B2B pricing strategy in a tight economy

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The business economy has taken a severe hit in recent times. When a huge ship named Ever Given ran aground in the Suez Canal in Egypt, it had repercussions around the world. And as we try to come out of the pandemic, other serious supply chain issues have arisen.

In the face of such volatility and unpredictability in the economy, corporate profits are reduced. But what can B2B companies do about it?

When profitability suffers, the priority is to reduce the costs of the business. The Lean Process Improvement model of ensuring that all tasks and workflows are efficient and effective can have lasting positive effects on bottom lines.

Businesses may also consider outsourcing functions such as IT, payroll, and even manufacturing. Your organization may never have imagined that other raw material suppliers, contractors and temporary workers are able to bring instant skills to the workplace for less.

But cost reductions can only take your business to a point. To maintain profitability, companies must also take pricing action.

There are different approaches to increasing prices, but increases should always be implemented with care and in a competitive manner.

Four ways to strategically increase prices

Every pricing initiative should begin with an understanding of the business growth drivers and important sources of volume. Making changes that compromise them is bad business.

It is also necessary to monitor market participants well, as competition and differential value set the limits on pricing. Improving the differential value of offers allows Easier so that customers pay more.

At the heart of business strategy is segmentation, based on a solid understanding of customer performance needs, the buying process and criteria. Do they want to buy directly or through a distributor, and where are there price sensitivities?

Having this information makes it easy to identify the least profitable SKUs and sell them through alternative channels such as e-commerce. Then you can be more aggressive with pricing in segments where there are no clear substitutes.

Additionally, value propositions need to be refined for each target segment. Are the company’s offerings helping customers reduce costs or increase revenue? Find your unique selling point and amplify it.

Beyond the outline of business strategy, let’s talk about specific ways you can increase prices without sending your customers packing.

1. Get creative with pricing models

Think unique: Products, services, and parts can be categorized based on their uniqueness to your customer.

  • Mark custom products and parts, while keeping items such as nuts, bolts, and pipes at a lower price to avoid substitution.
  • Create “Good”, “Better” and “Best” products for entry-level, target-level and presentation products; it allows pricing flexibility.
  • Provide low-cost offers with higher margins, such as own-brand items or insourced entry-level products, which have a place in the product line.

Think about the grouping: Items that are typically purchased together can be grouped together into an assembly or scatter which speeds up further processing.

  • Parts used for routine maintenance, including consumables, lend themselves well to grouping. Imagine the convenience of a gasket replacement kit that saves time and trips to the hardware store.
  • The price of the lots may be slightly less than the sum of the parts, or more if there are efficiencies.

Think about the timing:

  • If an offer is late in its lifecycle and sales are declining, customers can be migrated to SKUs with better margins.
  • Take advantage of price elasticity when switching costs are high or when there is a high degree of customization.

2. Adjust the definition of your product

There are several tactics to redefine your product that may work depending on the industry you are in.

  • Add a valuable service component, such as a facility or vendor-managed inventory to a physical product.
  • Mark and produce delivery or maintenance contracts for better price differentiation.
  • Make simple changes to product packaging, including color coding on boxes or offering quantities of liquids in bags, to provide price adjustment possibilities.
  • Change the pricing structure with a different unit of measure, for example, billing by activity such as hours flown, gallons pumped, or number of students trained.
  • Consider when renting versus outright buying makes sense: industrial customers often prefer to rent versus buy, while government customers may have easier access to capital budgets; Subscription models are popular in software and can also be used for consumables or rental equipment, and the addition of automatic renewals makes the relationship even stickier.
  • Use fixed and variable price variants with the same product: Some customers will prefer a monthly plan with a variable usage fee to a higher plan with a capped variable.

3. Be competitive on value

Many companies are reluctant to communicate about quality and value, but it’s worth being explicit about a product’s price position in the market. Don’t let prospects guess; if you have a unique or premium product, saying so will help you justify a higher price.

Investigate customer operations in detail and determine what end benefit your product contributes to. Then price it accordingly while being highly collaborative around innovation and product development. You can even stimulate new demand with a product and price comparison tool on your website.

4. Play the terms of service to your advantage

It may seem trivial, but some companies reap huge benefits by changing the terms of use of their various products and customers.

  • Change the pricing context by marking freight and urgent orders, or apply a surcharge for small orders.
  • Engage new customers with basic service, then offer a self-service upsell for more features.
  • Change the thresholds and target levels for volume discounts and discounts to improve margins.
  • Enforce surtax rules in contracts for fuel, shipping charges, or impact on commodity prices.
  • Optimize the price for high usage / high utility SKUs.

Even if price increases seem risky, your business can claim a significant share of the portfolio by carefully examining your industry, product, and how best to play price to your advantage.

How to implement B2B price increases wisely

Even if you think you have found the magic pricing strategy for your business, it is recommended that you create a cross-functional pricing team that includes sales, marketing, finance, and operations before implementing any increases.

Take a calculated approach to adjustments, re-examining prices line by line, keeping these elements in mind:

  • SKUs that haven’t seen increases recently may be priced too low; therefore, there will be less resistance to increases.
  • Always provide product and service options to retain price-sensitive customers. The cheaper and simpler “good” versions work well to retain customers, as do the low cost offers available in limited quantities.

When communicating price increases, explain your decision. Please feel free to mention how long ago the prices have been adjusted, or to point out how much the customer has increased their own selling prices.

It’s also a good idea to report pending price increases directly to important customers. The announcement of upcoming price movements in the trade press is not collusion, and it gives competitors a chance to follow suit, thus increasing the profitability of the industry at all levels.

Tying it all together

It is difficult to hold up a conventional price increase without doing proper market research and carefully considering the pricing strategy. Effective pricing begins with market segmentation, based on customer needs. If the issues are understood, an offering that meets the needs of the segment can be designed and priced according to the value it brings.

Adding service components or innovative pricing models such as subscriptions or activity-based pricing can add differentiation. No matter how a business comes up with a price, it is important to communicate the value of each product and service.

More resources on the B2B pricing strategy

Seven tips for optimally organizing your pricing page for conversions

Agency price trends for paid search services

13 Psychological Pricing Hacks To Increase Sales [Infographic]


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