must ensure that their system effectively manages these changes. A well-structured pricing strategy ensures accurate pricing, streamlined sales processes, and improved profitability.
Especially for global businesses using multi-currency pricing, it is imperative that exchange rate fluctuations are applied to product catalogue pricing. This enables sales teams to quote accurately and manage new sales, cross-sell, and renewals efficiently.
Key factors highlighting the significance of pricing strategy, flexibility, and scalability:
- Optimized Pricing for Different Markets
- Automated and Accurate Quote Generation
- Dynamic Pricing Adjustments
- Compliance with Regional Regulations
- Hedging Against Currency Fluctuations & Localization Support
- Improved Profitability and Margin Control
- Accelerated Sales Cycle
- Scalability for Global Expansion
Key Factors Affecting Pricing Updates
Pricing changes may be influenced by various economic indices and external market conditions, including:
- CPI Index Updates – A major driver of price adjustments.
- Producer Price Index (PPI)
- Retail Price Index (RPI)
- Gross Domestic Product (GDP) Deflator
- Employment Cost Index (ECI)
- Exchange Rate Index
- Commodity Price Index
- Interest Rate (Government Banks)
- Regular Pricing Uplifts – Yearly or renewal-based adjustments.
Modelling your Pricing Model
Given these pricing factors impacting your product pricing, a well-structured pricing strategy enables price scalability and efficient management of pricing updates. Some key factors to consider during pricing implementation in your revenue management system includes:
- Ensuring product prices follow the company’s pricing strategy and remain aligned with market conditions.
- Simplifying the process of updating prices in multiple currencies by ensuring exchange rate fluctuations are reflected accurately in product pricing.
- Once a quote is approved, price changes do not affect it, maintaining consistency for both customers and sales teams.
- Managing renewals, upsells, and cross-sells with updated pricebooks to ensure pricing stays competitive while honoring existing contracts.
- Price changes are in sync with discounting strategies so sales teams can apply discounts effectively while maintaining profitability.
Pricing Management & Scalability Design Considerations
1. Identifying the Right Pricing Strategy
Every Revenue management system supports multiple pricing mechanisms, Some of the common pricing mechanisms include:
- List Pricing
- Cost Pricing
- Volume Based Pricing
- Bundle & Option-Level Pricing
- Custom Pricing
- Discounting
Businesses should carefully analyze the impact of each pricing method before implementation.
2. Managing Pricebooks for Pricing Phases
Businesses can establish multiple pricebooks with updated pricing for different phases. Sales teams should be directed to select the appropriate pricebook during quoting. For example, a pricebook can be created for each year’s product pricing and linked to quotes as needed.
3. Managing Latest Prices for Renewals & Amendments
Revenue Cloud allows businesses to define pricebook references at the contract level. This ensures that contract renewals automatically reflect the latest pricing.
However, businesses must be cautious when applying new pricebooks, as they may result in incorrect pricing for existing subscriptions during amendments.
4. Define Your Renewal Pricing Behavior
Select the right renewal pricing approach based on your customer agreement to:
- Maintain the same pricing as the active subscriptions at the time of renewal.
- Apply annual uplifts for multi-year deals.
- Apply new product pricing for active subscriptions on renewal each year.
- Differentiate renewal pricing for active subscriptions vs. pricing for upsell or cross-sell products.
5. Renewal Pricing for Subscriptions
If a business uses third-party pricing systems, it should allow to define renewal prices to be predefined per subscription. When a contract renews, the updated price will be applied based on the predefined renewal pricing.
6. Managing Volume based pricing or Term Based Discounting
Volume based pricing and system discounting add complexity to pricing scalability. If businesses need to modify volume based pricing frequently, It is important to ensure existing approved quotes are not impacted with the change. Some of the common practices to update to volume based prices involve:
- Retiring the existing product and creating a new pricing structure.
- Using a new pricebook for revised prices.
- Creating a new discount tiers instead of updating existing ones.
7. Using Automations for Price Management
Businesses can leverage price automations to integrate pricing updates with third-party systems and lookup objects. However, pricing automation must ensure:
- Pricing updates do not impact existing and in-flight quotes.
- Amendments maintain initial pricing as per the active subscription.
Conclusion
A well-defined Revenue Cloud pricing strategy ensures accurate and scalable pricing, helping businesses maintain profitability while adapting to market changes. Organizations leveraging Revenue Cloud must continuously refine their pricing mechanisms to balance flexibility, accuracy, and compliance with business objectives.
Mayur Vats
Revenue Cloud Lead at GV Mantra