{"id":52058,"date":"2022-03-25T09:04:47","date_gmt":"2022-03-25T15:04:47","guid":{"rendered":"https:\/\/www.vendavo.com\/?post_type=glossary&p=52058"},"modified":"2024-06-03T10:02:38","modified_gmt":"2024-06-03T16:02:38","slug":"pricing-efficiency","status":"publish","type":"glossary","link":"https:\/\/www.vendavo.com\/glossary\/pricing-efficiency\/","title":{"rendered":"Pricing Efficiency"},"content":{"rendered":"\n

<\/span>What Is Pricing Efficiency?<\/span><\/h2>\n\n\n\n

Pricing efficiency is the assumption that a price is reflective of everyone in the market being in possession of all available information. It is also using smart process decisions to minimize the inefficiencies that are cutting into profits.<\/p>\n\n\n\n

Businesses are constantly looking for ways to wring just a bit more revenue <\/strong>out of their prices. As any pricing professional<\/a> knows, this isn\u2019t as easy as \u201cjust raising prices\u201d. There\u2019s only so high you can go and remain marketable, while there is a seemingly limitless array of costs and inefficiencies that can eat away at profits from the inside.<\/p>\n\n\n\n

There are numerous pricing strategies<\/a> and tools that can be used to fight the pricing war, including data-driven pricing analytics<\/a> and dynamic pricing software<\/a>. In this case, let\u2019s focus on how the right technology can support pricing efficiency.<\/strong><\/p>\n\n\n\n

<\/span>Pricing Efficiency: The New, Business-Oriented Definition <\/strong><\/span><\/h4>\n\n\n\n

If you enter \u201cprice efficiency\u201d in your favorite search engine, you\u2019ll most likely get a lot of definitions that refer back to economic theory. For example, Nasdaq\u2019s glossary<\/a> defines pricing efficiency as \u201ca market characteristic that prices at all times fully reflect all available information that is relevant to the valuation of securities.\u201d <\/a><\/p>\n\n\n\n

However, there\u2019s an often-overlooked definition of price efficiency that is more concerned with practical applications \u2013 and it\u2019s one businesses should be aware of. Pricing efficiency can be looked at as a way to \u2018trim the fat\u2019 by streamlining approval processes and workflows. The goal is to ensure pricing teams are making the right decisions in the shortest amount of time.<\/strong><\/p>\n\n\n\n

We can think of pricing efficiency as optimizing processes related to and impacting pricing. So, let\u2019s talk about the practical implications of price efficiency for today\u2019s companies. Specifically, we\u2019ll look at areas where teams can be quite ineffective and how using a data-forward, technology-driven approach<\/strong> can lead to greater price efficiency.<\/p>\n\n\n\n

<\/span>Pricing Inefficiency<\/em>: Finding Areas That Eat Into Profits<\/strong><\/span><\/h4>\n\n\n\n

Depending on who you ask, there are 4, 5, 6, 8 or more steps to setting a price. These include doing your research, assessing the market value, determining competitors\u2019 prices<\/a>, choosing the best pricing strategies, evaluating price performance, and more. But that\u2019s only half of the equation, because the revenue derived from those prices supports a lot more<\/strong> than just the initial pricing process.<\/p>\n\n\n\n

First of all, each of the stages listed above rely on data. And manual data collection is time-consuming and resource-inefficient. Unless this task is streamlined, usually via automation, all those employee hours finding and tabulating data from various sources can trim profit margins very quickly. Next, add in the time for analysts to analyze the data and for employees to process rebates, discounts, returns, and other adjustments. It\u2019s quite clear how this often forgotten aspect of pricing can seriously impact the bottom line.<\/p>\n\n\n\n

This alone makes a compelling case for using technology to optimize for price efficiency. Not only are the best of today\u2019s data-processing solutions extremely fast and readily available, but they are also much better than human beings at handling huge amounts of data without fatigue, distraction, and the resulting mistakes.<\/p>\n\n\n

Is your pricing and selling optimized for profitability?<\/h2>

Take the Commercial Excellence Maturity Assessment to discover where you fall.<\/h4><\/div>
\r\n Learn More<\/a>\r\n<\/div><\/div><\/section>\r\n\n\n\n

<\/span>Transforming Price Efficiency with Technology<\/strong><\/span><\/h4>\n\n\n\n

Data processing technologies \u2013 especially when paired with Artificial Intelligence \u2013 have already proven their worth <\/strong>in the business world. What\u2019s becoming increasingly apparent is how easily they can be used to optimize for price efficiency and various parts of the pricing process.<\/p>\n\n\n\n

For example, Vendavo\u2019s Pricepoint price management software<\/a> allows businesses to collect data from disparate places <\/strong>(solving the first issue of data collection and preparation). It includes local market information and competitors\u2019 activities, which increases the accuracy<\/strong> of any analyses carried out by this solution. And it allows users to set and automate custom business rules<\/strong>, which provides needed flexibility and granularity to the results.<\/p>\n\n\n\n

Another benefit of a technology solution like this?  Velocity-to-profit<\/strong> (and technology ROI) becomes much faster, as features within a tool like Pricepoint accelerate implementation methodology so a company is able to quickly apply best practices for its particular vertical. <\/p>\n\n\n\n

<\/span>Is Pricing Efficiency or Pricing Effectiveness the Most Important?<\/strong><\/span><\/h4>\n\n\n\n

We\u2019ve spent a lot of time discussing the benefits of pricing efficiency. What about pricing effectiveness?<\/strong><\/p>\n\n\n\n

The two terms are very similar, but they describe two different areas. While pricing efficiency is about eliminating wasted time and effort in business areas, pricing effectiveness is more concerned with how to improve pricing results. With this in mind, it\u2019s easy to see how the former plays an important part in the latter. <\/p>\n\n\n\n

Data-driven pricing efficiency and price effectiveness solutions are vital in today\u2019s volatile markets. Though they use different tactics and are aimed at slightly different objectives, businesses need both efficiency and effectiveness if they want to develop pricing strategies that don\u2019t end up costing more (in effort and expense) than they yield. <\/p>\n","protected":false},"excerpt":{"rendered":"

Pricing efficiency is the assumption that a price is reflective of everyone in the market being in possession of all available information. It is also using smart process decisions to minimize the inefficiencies that are cutting into profits.<\/p>\n","protected":false},"author":24,"featured_media":73421,"template":"","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kadence_starter_templates_imported_post":false,"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"footnotes":""},"glossary-type":[1343],"class_list":["post-52058","glossary","type-glossary","status-publish","has-post-thumbnail","hentry","glossary-type-p"],"acf":[],"yoast_head":"\nWhat is Pricing Efficiency? 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