5 Ways to Greater Profitability in 2024

Blog: Solutions Review - Business Process Management

As part of Solutions Review’s Contributed Content Series—a collection of contributed articles written by our enterprise tech thought leader community—Mitch Lee, a Profit Evangelist at Vendavo, outlines five ways companies can drive profitability in 2024.

In 2024, inflation is forecasted to be at 2 percent to 4 percent. Not as high as it was previously, but higher than most would like—including the Federal Reserve. In this economic landscape, what can organizations do to maximize profitability? Consider these five strategies when planning your 2024.

1) Out with price hikes. In with price improvement.

When inflation was sky-high coming out of the pandemic, price increases were tolerated by customers and fueled growth for many organizations. With a lower inflation forecast for 2024, the window has closed for significant, across-the-board price increases. Organizations must forego blanket price hikes or risk appearing out of touch with even their most loyal customers. While counter-intuitive, price improvement has a greater positive impact on the bottom line than cost-cutting.

2) Price cutting won’t cut it.

Just as blanket price increases won’t fare well in 2024, aggressive price cuts won’t either. Lowering prices might win more deals, but unfortunately, that success may not be evident on the bottom line. Margins will suffer, profitability will plummet, and your leadership will want to know what’s happening. Rather than quick, seat-of-the-pants, across-the-board price cuts, understand what specific customers are willing to pay for products and charge accordingly.

3) For greater agility, shift pricing authority to sales and marketing.

As organizations work to manage revenue goals in a fiercely competitive landscape, sales and marketing teams will be asked to do more with greater granularity. According to the 2024 Pricing Excellence Report, 56 percent of organizations have shifted pricing authority to sales and marketing to enable quick, easy price changes that satisfy customer expectations. Delivering consistent, competitor-aligned, easy-to-explain prices customers are willing to pay contributes to an excellent customer experience.

A deeper understanding of customers and their buying patterns will power organizational agility, making data collection more crucial than ever. AI-generated willingness-to-pay algorithms will be a tremendous help in finding the right price at the right time – but only if you are tracking the right data.

4) Adapt to customer preferences and market trends with value-based pricing strategies and software support.

Most organizations seeking pockets of profitability via price improvement in 2024 plan to find new opportunities using a value-based pricing strategy. This pricing model will aid in the development of customer-centric pricing strategies, optimized price decisions, and streamlined processes. Quantifying how price improvement impacts profitability will be essential because buy-in for new investment may be a challenge in 2024.

Building a business case starts best by understanding and articulating a problem or the area for improvement. Without this, quantifying success is much more difficult and less effective—case in point. Only 17 percent of organizations that could benefit from purpose-built price optimization software use it. That leaves 83 percent that likely isn’t articulating a problem or identifying an opportunity for price improvement and more significant profit.

5) Put your data to work by (cautiously) implementing AI.

More organizations will put their data to work by leveraging AI in 2024. The Pricing Excellence Report found that 51 percent of organizations already use it to understand price optimization or plan to implement it in the next 12 months. Already, AI-fueled pricing software powers global reference prices, guides negotiated pricing decisions and provides sales teams with timely product suggestions with context for pricing decisions.

For more significant revenue gains, AI can support sales by increasing cross-sell and upsell revenue opportunities and improving forecasting accuracy. For improved price optimization strategies, AI will analyze data faster and more accurately, discover patterns across various data sets to help create appropriate personalized discounts or bundles, and monitor competitors’ pricing.

Of course, when looking to the future, the only thing sure is change. But one thing remains true. Trading outdated, error-prone methods for AI-powered price optimization strategies and solutions that help you arrive at the right price for the right customer at the right time will improve your profitability. 2024 seems like a great time to get started.

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