What is Price Benchmarking and Why is it Important?
The role, relationship, and value of suppliers has become increasingly evident and crucial to companies across various industries, and transformed procurement, sourcing, and supply chain strategies. Identifying the best fit suppliers can be challenging, and businesses need to closely assess, evaluate, and compare the offerings of all potential vendors, leading to performance, compliance, and price benchmarking. There are various metrics by which companies determine the most suitable vendors to help achieve their business goals, but as more markets emerge, competition increases, and costs rise, organizations must search for the best prices and offerings. Price benchmarking helps companies evaluate, compare, and choose between various potential rate cards, deals, and vendors. In doing so, CPOs and supply chain managers can ensure they are receiving the best offerings, prices, and partnerships, keeping them ahead of the curve and providing a significant competitive advantage. Many businesses are leveraging expert advice and insights into conducting efficient and accurate price benchmarking, and achieving their stipulated business goals.
How Does Price Benchmarking Help Companies?
Pricing Model: Identifying, evaluating, and comparing rate cards and prices can help companies gain a more comprehensive understanding of the pricing model that suits their targets, business goals, and requirements best. Suppliers may offer varying pricing models including, hourly pricing, performance-based pricing, value-based pricing, and fixed pricing. Through price benchmarking, companies can assess the various potential models, and choose the structure that suits their organization best. This leads to further confidence, trust, and understanding between the parties, and helps companies maintain improved control over their costs and expenses. Both parties can also make the necessary adjustments to accommodate for each other’s needs and foster a positive dynamic.
Appropriate Pricing: The rapid pace of change that can be witnessed worldwide and across industries recently, has given rise to more competition, higher demand, increasing innovation, and changing costs. As industries continue to grow, companies will want to expand their operations, enter new markets, and evolve along with the industry. Price benchmarking helps companies gain a comprehensive understanding of the market they are in, the average prices offered by suppliers, and the best way forward when choosing a vendor. It also helps mitigate various uncertainties, and provides a feasible and relevant view into the overall financial atmosphere, suppliers’ pricing models and approaches, and an accurate price range.
Ideal Bids and Proposals: With comprehensive insights into the average prices, common and preferred pricing models, and industry, companies can utilize this data to efficiently handle negotiations. During the supplier selection, negotiation, and contract signing process, understanding the industry, suppliers’ market, potential suppliers’ offerings, congruence of business plans and strategies, and trustworthiness is imperative to creating and maintaining a strong partnership. Price benchmarking provides companies with the information needed to enter negotiations with a clear contract management plan, clarity regarding supplier expectations and demands, and the ideal price range and price models to accept.
Price Optimization: The benchmarking process requires a detailed and in-depth study of the market, various factors impacting costs, prices, suppliers’ offerings, and needs, and potential for improvement. Understanding these factors, entering into discussions and negotiations with suppliers, and comparing rate cards also helps companies understand how they can optimize the offerings and prices being put forth by potential suppliers. With clear knowledge of their needs, companies can help suppliers optimize costs, reduce risks, improve efficiency, and in turn, optimize the prices they are being offered. Aligning business goals, creating mutually beneficial terms, and helping the supplier grow with the organization, can lead to better offerings, stronger relationships, and optimized prices.
Industry Standards: Competition, rising prices, changing regulations, emerging markets, digitization, are all crucial factors significantly impacting companies across industries, and keeping pace with these changes can be highly challenging. As companies continue to grow, understanding the industry standard and meeting it becomes increasingly crucial and challenging to achieve. With price benchmarking, and other benchmarking processes, companies can identify, evaluate, and meet or surpass the industry benchmark, and propel their growth significantly. Price benchmarking also helps companies ensure that their potential partners are meeting industry benchmarks, and will not quote high prices, or overcharge the business due to lack of awareness.
Evolving markets give rise to major challenges, significant opportunities for growth, rapidly changing trends, and the need for constant awareness, research, and data-driven decisions. SpendEdge helps companies preemptively strategize for risks and challenges, capitalize on evolving opportunities, keep pace with the transforming market, and make data-driven decisions with various relevant solutions. When choosing suppliers, finding the right partner with the ideal offerings, and optimal price range is imperative to growth, and our price benchmarking solutions help companies achieve the same. Our benchmarking experts enable companies to gain a comprehensive understanding of the industry, factors influencing suppliers and vendors, and costs or other dynamics that impact prices and offerings. Leveraging our solutions has helped many companies identify, evaluate, and select the ideal suppliers for their growth and expansion, propelling them to unparalleled success.