PROS Modern Commerce ebook_WEB

Are you ready for
the new era of digital
business?

Why modern commerce with
dynamic pricing science is the key to
maintaining growth and viability

CONTENTS 2

Why modern commerce
and why now?

Why modern commerce is not
complete without dynamic pricing science 9

What else does modern commerce 15
entail beyond dynamic pricing science?

How does modern commerce 20
work in the real world?

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 1

Why modern commerce
and why now?

What is modern commerce and
why should you read an e-book on the topic?
Two compelling reasons highlight why business
leaders should pay attention to modern commerce.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 2

Technology and data science are
improving exponentially

Sell-side technology is vastly more sophisticated today than it was
even five years ago. Raw computing power and the volume of data

1that companies are now able to analyze are enabling a level of
precision that was previously unthinkable. With advances in data
collection and science, we now have new abilities to pinpoint buying
patterns in the so-called “segment of one” and to identify
propensities and preferences that deliver greater precision and
confidence when selling to customers. The trend that developed in
B2C sales is now available for B2B.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 3

The same advances in B2C selling
are changing B2B buyer expectations

Today’s B2C consumers expect instant – and fair – pricing, relevant
upsell offers, and a quick and easy buying experience, no matter
where or how they shop. Naturally, these same B2C consumers also

2 engage in B2B buying and – not surprisingly – are starting to
expect the same type of experience in their roles as professional
purchasers. Businesses that struggle to provide quick quote
turnarounds, fail to offer consistent or fair pricing, try to upsell the
wrong products or services, or cannot provide consistent service
across their channels will soon discover that their customers may
choose to go elsewhere.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 4

Coming into the sales situation, today’s B2B buyers are armed with
much more information and are backed, more than ever, by far more
aggressive procurement departments. In fact, thanks to vast sources of
self-serve research, reviews and recommendations, today’s B2B buyers
are 57% through their buying cycles and evaluations before ever
engaging with a vendor, according to research by the Corporate
Executive Board (CEB).1 Equally as compelling, according to a Forrester
Research survey nearly half of B2B companies said they expect that fully
50% of their customer base will be buying from them online within three
years.2 Customers expect a transparent, personalized, and omnichannel
buying experience, whether they are purchasing a book for themselves
or a product or service for their business.

1 CEB Study: The Digital Evolution in Marketing 2012

50% Nearly half of B2B companies say they expect that fully
50% of their customer base will be buying from them
online within three years.2

2 Forrester Research, Measuring Up: Benchmarking Your B2B eCommerce Performance, February 2016

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 5

Pricing is the key

Respondents to a recent Hanover Research Survey1 of more than 100 manufacturing
leaders reported that fair pricing and quote turnaround time were two of the most
common points of frustration for their customers. Customer dissatisfaction with
pricing – resulting in numerous price iterations – was, by far, the biggest factor in
slowing quote turnarounds. Price negotiations lengthen quote turnaround and order
fulfillment times at 82 percent of respondent organizations, resulting in lower win
rates and lost revenue.

What can companies do to turn around these troubling statistics? A number of
companies are finding that adopting modern commerce practices with dynamic
pricing science is the key ingredient to driving better outcomes.

1 Hanover Research Commercial Insight Study for PROS, September 2016 6
ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS?

Sounds good - but what exactly is modern commerce?

Quite simply, it’s the new era of digital business, one that will ensure companies
meet changing B2B buying expectations and continue to attain growth goals and
remain viable.

Say goodbye to plain vanilla, old-school eCommerce. Today, companies are
awakening to modern commerce – the new era of digital business. And that means
a whole lot more than a website or web storefront. Instead, it’s about CRM,
automated sales processes, and closer and smoother digital interactions. It’s
happening – at breakneck speed – because the buying experience has changed
forever. Customers no longer just walk through a front door or wait for a
salesperson to visit. In an era driven by buyers and their expectations, the new front
door is digital, social and mobile. Buyers want the ability to flow seamlessly across
multiple channels. They want self-service and price transparency. They want it
without the headaches and friction. And they want it now.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 7

Previously, the marketing battle was fought over product, service, brand/
company, and price/value. Today, research from CEB1 estimates those factors
now drive fewer than fifty percent of customer buying decisions. This
“traditional commerce” model – characterized by intuition, opaque pricing,
delays and inconsistencies across channels – has been forever changed.

