Mr. Winemiller: The company was founded in 1985, and during the 1990s developed forecasting and optimization systems for the passenger airline industry. That drove incredible increases in revenue and profits. Then the company took those same scientific capabilities, and built them into a common-code platform for pricing and revenue optimization that could be used in other industries. We targeted manufacturing and distribution, and now we have customers in all of those industries using our advanced real-time, integrated science pricing optimization to maximize margins and profitability.
TWST: Give us a more specific sense of what PROS does. What are some of your major products and services?
Mr. Winemiller: It starts with the advanced science capabilities of determining the pocket price and pocket margin for every product and every customer. Then we apply advanced scientific analytics to segment our customers' markets, determine their customers' willingness to pay, and profile those customers based on service and price sensitivity. Then most importantly, we make all the information that is needed and relevant, so it's available at the time a price is quoted or the sales transaction is actually consummated. Companies typically use spreadsheets to develop price lists and then allow sales people to discount off of those price lists without any of the information needed to quote an optimized price. We take information from ERP, SCM, CRM, data warehouses and market indexes, and bring it into our PROS pricing database. We apply our science to calculate pocket price, pocket margin, willingness to pay, scientific segments, customer profiles and win-loss ratios. We track the velocity of demand; we calculate the replacement cost for a product being sold, and we generate an optimized price. PROS software makes all of that information available to those setting prices or sales reps in real time.
Cost-plus and match-the-competition pricing practices are destructive, and the worst possible approaches a company could use. Spreadsheets are inadequate as the tool to generate prices because they are totally disconnected from the dynamic realities of the marketplace. One of the reasons we can generate such high return on investment is because current pricing practices are broken. We focus on providing very fast time to value, the highest return on investment of any technology investment our customers ever make, lowest total cost of ownership and total customer satisfaction by developing long-term partnerships. We have customers that have been partners with us for over 20 years. Pricing excellence and optimized pricing is a journey, it's not a destination because the market is always changing. There are always dynamic variables and attributes about the market that you must take into account when setting list prices for unique market segments or geographies, or for sales reps quoting a price. We have developed the science and the pricing products, Scientific Analytics, Price Optimizer and Deal Optimizer, to allow a company to optimize a price at the time that it's actually being used in a sales transaction. That's why the ROI is so high. Typically we go in and can easily find $3 million to $5 million of price-based profit leaks in the first 30 days of an implementation. And people ask, "How can you do this?" Well, many companies' pricing practices are busted. Their current practices are so destructive that it's not hard to do. We've had customers find $20 million of price-based profit leaks using PROS Scientific Analytics in the first 30 days of deployment.
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