Earlier this year, Advanced Pricing Logic released the latest version of its price management and optimization software, PRICEXPERT (formerly Promoter). The software as a service solution (SaaS) is targeted at mid-market companies.
Why did you originally develop the software?
I founded Original Parts Group Inc. (OPGI) in 1982, and over time our SKU count grew as we grew, from a few thousand SKUs to 10,000 and then to 20,000 and 50,000. We were unable to manage pricing for the SKUs and keep them updated on a regular basis. I dove head first into pricing science, and we built a price management solution in 1998. It worked so well and made us so much money we decided to turn it into a commercial solution. In 2010, Advanced Pricing Logic was born and we put out the first version of the program, Promoter. We just launched the second version, PRICEXPERT.
What are the key pricing challenges in the automotive market?
First and foremost, most companies have multiple price lists for different kinds of customers. That’s a challenge to keep that information synchronized. PRICEXPERT does it beautifully. It’s important that when the value of the product moves up and down, that everything moves up and down in sync with the reference price, and you can do that across thousands of products at once.
The other thing that is a big challenge for automotive suppliers is making sure that their prices don’t cannibalize their own profits, and how do you do that when you have thousands of products?
The program gives the organization information about their strengths and weaknesses on a SKU-by-SKU basis, and then allows them to act on that information. It provides a methodology for implementing corrective pricing across the board for thousands of SKUs simultaneously.
The system will look at how well can you stock the product, how good of a job does the supplier do in getting the product to them, how fast or slow the product moves against its own peer group, profit margins, etc. You find pockets of information that line up that allow you to discount without hurting your own organization.
How has importance of pricing changed?
Price has always been important. The difference now is that with the rise of big data, ERP solutions, optimization and so forth, is that companies actually have visibility into their mix, so they can really see if they are leaving money on the table or not. They can really tell if things aren’t selling and why. They can look at multiple data points and take each one into consideration.
We allow the user to price based on how data points intersect with each other. For example, you may see that you have a number-one mover, so you want to raise the price by a certain percent. Here’s another data point that says the product is trending downward since 90 days ago. If you were just looking at that metric alone, you would have lowered the price. You can consider every single metric that is measurable, and arrive at a price that consumers will likely think is a good value.
When we show our customers their data, almost universally the company values their own products less than their customers do. What does that mean? It translates into better profits and revenues if you have the tools and software to measure what it is you are doing and apply that to the price point.
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