Modern commerce is rewriting the rules and defining a new basis for

competition. Today, the sales experience – the sum of the transactional

interactions a customer has with a vendor, no matter how or where they are

buying, from quote to close – is the new

battleground for revenue growth. In such a Buyers want self-service
turbulent environment, leaders must fully and price transparency. They
embrace a modern commerce strategy or

risk getting left behind. want it without the headaches

and friction.

And they want it now.

1 CEB Study: The Digital Evolution in Marketing 2012 8
ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS?

Why modern commerce is not complete
without dynamic pricing science

The cost of inaction is significant. Do nothing or get it wrong, and your business could
leave money on the table, reduce its win rate and face downward price pressure.

A major source of friction in today’s buying process is the internally focused “approval
cycle.” In many instances, businesses bring a “company in control” mindset to their
interactions with customers. They require all deals – large and small alike – to complete
an extensive approval process, largely centered on financials, with pricing as the key
factor. While the intention is to ensure the company maximizes its revenue opportunities,

FROM TO

Traditional commerce Modern commerce

Company in control Customer in control, fully informed buyers
Guesswork, selling on gut instinct Selling on science, algorithms, machine learning
Online/offline silos Frictionless, omnichannel experiences
Manual, opaque pricing Dynamic, transparent pricing
Standard, pre-defined offers Personlized offers

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 9

it comes at the cost of time. These approval cycles drastically increase the time to
complete a transaction, making it even more difficult to satisfy increasingly changing
customer demands.

With modern commerce, the customer is in control. When a deal takes too long,
customers wander away and pursue different options. The simplest alternative is to
find a different way to buy the product. In the process, they uncover different
channels with different price points for the same or similar products.

In essence, these problems are caused by one big obstacle: the inability to
dynamically price across all channels.

While your business may have eCommerce strategies and CRM systems to automate
many processes, if you cannot provide accurate pricing at the speed customers

1/2 By 2018, more than half of large organizations
globally will compete using advanced analytics
and proprietary algorithms, causing the
disruption of entire industries.

Gartner Predicts 2016: Algorithms Take Digital Business to the Next Level

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 10

require – with fast quotes using prices that move with the pace and speed of the
market – you cannot succeed in modern commerce.

According to insidesales.com, 50 percent of deals are won by the vendor that
responds first.1 For example, one major high-tech manufacturer found that 68 percent
of its time to quote was consumed by the pricing process. Its static, outdated quoting
was designed to protect margins, but it came at the cost of speed – which
increasingly impacted win rate and revenue. But pricing consistency across channels
is also essential to maintaining revenue and margins. Dynamic pricing science
ensures prices are timely as well as consistent across all channels for your customers.

Dynamic pricing science delivers what modern commerce requires – speedy,
financially sound deals that are consistent across channels.

50% 50 percent of deals are won
by the vendor that responds first.

1 insidesales.com 11
ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS?

To succeed, your company must do these things:

Track and analyze Create the right offers
You need systems to assess Dynamic pricing science creates the right
hundreds and thousands of internal offer for the right customer at the right time
and external factors and data points to create by treating each customer as a “segment of one.”
the deepest segmentation, understand Personalized, customized offers based on the
customer buying patterns and identify intelligence gained from algorithmic analyses create
meaningful correlations. more impact in competitive market segments.

Efficiently deliver pricing to the field or customer
Optimized pricing is only effective if you are empowering sales and channel teams to access and
use the price recommendations. Tools like Smart CPQ – Configure-Price-Quote – that enable
companies to deliver pricing at the time of quote – and extend these same capabilities and experiences
across all direct and indirect sale channels – are essential to create a consistent sales experience, no matter
where or how customers buy.

