Choosing between insourcing and outsourcing your pricing tool requires an informed decision, especially in a context where IT and data-science resources are both scarce and expensive.
It is therefore essential to make the right investment decisions to guarantee ROI.
You can choose between two options:
- Invest in the development of an in-house pricing solution.
- Invest in an external pricing solution.
Pricing tools: 9 key steps to make the right choice!
Step 1: Understand the key data to track
Pricing is more than just numbers and/or tools. Behind every strategic pricing decision lies a rich stream of data, guides and optimizes these decisions.
When setting up a pricing tool, it’s crucial to take these flows into account to ensure that the strategy is as effective as possible.
So, before you decide whether to insource or outsource, let’s take a look at the main data flows to consider.
Step 2: Identify historical transaction data
Sales History, sales volumes, discounts granted, etc. These data provide a snapshot of past performance and enable us toidentify consumer trends and patterns.
Step 3: Retrieve cost information
This includes data on cost of goods sold (COGS), operating costs, logistics costs, etc. Knowing these costs is essential to defining a profitable pricing policy.
Step 4: Look at competitive data
It’s crucial to understand where you stand in relation to the competition. The Competitors’ prices, promotions and even customer ratings can influence your own pricing strategy.
Step 5: Gather customer feedback
Surveys, comments and evaluations can provide information on how customers perceive the value of your product, which can influence pricing.
Step 6: Collect seasonal and calendar data
Demand can fluctuate with the seasonspublic holidays or special events. Integrating this data helps to anticipate peaks and troughs in demand.
Step 7: Consult demographic and geographic data
Location, age, income and other demographic factors can influence willingness to buy and price sensitivity. Effective segmentation based on this data can enable differentiated pricing.
Step 8: View inventory data
Stock levels, expiration dates for perishable products and availability can all play a role in determining price, particularly in the case of surpluses or shortages.
Step 9: Find market trends and forecasts
Market projections, technological innovations, future regulations and other macroeconomic factors can affect pricing decisions over the medium and long term.
Is it better to outsource or insource the use of your pricing tool?
For any type of structure, but even more so in the retail sector, price is the sinews of war!
Shrinking margins, the multiplication of players and changing consumer expectations make management increasingly complex. To cope with this, many companies have decided to use a market pricing tool.
The decision to insource or outsource your pricing strategy is a crucial one for your company.
Each of these approaches has distinct advantages and disadvantages that merit in-depth analysis.
Internalize your pricing tool - Advantages and disadvantages
The advantages of internalizing your pricing tool
- Greater control : By keeping pricing management in-house, you have direct control over every aspect of your pricing strategy. This allows you to quickly adjust your prices in line with market trends and the specific characteristics of your brand.
- Data confidentiality: Internalization limits the disclosure of sensitive data to third parties, which can be decisive for certain industries subject to strict confidentiality regulations.
- Customization: You can tailor your pricing strategy to meet the specific needs of your business and target market.
The disadvantages of in-house pricing tools
- High costs: Internalizing pricing can be costly in terms of recruitment, training and the technological tools required.
- Lack of expertise: If your team isn’t made up of underwriting experts, you may not benefit from industry best practices, which can lead to inefficiency or costly mistakes.
- Increased workload: Managing pricing in-house can increase your team’s workload, which can affect other aspects of your business.
Outsourcing your pricing tool - Advantages and disadvantages
Business expertise
When you call on a publisher, you call on specialized experts who understand the nuances of pricing. These professionals have in-depth experience and knowledge of current trends and best practices in the industry.
Flexibility and scalability
When the market changes, outsourcing enables you to adjust your pricing strategy quickly. So you can respond to changing customer needs and market trends.
Cost reduction
Outsourcing avoids the cost of hiring and training an in-house team. What’s more, by avoiding up-front technology investments, you save a considerable amount of money.
Focus on core business
By letting the experts manage your pricing, you can concentrate on what you do best: running and developing your business. This frees up time and resources to focus on other strategic initiatives.
Regulatory compliance
With changing regulations and laws, maintaining compliance can be complex. SaaS editors keep abreast of these changes and ensure that your pricing strategy remains in line with them.
The advantages of outsourcing your pricing tool
- Specialized expertise : By outsourcing your pricing, you benefit from the expertise of professionals dedicated exclusively to this task. So you can take advantage of industry best practices.
- Cost savings: Outsourcing can often be more cost-effective than insourcing, because you don’t have to bear the costs of recruitment and training.
- Flexibility: You can quickly adjust your pricing strategy in line with market fluctuations, without having to worry about managing in-house staff.
The disadvantages of outsourcing your pricing tool
- Less direct control: By outsourcing, you entrust part of your pricing strategy to third parties, which can result in a loss of direct control.
- Confidentiality risk: By sharing sensitive data with external service providers, there is a potential risk of unauthorized disclosure.
- Limited customization: You may have less leeway to tailor your pricing strategy to specific needs.
Once the decision has been made, it’s time to implement it! Whatever option you choose, it is crucial to bring together three essential elements to successfully implement your pricing tool:
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Your dataset must meet three basic requirements:
- Reliability
- Granularity
- Access facility
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Your tool must be able to take into account business needs, which will allow you to deploy adaptable pricing strategies based on:
- Business needs
- Distribution channels
- Supplies
- Inventory management, etc.
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Your tool should be user-friendly and easy to use. A simplified user experience will drive adoption and allow your application to become a central decision support tool.
Conclusion
Implementing a pricing project requires a global vision, supported by a multitude of data flows. Ensuring effective collection, analysis and application of this data will ensure that your pricing strategy is not only competitive but also sustainable. It’s this depth of analysis and adaptability that makes pricing an art as much as a science.
Ultimately, the choice between insourcing and outsourcing will depend on the nature of your business, your internal resources and your long-term goals. Some opt for a compromise by keeping parts of their pricing strategy in-house while outsourcing other aspects to benefit from external expertise.
Whatever you decide, it’s essential to carefully weigh the pros and cons to make the best decision for your business.
The success of your project will depend on several key factors:
- The availability of your resources
- ROI
- Time to Market
- Measuring value creation
- The need for personalization
Outsourcing your pricing tool is not only a question of cost. It’s a strategic move that can deliver a multitude of benefits, from access to experts and cutting-edge technologies to greater flexibility and competitive advantage.
We encourage you to take the reins from previous proposals when your expertise is at stake, while delegating the development of your pricing tool. Creating such a tool requires technical skills and in-depth understanding of pricing.
OptimiX devotes more than 10% of its turnover to R&D to meet the varied needs of its customers and the very rapid developments in technologies, particularly in terms of Artificial Intelligence.
