Pricing has long been considered many companies’ secret sauce. Companies usually don’t talk about generating higher profits based on their pricing strategy. United Parcel Service, the global package delivery and logistics provider, is an exception.
UPS (NYSE: UPS) offers a broad range of services. The company has a global presence, serving over 200 countries and territories. Their services include transportation and delivery based on their air and ground network, warehousing, ocean freight, airfreight, and customs brokerage. In 2024, they delivered 5.7 billion packages. UPS’s total revenue in 2024 was $91.1 billion.
UPS is using a pricing solution from Zilliant. UPS participated in a Zilliant webinar where their pricing transformation director talked about how they worked with Zilliant to achieve significant results.
When you think about pricing, it is easy to think of the price of items in a grocery store. In this situation, pricing optimization would consist of calculating whether lowering the price of an item by a few cents will lead to a higher number of purchases that lead to higher profits despite a lower margin. Or conversely, will raising the price by a few cents not really decrease sales by that much and thus that would increase profitability. That is pricing in a business-to-consumer scenario.
What Zilliant for UPS is business-to-business pricing. In this setting, sales representatives provide prices for various services or products to potential customers. There is often a wide variation in the price quoted for the same services by different reps. That differentiation in prices quoted and won provides the data for Zilliant to use historical data to segment services and customers, look at win rates, and provide a suggested price to sales reps.
Pascal Yammine, the CEO of Zilliant, believes pricing should be viewed as a strategic tool., He emphasized that “pricing is underused, underinvested in, and underappreciated” in B2B settings. “Pricing comes with so much complexity that companies are often just afraid to do anything with it, because getting it wrong could be catastrophic.”
“Zilliant’s Precision Pricing Platform helps customers manage and optimize pricing,” Mr. Yammine emphasized. The solution leverages historical data and AI to identify revenue growth and higher margin opportunities.
UPS’s experience suggests this is true. In an earnings call in the first quarter of 2022, Carol Tome, the CEO, stated that for medium-sized businesses, “we are leveraging best-in-class technology to enhance the experience for our customers and our sales people. We’ve moved from a slow manual pricing process to a new digital platform that we call ‘Deal Manager.’ This platform, which will be fully deployed to all U.S. SMB salespeople by the end of this month, operationalizes our data and applies pricing science to present the customer with the right price the first time. For our customers, this means they no longer need to submit cumbersome sample data just to get a quote. For our salespeople, they can close deals on the spot, making them more efficient and freeing them up to spend more time selling. And because this platform uses advanced analytics, the more we use it, the smarter it becomes. It’s a key building block toward dynamic pricing. Our Digital Access Program, or DAP, is another important SMB growth driver.”
And what was the result of this? In the fourth quarter call that year, Ms. Tome stated that DAP was a “huge success. We generated more than $2.3 billion in DAP revenue… We expect the momentum to continue and plan to generate around $3 billion in global DAP revenue in 2023. And with the launch of Deal Manager in 2022, we’ve made progress toward dynamic pricing… We are able to close deals faster and with better revenue quality. In 2022, our U.S. win rate with Deal Manager was 22 percentage points higher than the baseline.” In a CNBC interview, Ms. Tome made it clear that when she is talking about better revenue quality, she is talking about a higher win rate with lower discounting.
But Zilliant’s Mr. Yammine points out that depicting pricing as pure science can be exaggerated. Pricing is about both science and art. A sales representative might say “‘I know by market, I know my region.’ Science can’t account for everything.”
Implementing a pricing transformation is a significant achievement. In a webinar, Ryan Neal – UPS’s pricing transformation director – discussed how UPS successfully navigated this complex change. He had five large takeaways.
First, get the data right. “We had to have good enough data quality and get the right data feeds and sources of truth, to feed the machine.” Their consultant, PwC, and Zilliant could not solve all the data problems UPS had. “We got started early,” Mr. Neal said. “Data feeds the science, the flexibility, the governance.”
Secondly, expectations associated with the project needed to be managed. “If you talked to ten different stakeholders at UPS, they would probably tell you ten different things on how they would define” the minimum viable product. “Threading the needle, striking that balance, Mr. Neal continued, “on how skinny you make that MVP that still demonstrates value” was a critical challenge. But the solution still needed to be robust right out of the gate, “to keep users excited about what they have. Striking that balance has been very difficult.” He emphasized the need for constantly working with executives and stakeholders, to not force everything from day one.” It needed to be understood that value would be delivered in a phased approach.
In hindsight, the MVP they defined was too broad and it meant that they did not get to market as quickly as they otherwise could have.
Thirdly, Mr. Neal described a very thorough request for proposal process where they learned the Zilliant solution in detail. Further, they spent time learning how Zilliant could contribute to a minimally viable product. “That bled from the RFP phase to even after selecting Zilliant as our software solution and the early stages of implementation and build out.”
Fourth, Zilliant is plugged into their Salesforce CRM solution, Tableau for analytics, Docusign for electronic signatures, and their billing system. This allowed for a more seamless pricing process flow. This integration allowed for an end-to-end solution.
Finally, the project could not have succeeded without dedicated staffing. Mr. Neal worked with a “handful” of others from pricing revenue enablement, IT, and sales. For some of these internal assets, their full-time responsibilities were based on the Zilliant implementation. Having sales involved was “huge” because the end users were several thousand reps.