Embed dynamic pricing science Ensure speed
This discipline must become part of the fabric of all of your Modern commerce
modern commerce initiatives. It can’t exist as an external, moves at high speed.
standalone routine outside of the natural flow of business. It must be You need to respond quickly
embedded in your systems and engrained in your processes. with precision and consistency
across all channels.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 12

With dynamic pricing science, you run your business on facts, algorithms, and
context-aware, machine-guided learning – not hunches and gut instincts. You gain
greater confidence in your sales team’s abilities because you begin to capture
opportunities that were previously lost. You don’t give away revenue and margin from
inconsistent pricing. You drive better business results.

4/10 By 2018, 40% of B2B digital commerce sites
will use price optimization algorithms and
configure/price/quote tools to dynamically
calculate and deliver product pricing.

Gartner Inc., Magic Quadrant for Digital Commerce, March 9, 2016

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 13

Companies have access to a variety of advanced strategies and techniques in their
efforts to manage pricing and profitability. What makes dynamic pricing science
especially powerful is its step-by-step ability to improve your pricing strategy.

How to Improve your pricing strategy
A step-by-step guide

1 Create better 2 Provide new 3 Create additional 4 Incorporate
“starter” or list pricing customers with fair or price guidance for
that uses science-driven appropriate – but not sellers who want to transactional history
micro-segmentation to engage with for new and existing
determine willingness- necessarily the lowest – customers in different customers to provide
to-pay parameters for sales or partner algorithmic-based,
broader customer market-driven pricing at channels. customer-specific
groups. guidance to sellers for
the right time, regardless future transactions.
of channel.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 14

What else does modern commerce
entail beyond dynamic pricing science?

Modern commerce is about creating a sales experience that accelerates deals,
increases win rates and improves customer satisfaction and loyalty. Dynamic pricing
science drives a modern commerce strategy, but there are other important
components to consider:

Smart CPQ with Guided Selling

The first step to any deal – before pricing even becomes a factor – is to ensure
customers are offered the right product. Guided selling provides a scientific approach
to product selection that helps self-service buyers or sales reps quickly recommend
the right product, service or part for the customer. By identifying the right offer,
dynamic pricing science can then deliver fair, consistent pricing to close the deal.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 15

Intelligent Cross-Sell and Upsell

Another outcome of the B2C “Amazon effect” is that today’s customers expect
cross-sell and upsell recommendations to be highly targeted and personalized.
Unwanted or unneeded suggestions are lost revenue opportunities and can lead
to customer dissatisfaction. Intelligent, data science-driven offer optimization
within the Smart CPQ or eCommerce environment can maximize deal value and
demonstrate the seller’s understanding of a customer’s unique needs.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 16

Across modern commerce, there is one shared component: the use of data science to
drive personalized offers that close deals with terms that satisfy both buyer and seller.
Whether it’s dynamic pricing science, guided selling, or intelligent cross-sell/upsell,
data science is the foundation that drives successful outcomes in modern commerce.

Right time

Sellers Right offer Buyers
Right price • Right terms

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 17

The eight PILLARS of modern commerce

Personalized Algorithmic Omnichannel Real-Time

Relationships, reciprocal The secret sauce of success. Customer buys in There’s no better time
loyalty & personal whatever manner, from than now.
recommendations. Frictionless whichever partner.
Dynamic
Transparent

Mobile

What the buyer sees is Fast, efficient and Anywhere. Any time. The recipe for
what the buyer gets. modern flow. successful commerce:
Adapt. Act. Repeat.
ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS?
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The eight PILLARS of modern commerce

Personalized Omnichannel

Sellers and buyers alike don’t want faceless, Whether online, on the phone or in the aisles,
anonymous transactions. They want relationships consumers expect consistency and efficiency. Modern
and two-way loyalty with personal recommendations commerce breaks down the walls to create a single
and offers that best fit their business and recognize channel that spans multiple points of contact, enabling
the ongoing relationship. the customer to buy in whatever manner they choose
and from whichever partner they select.
Transparent
Mobile
In modern commerce, pricing is transparent and
consistent across all similar customer segments. Thanks to billions of mobile devices and computers,
It increases customer confidence and loyalty, and modern commerce can take place virtually anywhere,
eliminates leakages in revenue and profit. at any time.

