Pricing Automation System

Every 3.5 seconds, a Banner Engineering sensor is installed somewhere in the world. Banner solves problems for most of the manufacturing companies in the Fortune 500, as well as the startups changing the industry with leading-edge production.

As a channel-based business, Banner sells its sensors and related products through distributors. Banner has a set list price and each distributor gets a special discount off that list price, so they can make a profit. For example, if a list price is $100, the distributor may purchase the item for $60 after their discount. However, they may need to sell to the customer at a price of $50 in order to get the sale. Formalized sales agreements allow distributors to provide a deeper discount for sales to specific customers.

Banner had created more than 4,000 of these different sales agreements to meet the needs of their growing customer base. Unfortunately, having so many different, manually-maintained sales agreements was causing confusion for both customers and employees. As a result, Banner employees spent too many working hours just sifting through the different discount offerings, hoping to find the right match.

This disorganized system also increased the risk of revealing sensitive customer pricing data. If a sales associate accidentally used the wrong agreement — or forgot to manually edit it — they could inadvertently expose one customer’s pricing to another. Moreover, the sales agreements and price lists contained many items that were no longer active. In fact, at any given time, up to 40% of price list line items were irrelevant!

Implementing Pricing Automation

While we were initially brought in to perform an Oracle EBS upgrade, Banner turned to Traust to help implement a new pricing automation system that would reduce manual labor, better organize their discount policies, and protect confidential customer data. To achieve these objectives, we integrated Banner’s existing Oracle-based sales agreements with the Channel Connect online quotation system. Now, they can create sales agreements and keep them correctly updated with version control. In the new system, Banner creates approval rules based on the profit margin of each sales agreement. If the margin on a deal is above a certain percentage, it is automatically approved. If it falls below that range, the agreement must be approved by management. This helps ensure that the deals are never discounted too heavily.

Another significant change was to align all pricing on the same basis. Prior to the conversion, some deals were based on net pricing while others were based on specified discounts. For example, if a sensor costs $100, the net price to one distributor might $50, while the discount to another distributor would be 50%. The resulting price for the sensor to both distributors is $50. Banner was concerned, however, that, as sales agreements were renewed from year-to-year, those net pricing deals wouldn’t keep up with inflation. So if the list price for the sensor in our example went up to $110, the discount-based price would also rise to $55, without requiring a change to the sales agreement. The net pricing agreement, however, would have to change to bring it into alignment with the new list price. Traust implemented a seamless conversion process to transform all the sales agreements from net pricing to the equivalent discounts.

The previous sales agreement process also didn’t support price breaks on point of purchase (POP) special purchase agreements (where the special discount was taken at the distributor-level, instead of at the wholesale-level). To compensate, Banner had to manually add and maintain these price breaks to match the signed sales agreement. To help eliminate this manual effort, Traust designed a utility that seamlessly adds and updates the pricing on the existing price list, as needed. We also designed and implemented a new pricing report based on data extracted from the QlikView analytics engine. The new reporting gives Banner the pricing data analytics they need, without having to jump into a separate application.

Optimization and Labor Savings

With an ambitious project timeline of just 6 weeks, the conversion was completed successfully and on time. Ultimately, this pricing overhaul will save Banner Engineering more than $300,000 in labor expenses every year. It also gives them the tools needed to better optimize their pricing strategy in a growing and highly competitive market.

Interested in learning how we can help you improve your business through pricing automation? Let’s connect.