Readers of this blog know well that at Premoneo we firmly believe that there is no golden strategy or even ‘evergreen’ rules when it comes to pricing.
This is true both in Business-to-consumer and in Business-to-Business markets where we have often witnessed managers who, after a change of personnel, were convinced to replicate the same pricing strategies that had been successful in their previous jobs.
B2B, pricing starting from data
The only way we know, and which remains valid regardless of the context, concerns the preliminary phase. Analysing the available historical data and possibly planning a collection of missing data in order to start a price optimisation path by gathering initial evidence and making assumptions. Once a strategy has been identified, the best way to proceed is to set up A/B tests in order to be able to construct the most suitable tactic for each individual case. This is in fact the only solution that can provide real feedback on the goodness of a strategy.
B2B pricing, 6 mistakes
Instead, today we will analyse six typical mistakes that companies operating in B2B markets make when it comes to pricing.
- B2B – Starting with incomplete data
Companies often use the outlined personas models to fine-tune product functionalities in order to sell more effectively. However, these two interlocutors often do not coincide. This is why we suggest developing new personas for pricing, which take into account characteristics that are useful for identifying the potential customer’s willingness to pay. This information will enable you to develop multiple levels of pricing, differentiated by customer characteristics and capable of attracting different types of buyers interested in your offer.
- B2B – Do not experiment before choosing a strategy
A/B testing allows you to test the performance of multiple strategies to see which aspects of each perform best. This can help the company understand the optimal mix of product features and pricing that will attract more customers, allowing you to optimise conversion rates is.
- B2B – Set a strategy and carve it in stone
Building a pricing strategy is a long and arduous journey. This does not entitle you to think that you can forget about it once you have defined your pricing. Price can be the element that destroys a good product in the market, so pricing is a process that must be continuously tested and re-evaluated to determine the right combination of packages and prices that will continue to attract your customers.
- B2B – Linking pricing to the wrong metric
In B2B markets, you often find yourself selling the same product or service to companies in the same business, with very different sizes. This is why it is crucial to link the price to a metric that allows you to correctly size the potential customer. For example, if you sell management software, it will not always be correct to ‘target’ customers by measuring their turnover, because from market to market the business logic will change, and consequently the weight of turnover in relation to the real size of the company.
- B2B – Confusing the customer
Every company should try to simplify its pricing offerings in order to balance customer information with transparency and ease of understanding. Some companies make the mistake of providing too many price levels, creating justified confusion in the eyes of the buyer. Similarly, a single product price is inadvisable, as it leaves no room for customers to upgrade and captures revenue at only one point on the demand curve.
- B2B – Applying unjustified or ill-judged discounts
While it can be very useful to offer discounts for long-term contracts paid in advance and increase discounts as the contract term increases, excessive use of discount leverage is inadvisable. This practice sets a precedent for your customers to get used to. You condition your customers to expect discounts and this conditioning is very difficult to undo.
B2B, what is your company’s pricing optimisation level?
Pricing as the process of price management, definition and optimisation, is a strategic activity for the company, with a high direct impact on revenues and commercial performance.
In a B2B market, as in a B2C one, establishing the right price at which to market a good or service is a complex process, in which it is necessary to take into account a large number of variables, not all of which are under the control of the company itself. Premoneo offers, in a single solution, a product capable of calculating pricing at any time to optimise your company’s objectives, considering factors such as production/purchase costs, competitor prices, seasonality, willingness to pay and much more, allowing you to maximise profit margins.
Want to calculate your company’s Pricing Optimization Score? Answer here some questions on how pricing is defined today here
