What is Agile Pricing?

Agile pricing is a dynamic and flexible approach to pricing products or services. Prices are adjusted in real-time or near real-time in response to market conditions, customer demand, and other external factors. The concept draws inspiration from Agile methodologies in software development, emphasizing adaptability, responsiveness, and continuous improvement.

This pricing strategy is particularly valuable in industries where prices fluctuate frequently, like energy, travel, and certain digital services. For example, in the energy sector, consumers benefit from lower prices when demand is low or when renewable energy supply is abundant. And prices rise during peak demand periods, which helps these businesses maximize profitability.

To reflect true cost dynamics, businesses need to use sophisticated algorithms and data analytics to predict and respond to market conditions in real-time. Companies that implement agile pricing generally do so using software that automates the process, enabling quick decisions and immediate changes to pricing.

It’s worth mentioning that agile pricing is also broader than just real-time price adjustment. It’s a mindset of constantly adapting prices to maximize revenue and profit while also considering customer satisfaction and market competition. In addition to supply/demand changes, it includes promotional offers, timing of price changes, pricing transformation, and strategies for new products.

Synonyms

• Agile pricing model
• Agile pricing strategy

Why Companies Implement Agile Pricing Strategies

While it isn’t the best fit for just any company, agile pricing is definitely a viable choice for businesses that experience dramatic fluctuations in demand, cost, or competition.

Examples include:

• Energy providers
• Airlines
• Hotels
• Ride-sharing companies like Uber and Lyft

For these types of companies, a fixed price could either be too high, leading to lower sales, or too low, cutting into margins.

Agile pricing provides a better alternative by allowing price changes to occur automatically. For them, it’s the only way to stay competitive while managing costs. With dynamic pricing strategies like agile pricing, businesses easily respond to real-time market changes, so they don’t lose out on potential sales opportunities or leave money on the table.

Not to mention, this type of dynamic pricing strategy gives companies the ability to test different price points and see their impact on customer demand. By collecting data on how pricing affects sales and revenue, businesses can make more informed decisions and fine-tune their pricing strategies according to price sensitivity and willingness to pay.

Benefits of Agile Pricing

The number-one benefit of agile pricing is the ability to stay competitive in a constantly changing market. It’s unique in the sense that prices can be adjusted in real-time, which allows companies to respond quickly to fluctuations in demand and supply.

But there are other advantages, too:

• It’s customer-centric. Since prices are adjusted based on customer demand, businesses can offer more personalized pricing and discounts to their target audience.
• Minimal overhead is required. Although constantly changing prices may seem like a lot of work, pricing automation software makes the process easy and efficient — there’s practically no manual work at all. And it eliminates pricing errors.
• It’s data-driven. By analyzing pricing data, businesses can make more informed pricing decisions that lead to better sales and profits.
• Prices closely reflect value and cost dynamics. In industries using agile pricing, the general consensus is that prices should reflect current costs, demand, and competition.
• You can easily test different prices. Pricing experiments are a lot easier when customers are already expecting pricing changes. You can test different pricing options to see which ones have the highest impact on sales and revenue.
• Revenue and profitability increase. When prices are optimized, businesses can expect to see an increase in both sales (because more customers align with the price point) and margins (because you don’t have to eat into margins).
• The customer experience significantly improves. When customers feel prices are tailored to their needs, they’re more likely to have a positive experience and become loyal customers.

Developing an Agile Pricing Strategy

Agile pricing setup requires a well-thought-out strategy to ensure the process runs smoothly and benefits the business.

Your organization will, of course, apply the agile pricing framework in its own way. But the following steps are a great place to start:

1. Identify pricing objectives and goals

Before anything, you need to have everything laid out and understood. That means setting your pricing objectives, goals, and vision for the future.

• What are you trying to achieve with this pricing strategy change?
• Are all your stakeholders on board with a dynamic pricing strategy?
• Do you have the necessary technology and resources in place?
• If you don’t, how much will it cost to implement them?

At this first step, you want to make sure all the numbers make sense and that everyone agrees agile pricing is 100% the way to go for your business.

2. Conduct a thorough market analysis

The market includes your customers, competitors, and the economic environment. To get a holistic view of market conditions, look at all pricing factors (costs, competition, demand) to avoid making assumptions about how agile pricing will play out in reality.

• Look at the most effective pricing strategies for your competitors. Do they use agile pricing?
• Survey customers to understand price elasticity. Are they okay with volatility or do they expect something predictable?
• Analyze your own cost structure and dynamics. Does your COGS constantly fluctuate?
• Look at market trends and economic factors that could affect agile pricing implementation. Do regulations or tariffs play a major role in your industry?

If your customers don’t respond well to constant price fluctuations, or if it isn’t at least somewhat established as your industry standard, agile pricing isn’t right for your business.

3. Define pricing roles and responsibilities

Your next step is to assemble a pricing team. You’ll need the right people to ensure you roll out the framework properly. You’ll need people to handle pricing analysis, data collection and management, and software maintenance. And you’ll need people to manage your customer-facing teams so that everyone is on the same page about pricing.

Key roles in agile pricing implementation are:

• Executive leadership: They’re in charge of budget allocation, software procurement, and final sign-off for pricing decisions.
• Pricing manager: The pricing manager understands pricing strategy and the technology that supports it. Is responsible for maintaining software, monitoring data, running analyses, and reporting results.
• Data analysts: Your data team is responsible for collecting, analyzing, and interpreting pricing data in order to inform price changes.
• Sales representatives: Sales reps need to understand how the new prices are going to affect customers — they will be the ones explaining pricing changes as well as talking about products or services your company offers. They also need to communicate critical feedback from customers and sales management to the pricing manager.
• Customer success/account managers: They make sure customers understand the pricing changes. CS and account management teams facilitate smooth communication between the sales team and customers. They also help customers understand why prices are changing.
• IT support: IT team members keep your pricing software running smoothly, troubleshoots technical issues, helps with data integration and management, etc.
• RevOps (revenue operations): RevOps is responsible for aligning all revenue-generating departments — sales, marketing and customer success — with your pricing objectives, strategies, and tactics.

