The market for price optimization and management applications grew at 30 percent in 2007, and should grow at another 20 percent this year, according to Michael Dunne, Gartner research vice president, and author of Gartner's "MarketScope for Price Optimization and Management, 2008." The market itself was $150 million, larger than Dunne had expected when he started compiling the report, Gartner's first MarketScope covering this market. The report predicts that, through 2010, price optimization technology will have a more direct impact on increasing revenue or margins than any other CRM technology.
"The potential for this market is significant," the report says, "because defining and defending optimal prices is a fundamental imperative for enterprises responsible for producing returns for shareholders."
PROS, Vendavo, and Zillian are the leading best-of-breed vendors, according to the report. Oracle is the only large vendor in the market. Other vendors examined in the report include Servigistics, SignalDemand, Vendavo, and Vistaar Technologies. (Vistaar was named one of CRM magazine's 2007 Rising Stars.) To be included in the report, vendors had to have at least five customers who had used or were in the process of deploying price optimization, execution or analytics software in the last 18 months. Vendors also had to sell to two or more verticals or world regions and have a commitment to pursuing this market in the next three to five years.
"The most surprising finding is the value that [application buyers] are getting and the value they seem to be getting [for new installations]," Dunne says. "They feel that they are getting value from better revenue recognitions, finding opportunities where they can raise prices, finding where they have revenue leakages and finding opportunities where they can cut out manual steps."
So the potential for this market is significant, Dunne says. Traditional approaches for price optimization, such as the use of spreadsheet calculations, are no longer adequate. Additionally, the software solutions have evolved to the point where they appeal to a broader base of enterprises.
Dunne adds that several vendors in this market that focused on single verticals are now expanding slowly into other markets by working with a few select new clients.
Dunne acknowledges that the market for price optimization applications may face some challenges because some potential buyers, while they can benefit from use of the applications, may have lack of financial resources to add the technology. However, most of the vendors in this market will conduct proof-of-concept trials for potential clients, enabling prospects to determine how quickly they will get a return on their price optimization investment.