I’m sorry to be the one to break the news, but your pricing needs to change.
Actually, it’s not just your pricing—it’s your whole pricing model. Whether you’ve been pricing using a cost-plus model, or you’ve been creating your prices based on what the competition is charging, it’s time for a change. Today’s blog post talks about one common pricing problem and how you can avoid it.
SWK Tech’s newest podcast helps you plan a pricing strategy. Listen to it here.
Too Many SKUs
For at least the past 35 years, businesses have been pricing their products incorrectly. Here’s why:
- Most companies price products manually.
- Manual pricing has to be entered in by humans.
- Humans make errors.
- One error is okay, but companies typically have 1000’s of SKUs… with thousands of prices.
Therefore, error-filled pricing done by humans is likely to affect many of your products. Don’t manually enter your prices.
How Price Optimization Technology Helps
One way to combat human error in price entry is by using business intelligence (BI) software that helps analyze product variables to develop the best prices. This software works with your ERP and is called “price optimization software.”
Although business intelligence software has been available for the past 5-10 years, only recently has it become strong enough to crunch large amounts of data to come up with workable solutions. This ability to analyze large amounts of data is where the term “big data” comes from.
Pricing the Right Way
To crunch big data properly, your analyst (or computer system) needs to look at a number of factors, namely:
- How fast the product moves
- If it can be kept in stock reliably
- What your current inventory is
- If sales have shown an upward or downward trend
- What the competition is doing with the product
When you have a human on the job, even the best human, it usually takes an average of three months for them to compile this data for you, due to the many research points and the thousands of SKUs needed to be analyzed. Computers can do this fast—and good software can do this even faster.
It’s like a calculator. Sure, you can add up a string of fifteen-digit numbers by hand… but it will take you a while. Type those numbers into your calculator (or hit “=SUM” on Excel) and they’re all added up instantly.
Why waste your time comparing numbers—when you could be selling more?
Contact SWK Tech using the button below to learn more about how price optimization software can help you.
Image courtesy of Stuart Miles / FreeDigitalPhotos.net