4. Establish a pricing governance structure

Before implementing agile pricing, businesses should put a governance structure in place to ensure decisions are made efficiently and consistently.

This should include:

• Clearly defined roles and responsibilities for pricing-related tasks
• Clear communication channels between all stakeholders within the organization
• A decision-making process that allows for quick and coordinated responses to market conditions and pricing changes
• Regular reviews and updates to ensure the pricing strategy remains aligned with business goals

Doing all of this will require you to set up new processes, procedures, and workflows within your business tools to facilitate the pricing strategy’s execution.

5. Implement a pricing technology solution

Once you’ve laid out all the groundwork, it’s time to put the agile pricing framework into action. An agile pricing tool is crucial in order for your business to keep up with price fluctuations across multiple channels.

When you’re implementing any type of dynamic pricing, there are several key features of pricing management software to consider:

• Real-time data analysis and insights
• Automation of price changes based on rules and triggers
• Profit margin protection and optimization
• Integration with CRM and ERP systems
• User-friendly interface for easy pricing management
• Customizable dashboards and reporting capabilities 

Having a technology solution in place will not only make it easier to implement agile pricing, but it will also provide valuable insights into customer buying behavior and market trends.

6. Solution integration and data synchronization

With a fully integrated solution, you’ll always have a pulse on your pricing strategy’s performance and be able to make adjustments as needed.

• ERP integration facilitates automatic data synchronization for accurate pricing decisions and streamlined workflows.
• CRM integration helps sales teams make better-informed pricing decisions by providing real-time customer data.
• Integrating with your e-commerce platforms ensures that online prices are updated in real-time.

Beyond that, you’ll need to make sure that your pricing tool integrates with other relevant systems in your business, such as inventory management and marketing automation software. This will allow for a more holistic view of how pricing affects other areas of your business. And it’ll make sure you’re always promoting the most up-to-date price.

Technology Requirements for Agile Pricing

Customer relationship management (CRM)

CRM software is the central hub for all your customer data, sales interactions, and communication. It’s an essential tool for implementing agile pricing because it provides valuable insights into customer behavior and preferences. It also shows sales data, including deal velocity and conversion rates, giving your team a better understanding of how pricing changes are impacting sales.

Your customer success team also uses CRM. They’ll record all customer interactions and feedback, which will inform pricing decisions moving forward.

When you launch your agile pricing strategy, make sure your CRM is properly integrated with your pricing tool. This will ensure that all customer data and interactions are up-to-date, allowing for more accurate pricing decisions.

Enterprise resource planning (ERP)

A good ERP system provides valuable insights into your business operations, including inventory levels, production costs, and financial data. Integrating with your pricing tool will ensure that all this information is up-to-date and accurate when making pricing decisions.

Your ERP system also plays a crucial role in agile pricing by providing real-time data on production costs and inventory levels. This information is necessary for optimizing profit margins and setting competitive prices.

Competitive intelligence and market intelligence

Price intelligence tools provide real-time data on competitor pricing, allowing businesses to make more informed decisions about their own prices. There are two sides to this:

• Competitive intelligence (CI)
• Market intelligence

The former is something you can quickly generate using a CI tool. The latter requires a more in-depth analysis of market trends and customer behavior. You can use market intelligence tools to understand how external factors, such as the economy and industry changes, affect pricing. You can also use it to get a clear picture of how your target market makes purchasing decisions.

Before you make any conclusive decision on pricing, you need to closely evaluate both what your competitors are doing and where the market is headed. If all your competition is successfully doing the opposite of what you plan, or your ICP is closed to change or won’t buy, then you have to make an adjustment to your strategy.

Pricing optimization software

Price optimization is the process of finding the optimum price for your products or services to maximize revenue and profit. This is achieved through a combination of data analysis, market trends, and customer behavior insights.

The optimal price is the sweet spot between what customers are willing to pay and what will generate the most profit for your business. When you strike that balance, more customers will buy from you and your margins will be at the ideal point.

Pricing optimization software leverages advanced algorithms and machine learning to analyze all these factors and recommend prices. Recommendations are based on previous performance, current cost structure, and market dynamics.

CPQ (configure, price, quote)

CPQ (configure, price, quote) software is what allows businesses to quickly generate accurate product configurations and quotes for customers. On the backend, an admin (from your company) creates a standardized pricing process that takes into account factors such as discounts, promotions, and customer-specific pricing agreements.

Agile CPQ is a must in B2B sales because it drives agility, efficiency, and control in the sales process. It automatically applies your pricing rules and minimum profitability thresholds when calculating prices.

And if it has a dynamic pricing engine (i.e., price optimization) built in, it can make pricing recommendations and changes for your sales team based on real-time market and production data.

Business intelligence (BI) tools

You’ll use BI tools to gain insights from your company data, particularly sales and revenue data. These tools help you identify trends and patterns in customer behavior, market conditions, and product performance that impact pricing.

A BI tool that integrates with your pricing software allow you to see how changes in pricing affect sales and revenue. You can also use it to forecast potential outcomes of different pricing scenarios, helping you make more informed decisions.

Additionally, BI tools generally have data visualization capabilities, making it easier for everyone on your team to understand and communicate complex data related to pricing.

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