Algorithmic Real-Time

Using big data, machine learning and sophisticated In modern commerce, delays spell doom for
analyses, companies can create and refine businesses that are unable to apply automation and
algorithms that segment and target customers with intelligence to their pricing activities.
pinpoint precision, prescribing the right offer with
the right price. Dynamic

Frictionless Commerce is no longer static. Conditions are
constantly changing, including costs, supply chain
In an always-on, available-anywhere world, there’s dynamics, or market movement. That places pressure
little tolerance for outdated processes, delays, and on companies to adapt with speed and agility to
frustrations. Modern commerce delivers fast, low or ensure the latest information is reflected in their
zero-touch transactions when appropriate, and go-to-market strategies.
reorders that are smart and efficient.
19
ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS?

How does modern commerce
work in the real world?

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 20

Increase the number of line Win every deal
items sold per salesperson
each month by more than Bidvest Foodservice used price guidance and product
analyses to identify gaps in what they sell. Dynamic pricing
400 science helped the company eliminate unprofitable
transactions, increase the number of line items sold each
month by more than 400 per salesperson, and improve
margins - no easy feat in a thin-margin industry.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 21

25% Gain an outsized advantage
reduction in quote cycle time
through a new automated, In its crucial partner channel, Hewlett Packard Enterprise
“no touch” process reduced its quote cycle times from days to a few hours through
an automated “no-touch” bid process built around smarter
pricing strategies. By eliminating “hunches” and unnecessary
discounts, the company also improved its margins and volume
while increasing partner satisfaction.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 22

10% Shape demand
increase in incremental
revenue through consistent, For airlines, group sales are 10-20 percent of revenue, but
real-time pricing and these transactions often required phone calls and days of
availability across ALL channels delays in generating price quotes. One major airline uses
modern commerce to provide group pricing and seat
availability in real time without the friction, delays, and
frustrations. The result: 10 percent increase in incremental
revenue from group bookings – and an increase in market share
at the expense of competitors.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 23

Now it’s time to act

Modern commerce is emerging as the key strategy to respond to
customer expectations. By embracing dynamic pricing science as a
foundation of how they sell, companies can synchronize their
pricing strategies across channels in real time and present the right
price to the right customer at the right time.

The cost of maintaining status-quo selling processes is too high to
ignore, and many industries will be disrupted by the uneven pace
by which companies rise to this challenge. The time to embrace
modern commerce is now – before customer dissatisfaction, lost
revenue and margin, and downward price pressure impact
business vitality and long-term viability.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS? 24

Authors: Craig Zawada, Chief Visionary Officer and Doug Fuehne, 26
Vice President of Customer Value

Craig Zawada is responsible for creating and articulating the vision
for how PROS uses the latest technology to help companies drive
incremental sales growth and profit improvement.

Doug Fuehne joined PROS in 2007. He holds an MBA in quantitative
operations from Vanderbilt University and a B.S. in aerospace
engineering from the University of Illinois.

About PROS
PROS is powering the shift to modern commerce, helping competitive enterprises create a personalized
and frictionless experience for their customers. Fueled by dynamic pricing science, PROS offers solutions
that make it possible for companies to price, configure and sell their products and services with speed,
precision and consistency across sales channels. Our customers are leaders in their markets across more
than 10 sectors, and benefit from decades of data science expertise infused into our industry solutions.

To learn more, visit pros.com
or call us at 1 (855) 846-0641.

ARE YOU READY FOR THE NEW ERA OF DIGITAL BUSINESS?