Pricing is underprioritised in B2B

Pricing should be a strategic discipline. Still, many B2B companies haven’t assigned a single person fully dedicated to it. Many still struggle with oversimplified customer segmentation, lack of cost transparency, and individual and unstructured pricing.

All of which silently erode margins.

Even a 0.5% improvement in profit margin translates into big numbers when your annual revenue is 1 billion DKK. And the truth is – most B2B companies can achieve that.

A group of companies got valuable insights from pricing experts at our event last week. And some of the key takeaways include pistols, cost vs. value, and a slightly modified quote from Star Wars.

Make sure not to miss out on upcoming events, news, and insights.

Pistol pricing 

Most discounts in B2B companies are given right below the point where the salesperson must ask their manager for permission. That’s what Nicolaj Broby Eckert from Simon-Kucher calls pistol pricing – and it has nothing to do with the customer or the perception of value.

And “any idiot can lower the price to become more competitive.”

It’s a huge profit killer not to have a better pricing strategy than shooting from the hip like Lucky Luke. You need to talk about value drivers, pricing models, product categories, and digitalisation to find your pricing strategy.

B2B salespeople must have a million price points in their heads across products, segments, discounts, etc. It’s not a fair situation to put them in – and also expect them to be pricing managers.

Values

Price = value.

But too many B2B companies are trying to calculate the right price based on cost and competition. Pricing is a powerful lever for shaping customer perceptions of value, improving profitability, and ensuring long-term success.

The exact number is a small part of pricing. A lot of the work is analysing your customers, market, and the values of the product and company. According to Patrick Borup, B2B Pricing Manager at Linde Gas, B2B companies almost only talk about functional values such as performance or economics – and not abstract values as shown in the Value Pyramid from Harvard Business Review.

You need to research and understand your customers to understand the value of your products.

The force of data 

If you are a movie aficionado like Peter Bak Torjusen, Client Director at IMPACT Commerce, you may know the Star Wars quote he used in his presentation. But as you can see below, he altered it a bit to become a Pricing Master.

The point being that the right price is crucial for your business and data is your best friend when you have to find the price.

With help from IMPACT and some prior analysis your B2B pricing can be digitalised and visualised, so both sellers, buyers, category managers, and management get: