It’s not easy for corporations to price their goods and services appropriately, but getting pricing right is critically important to their success. According to a McKinsey & Company report, a 1% price increase translates to an 8.7% increase in operating profits on average, yet an estimated 30% of the thousands of pricing decisions companies make every year fail to deliver the best prices.
Firms like Pricefx, which was cofounded in 2011 by former Accenture consultant Dr. Martin Wricke, Ariba veteran Marcin Cichon, and programmer Christian Tratz, hope to reverse the trend with a dynamic alternative to “tried and tested” historical methods. The Munich-based startup provides a software-as-a-service solution for price optimization that taps AI to suss out business-to-business and business-to-consumer product pricing, a solution that’s evidently impressed the investors who continue to throw money its way.
Pricefx today announced that it’s raised €23 million ($25.3 million) in an extension of its series B round at triple its valuation 12 months ago, led by B2B tech growth investor Digital+ Partners and Bain & Company with participation from Talis Capital. It brings the company’s total raised to €55 million ($60.6 million), which CEO Cichon said will be used to expand Pricefx’s platform capabilities and introduce new products in 2020.
Pricefx’s cloud-hosted, modularized platform connects to apps and algorithmic libraries to analyze and manage pricing. Its PriceAnalyzer tool provides visualizations and reports that spotlight underperforming products, accounts, and marketing programs, while a separate component — PriceOptimizer — leverages machine learning and data science techniques to test various pricing strategies, segments, volumes, and margins. As for PromotionManager, it allows customers to define, create, and manage discounts and pricing offers, complementing the QuoteConfigurator tool that feeds optimized quotes to customer relationship management systems.
That’s the tip of the offerings iceberg, in truth. Pricefx’s RebateManager lets companies manage rebate processes from a single dashboard, and its PFX Platform product connects its SaaS-based pricing solutions to existing ecommerce and enterprise resource management systems. Lastly, there’s ChannelManager, which offers a ship and claims management workflow designed to work seamlessly with current tech stacks.
“We have a customer that was competing against a company using algorithmic and dynamic pricing. This customer ended up implementing our solution to compete, and thanks to this, they uncovered a trend that showed their competitor was dropping prices at 4:30 p.m. every Friday,” Pricefx chief evangelist Gabriel Smith told VentureBeat via email. “They would drop their prices and capture sales over the weekend and raise the prices on Monday morning at 8 a.m. After discovering this, our customer could respond appropriately.”
Pricefx — which recently expanded its footprint in Chicago and hired on 40 employees — says it’s experienced “exponential” growth in 2019, with a second fiscal quarter in which year-over-year revenue growth increased 34% and annual recurring revenue (ARR) saw a 90% uptick. Its over 90 customers in 37 countries include CertainTeed, Schneider Electric, Oerlikon Metco, Spinner Group, and some of the largest manufacturing, retailing, and energy businesses in the world.
In addition to its Munich and Chicago headquarters, Pricefx has offices in the Czech Republic, Switzerland, and Australia, supported in part by Pricefx’s €25 million ($27.5) series B, which closed in December 2018.
Analysts at Gartner anticipate the price optimization and management market will grow rapidly in the next three years, and competition abounds. There’s Qualtrics, maker of CoreXM; BlackCurve, which claims to boost profitability by 9%; and Prisync, netRivals, and Competera. But backers like Bain & Company partner and director Ron Kermisch assert that Pricefx’s product diversity sets it apart from the rest.
“Over the last year, we have been collaborating with Pricefx on a new disruptive offering for the market,” said Kermisch in a statement. “We are very excited about its upcoming innovation and happy to see Pricefx executing its strategy to become the de-facto software standard in pricing.”