Almost all companies need to manage pricing and margins with the same precision and control that they use to manage manufacturing and procurement costs. While there are numerous pricing-related, statistical techniques and process models in the public domain and in academia, getting such systems to work in the real world is no small feat. Areas where this is especially true are the airline, hotel, retail, and business-to-business (B2B) markets. This opportunity has spawned a small group of successful price management vendors that have developed "proprietary" science tailored to the unique data types and selling dynamics found in different segments of B2B and business-to-consumer (B2C) industries.
Zilliant, an Austin, Texas (US)-based provider of data-driven price management software, is enabling its B2B manufacturing, distribution, high tech, and industrial service customers to better exploit their enterprise data in order to improve price analysis, setting, and execution. Greater price differentiation and price optimization have reportedly helped some of Zilliant's customers significantly increase profits (by 10 percent and more). The idea behind Zilliant Precision Pricing Suite (ZPPS) is to combine proprietary price segmentation and optimization science with relatively easy-to-use software applications to help business people determine and negotiate the best pricing possible for each and every sales transaction.
While the product offering will be delved into deeper later on, for now it suffices to say that ZPPS was designed to address the pricing challenges of complex, discretionary selling environments common in B2B environments, especially manufacturing and wholesale distribution. To that end, the vendor's proprietary, patent-pending pricing science extracts maximum insight from complex data, whereby ZPPS applications apply the resulting insights to inform and streamline all price analysis, setting, and execution activities. Via a data-driven approach to price analytics, optimization, price list management, quoting, negotiation, and enforcement, the product suite enables B2B companies to identify and optimize opportunities to tighten control of discounts, markups, and other financial terms, thereby improving overall margins. The approach embodied in ZPPS also fits well in B2B service industries and B2C upstream channels (so-called B2B2C environments), where the pricing dynamics are similar to those of manufacturers and distributors.
Founded in 1999, Zilliant is a privately held company, and has thus far attracted about $42 million (USD) in venture capital. The company's investors include Panorama Capital, Austin Ventures, Cardinal Ventures, and Trellis Partners. To be fair, the first few years following the company's inception were marked by soul-searching in the dot-com era. Yet since 2003, the company has been on quite an upslope. It brought in a new chief executive officer (CEO), Greg Peters (former CEO of portal and content management vendor Vignette), and the vendor's once 30 employees has grown to over 130, in addition to the more than 30 offshore contractors.
Where Pricing and Science Meet
During the last 2 years, revenue and bookings both grew in excess of 400 percent year over year. Zilliant attributes its strong momentum to two favorable trends: increasing market demand for pricing software and the company's apparent ability to lift profit margins for B2B companies. The vendor has also been pleased with the recent, favorable coverage in leading business, academic, and consulting circles that highlight how analytical math and science capabilities have become competitive necessities, as firms seek to optimize business processes and decision making. Namely, in recent months, BusinessWeek, Harvard Business Review, and McKinsey & Co. have all published articles on this trend, citing examples of how innovative companies are marrying sophisticated analytical techniques with their enterprise data to realize untapped, significant opportunities for competitive and market advantages.
While the intersection of pricing operations and sales negotiations with math, science, and data is a new concept for many, it forms the core of Zilliant's value proposition. The vendor aims to help B2B companies improve aspects of pricing, namely, price segmentation, analysis, setting (optimization), and deal execution. Zilliant's offerings provide the marketing, sales, and price operations with the quantitative insights and guidance companies need to achieve the best pricing possible on every deal. To that end, Zilliant's applications leverage proprietary pricing science to provide two to three times more margin uplift than approaches not based on science. Some competitors may still claim that price segmentation and optimization (see Know Thy Market Segment's Price Response) are unnecessary or are too advanced for B2B companies. These vendors promote basic analytic price setting approaches as sufficient to reveal most price improvement opportunities. Yet this approach only serves to differentiate Zilliant's offerings.
A significant percentage of Zilliant's employees hold advanced degrees in mathematics, economics, or other decision sciences. The company employs a dozen advanced degree pricing scientists, several pricing architects and price consultants, and other experienced personnel throughout the design, development, and delivery departments—over 500 years of pricing domain experience in total. These scientists and domain experts have developed proprietary models, algorithms, and price segmentation techniques that synthesize the massive amounts of data within enterprise resource planning (ERP), customer relationship management (CRM), order management, and other transaction systems into a variety of formats to enable better pricing decisions.
The quantitative capabilities of this science form the foundation for Zilliant's pricing software, ZPPS, which helps customers better analyze, set, and execute prices that are finely tuned to differences in customer, market, product, and order characteristics. Zilliant has invested over seven years and $18 million (USD) in developing its proprietary empirical science (as opposed to heuristic rules) and transforming it into enterprise software. These efforts have produced significant intellectual property (IP): Precision Price Segmentation, Price Band Optimization (patent pending), and Dynamic Data Aggregation (patent pending). The combined capabilities of this IP and applications provide data-driven approaches that deliver better and more precise price analysis, optimization, price list management, quoting, and negotiation.
Consequently, Zilliant was recognized by the Manufacturing Business Technology (MBT) magazine as one of the top forty emerging software vendors in 2006. Featured in the publication's October 2006 issue, Zilliant was selected among a prestigious group of up-and-coming information technology (IT) vendors based on such factors as growth statistics, recent customer wins, product innovation, overall company direction, and editorial insight. This recognition came on the heels of other "fastest-growing" and "top" list announcements, like those of Deloitte & Touche's Texas Technology Fast 50 program and Red Herring's list of top 100, privately held companies in 2005. Furthermore, the vendor's customers have recently been profiled in CIO Magazine, USA Today, Forbes, and the Wall Street Journal.
In September 2006, the vendor opened its first European office, located in London, United Kingdom (UK). This expansion should allow Zilliant to provide local support and better quality of service to its global manufacturing and distribution clients with operations across Europe, as well as facilitate expanded sales activities in this region. Zilliant's European sales and service personnel are responsible for selling ZPPS, as well as for supporting Zilliant's global customer base, including Insight Technologies, Schneider Electric, and Parker Hannifin.
This is the part one of the series What if Companies Could Use Science to Align Prices to Market and Maximize Margins?, which takes an in-depth look at the price management software provider, Zilliant, and its enterprise pricing solutions. In the next part of this series, Zilliant's science-based foundation for data-driven price analysis, setting, and execution—the vendor's proprietary Precision Price Segmentation and Dynamic Data Aggregation—will be discussed in detail.