Historically, pricing and planning have been dealt with by separate divisions within companies. This has resulted in inconsistent strategic thinking and data silos. For this episode of LokadTV, we discuss why these two challenges should be dealt with in tandem and how they are actually, in reality, two sides of the same coin.
When you think about demand you need to try and anticipate the future, to be able to produce or source ahead of time what you plan on selling. However, demand is also highly affected by the price, yet from a traditional forecasting perspective, the concept of pricing usually doesn’t exist at all.
When Lokad first started out, we also tried to solve the two problems separately with two separate pieces of software: “Salescast” and “Priceforge”, before we realised that the two perspectives and their data needed to be handled together, which took us some time.
When it comes to pricing, willingness to pay is often seasonal, especially in fashion. But each industry (fresh food, aeronautics etc.) has its own distinctive perspective on planning and pricing and these two subjects are nearly always entangled. Therefore, planning and pricing teams should work much closer together, which isn’t the case in most companies.
Or to get even better results, the two teams shouldn’t be separate, as you’re just looking at the same problem from two angles. An example of a company that is already doing this and doing it well is the usual suspect - Amazon. For example, Amazon begins to raise the price of products as soon as the stocks start to run lower.
To conclude, we discuss if in the future there’s any possibility that pricing and planning software companies will try and join forces to produce solutions and why Amazon and Alibaba; despite being so enormous, still continue to grow precisely because they analyse pricing and planning together.
00:26 Joannes, we have already spoken about pricing before. What is the angle today?
03:06 Previously at Lokad you dealt with pricing and planning separately. Why did you decide to join them in the end?
05:49 When did the solution start converging in terms of pricing and planning?
08:56 Did the system work well at the time or was it a rough approximation?
11:44 Is the Fashion industry the one where the unification of price and planning is most applicable to?
14:37 If there should only be one team taking care of planning and pricing, have you observed any companies that do this well?
16:25 Why is it the market still offering softwares that are just focused on pricing and just focused on planning?
19:47 If we look at the future do you see some software vendors partnering up and providing a joint technique?
21:36 What is our main conclusion today? A company that unifies pricing and planning has a lot more control?