Pricing

The 8 most important challenges of pricing models in Excel

August 23, 2021

How Excel is hurting your pricing strategies in 8 different ways


90% of pricing and demand forecasting still depends on spreadsheets, excel and gut-feeling decisions. This comes with challenges as these methods are not flawless. These flaws could potentially hurt your pricing strategy and result in you leaving money on the table. But what are these most important challenges that come from working with pricing models in Excel?

1. Excel is not useful for advanced pricing methods

Typically, businesses use Excel for managing basic pricing strategies, such as cost-plus pricing, competition-based pricing or other simple pricing analyses. These strategies make you sell your products for a profit, but it still leaves a lot on the table. Many other factors, which make up the consumers’ willingness to pay for a product, are left out.

More advanced pricing strategies are harder to conduct in Excel, such as pricing based on season, markets or on product specifications. Therefore, more advanced strategies are often ignored in businesses where they make use of outdated spreadsheets.

2. Human mistakes are made in Excel

At least, more easily. Excel is very susceptible to simple human errors that everyone can make on a day to day basis. Replacing a comma for a dot sounds harmless, but in spreadsheets this can have a huge impact on your data.

This harms the effectiveness of your pricing model and could result in a serious amount of money being lost. Something, which I guess, you do not want.

3. Excel is not useful for collaborative work

Most of the time, Excel is used in an offline environment and data is stored on a single device. Only one person is then able to access this file, while others are not able to work on the data or perform a price analysis. Either one person is responsible for it all, or the entire team needs to put a lot of effort into making sure that changes to the document do not go unnoticed.

4. Excel is not agile (enough)

Excel is a powerful tool for many businesses, from start-ups to multinationals. However, it is not an agile way of working. People often create Excel sheets that work for themselves, and which are personalized towards a specific problem or geared towards the preferences of the creator.

This is a source of problems when someone else takes over the job. They then need to adjust to an unstructured document instead of a standardized dashboard.

5. Excel is not useful for large databases

If you have a large data file with a lot of information, chances are pretty high that Excel will be very slow. You can prevent this by having the data separated in different files. However, human mistakes will then be easier to make and harder to spot. Large databases can thus be a problem for how well Excel performs and the accuracy of the outcome.

6. Effectiveness of decision-making is hard to test in Excel

Whether you are a pricing manager or someone that works with pricing, sometimes you want (or need) to know what the effectiveness of your decisions is. Testing your decisions in Excel is not simple because you can’t keep track of all the changes everyone makes. This prevents you from learning from your “wins” and “losses”

7. Excel needs to be kept simple

Let’s face it, not everyone is an Excel superstar. Some can do the most complicated formulas without any effort, while others struggle to understand what is going on entirely. When you use Excel for pricing, you need to make sure that everyone who works on the team knows what is going on. Therefore, you are always limited to the person with the least amount of Excel experience.

8. Excel is not ‘smart’

While Excel can perform basic price analyses, it is not a smart program. You cannot perform very advanced analysis and external factors and data are very hard to incorporate. Sometimes your pricing strategy should not only be based on internal data but also on external data. Excel cannot handle all of this and is thus considered to be ‘not smart’.

Pricing is a crucial part of every business, and it should be treated as such. You probably have IT systems for your legal and sales departments, why not have one to structure your pricing as well? SYMSON allows you to make your pricing more intelligent by combining human expertise with AI insights. SYMSON helps you to automate your tasks, it makes advices how to increase your margin and revenue and let you combine multiple pricing strategies together.

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