Tuesday, June 22, 2021

The Art of Negotiation Meets the Science of Pricing

Lindsay Duran
April 30, 2021

5 minute read

As diverse as B2B company dynamics tend to be, there are some universal truths. For strategic pricing, digital, ecommerce, and sales leaders, one of those is the time-sucking and costly negotiation process. Negotiating big and medium-sized deals often proves to be a complicated task, causing unnecessary internal headaches and a poor customer experience.

Let’s take a look at how B2B leaders can turn these pains into significant opportunities.

The tricky B2B negotiation game

While defining the typical price negotiation process in B2B can seem like a futile exercise, we’ve found that many dynamics ring true across the global market. As such, there are some broadly practical realities when it comes to price negotiations in large enterprises.

First, larger B2B companies that have grown via mergers, acquisitions, or organically are processing an incredible amount of quote lines daily. Most of these tend to be very complicated and flow through many sales channels, such as in-person sales reps, ecommerce, online self-service portals, and deal desks.

Within those channels, many types of quotes and orders are taking place: project bids, distributor orders, partner reseller orders or bids, new quotes, re-quotes, and more. The proliferation of sales channels impacts how quickly a new quote can be routed, reviewed, approved, and ultimately finalized.

And the pricing negotiation process itself is usually overly complicated. When customers request price exceptions, which they often do, reps must route those to a manager or pricing team for approval. If pricing misaligns with the market, which is also highly common, this pricing exception queue bogs down internal teams and slows down quote turnaround times.

To improve those times, companies commonly add more resources to internal teams but quickly discover that throwing headcount at the problem fails to get to the root of it. Instead, an already convoluted process becomes prone to human errors in judgment and calculation. The outcome is a significant administrative overhead cost and pricing that fails to meet the business’s profit and loss (P&L) targets.

Compounding matters, customers often grow frustrated by such delays in quote turnaround times and prices that consistently fail to meet their expectations.

Change the game with Intelligent Automated Negotiation

Enterprising B2B leaders are adopting Intelligent Automated Negotiation, a new technique that seamlessly blends the art and science of negotiation. This approach connects leading price optimization, price management, dynamic pricing, and sales effectiveness solutions to a company’s existing internal and customer-facing applications via a highly available, scalable, representational state transfer (REST)-based API.

The outcome: an automated approach that sets pre-defined rules on which prices can be approved without human intervention. This gives sales reps, partner resellers, and customers the flexibility to negotiate within a range of prices, while maintaining necessary margin levels and the ability to escalate issues quickly and efficiently when needed.

From an experience perspective, Intelligent Automated Negotiation completely revolutionizes the price negotiation function. Let’s walk through an example of one application.

Industrial parts manufacturer enables distributor network to move deals faster

Imagine an industrial parts manufacturer that feels the pain of its legacy negotiation process and deployed Intelligent Automated Negotiation to improve self-service on its online distributor portal. The company’s distribution customers can now upload requests for quotes and quickly see how the manufacturer’s pricing compares to list price line-by-line within the quote. Additional recommended products appear so the distributor can quickly determine if they’re missing something or should recommend other products to the end customer.

For example, suppose the end customer is asking for a final price of $14,000. In that case, the distributor can enter that final price offer and immediately see a counteroffer that has taken into account similar customer orders or active initiatives like inventory aging. Since the counteroffer still achieves an acceptable margin, the logic built into the manufacturer’s Intelligent Automated Negotiation use case dictates that this offer is within acceptable bounds.

For this quote, it wouldn’t be worth the time to go through the whole process and do an internal evaluation. The deal is auto-approved with no human intervention, freeing up the manufacturer’s skilled reps to focus on more significant, strategic sales. Not only does this reduce the manufacturer’s costs, but the distribution customer is delighted. They didn’t have to pick up the phone or send an email to ask a sales rep for better pricing, which would likely have to be escalated to someone else for approval, slowing down the distributor’s ability to get the deal done with its end customer.

Of course, some price exception requests will still require human intervention and approval. In those cases, the distributor can click a button and send the quote and request right to the manufacturer’s deal desk. The deal desk team is notified and can then access a dashboard of auto-approved, countered, and rejected deals with handy key performance indicators (KPIs) like average response time and win/loss ratios. From there, they can focus on the special pricing request from the distributor and quickly see the background of pricing and counteroffers. The team can change the price line-by-line with an intuitive format, while seeing how each price change affects the deal’s overall health. Once finalized, the approved pricing is immediately pushed back to the distributor.

A whole new ballgame

There are significant operational and margin gains to be had by automating your internal and external negotiations more intelligently, informed by data science and significantly accelerated by technology.

The potential is vast for more B2B companies to remove the human element when not necessary and reserve their highly-skilled workforce to review, counter-negotiate, and ultimately close the deals and proposals that fall outside acceptable margin bounds.

Those who adopt Intelligent Automated Negotiation can save time, deliver prices that consistently fall above margin thresholds, and remove human error. At Zilliant, we worked with an electrical products manufacturer who automated 50% of its opportunities and now processes more than 10,000 quotes weekly with a 1.3 second average response time. The resulting boost in customer experience is evident across any sales channel, but most notably ecommerce, where user patience and loyalty are hard to come by.

For more information on how Intelligent Automated Negotiation can work for your B2B enterprise, read Zilliant’s whitepaper:

Change the Price Negotiation Game

Lindsay Duran
As the leader of Zilliant’s marketing organization, Lindsay is responsible for accelerating growth strategies, demand generation, product marketing, corporate communications, sales enablement, and market positioning. Lindsay is also the co-host of the Zilliant podcast B2B Reimagined. Prior to joining Zilliant in 2012, Lindsay served as a senior consultant at Deloitte Consulting, and held product management and product marketing manager positions at Dun & Bradstreet. Lindsay holds a Bachelor of Science in Public Relations and a Master of Business Administration from the University of Texas at Austin.
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