Vendavo is expanding its reach by launching Profit Advisor, an automated price-optimization solution targeted at enterprises with revenue as low as $300 million. The software-as-a-service (SaaS) solution allows users to upload data from their CRM or ERP systems and see areas where they are not optimizing on price, as well as what actions they should take to improve margins.
"For the small guys, it's all benefit. It's something they could not imagine doing a few months ago," Vendavo Chief Marketing Officer Joe Boissy says. "They might have only one or two people massaging their data as much as possible with Excel and macros." The automated product also requires no extensive expertise, which is helpful given the shortage of data scientists in the United States.
Because Profit Advisor is a SaaS product, it will work for smaller companies that may not have the IT departments or budgets for large-scale installations, unlike Vendavo's price optimization product for larger companies. It also automates much of the process, making it easier for companies to find profit opportunities without extensive customization.
In three months of beta testing, one customer reported $59 million in profit opportunities, according to CEO Neil Lustig. Another found the quality and level of findings on par with a three- to six-month consulting job, he said. "There's a lot there for customers who want to understand what the DNA of a deal looks like," observes Joshua Greenbaum, a principal at Enterprise Applications Consulting. "They are going to get to more companies who may not have wanted broader solutions."
After logging into the Vendavo Profit Advisor interface, a user can analyze different profit opportunities. A margin could be less than expected due to high freight costs, a sweetheart deal that hasn't been revised for years, or poor sales negotiations. "For a lot of companies, this kind of analysis is going to move the needle very far very quickly," observes Greenbaum. "There's a lot of low-hanging fruit that pops up when you do this kind of analysis."
Boissy offers the example of a sales manager who could drill in by territory, observing different pricing in different areas or deals completed by a weak salesperson. "We find a lot of simple discrepancies," he says. One common example would be if "a deal was negotiated years ago for a high-volume, special customer and though those conditions had changed, [the customer] still had a preferred price," Boissy says. Another frequent finding is that companies aren't updating pricing for raw materials often enough, costing them money when prices rise and they don't pass those costs to customers.
Vendavo traditionally has had success in areas like manufacturing, wholesale distribution, or high-tech hardware, Boissy states. He predicts that companies with "anything $300 million [in annual revenue] and above" will be at a "sweet spot" for the product offering. Greenbaum sees Profit Advisor as offering particular value to "companies that have relatively dynamic markets that are changing rapidly, with a lot of competition, or a product or technology evolution."