As you move into 2021, it’s essential to consider various areas of your business you can improve. An important part of this reflection process is looking for new opportunities.
Ask yourself a question: how often did you reflect on your pricing this year?
If you didn’t reflect on it at all, you probably underperformed. The good news is that even small improvements in your pricing strategy will pay dividends quickly.
B2B Pricing Strategies
There are three common B2B pricing strategies:
- value-based pricing
- cost-plus pricing
- competitor-based pricing
To customers, price is an evaluation of how much they value what you are selling. Unfortunately, some business owners forget about the customers. Instead, people build a pricing strategy based on internal reasons, intuition, or adopting current market prices.
Here’s the newsflash: customers don’t care how much it costs you to outperform your competitors. They care how much value they get at a particular price.
Value-based pricing is probably the most powerful strategy as it forces you to look at your customers first to build the perfect pricing strategy for your B2B business.
Cost-plus pricing is perhaps the simplest method of determining the price of your product. The idea behind this strategy is to sell your product for more than you spent making it. Some companies calculate how much it costs for them to produce the product, determine their desired profit margin out of thin air, and slap the two numbers together. The main disadvantage of this strategy is that it doesn’t involve market research. Doing no research, you have little to no data on your customer’s perceived value of the product. The cost-plus pricing strategy also disregards the customer’s willingness to pay.
Competition-based pricing is a strategy that involves determining your prices in relation to the competitors’ prices. Such an approach focuses mainly on what competitors are doing but disregards customer value. If you have just one or two direct competitors you can probably try to implement a reasonable competitor-based pricing strategy. However simply copying your competitors’ prices leads to a lot of wrong prices, lost profits, and missed opportunities.
Tips to help you set the right price
Include a free trial period
It’s a quite typical practice for B2B products to let users try a product before buying it. You need to plan how your customer journey will look like and include a free trial. In most cases, it’s a 7-, 21- or 30-day period. Make sure your users get an offer to renew and subscribe to a full pricing package before a free trial expires.
Use AI to build strategy
When determining the right pricing strategy for B2B products, leveraging AI and machine learning can provide valuable insights by analyzing large datasets. AI algorithms can identify trends, customer preferences, and willingness to pay. This enables businesses to optimize their pricing for different customer segments. AI can also help uncover opportunities, such as gaining early insight into emerging ingredient trends in beauty and personal care industry. AI can analyze large amounts of unstructured data from various sources like social media, reviews, forums, and search trends to identify rising ingredients, formulations, or compounds that are gaining popularity and engagement among consumers and industry experts before they become mainstream.
Essentially, B2B companies can develop data-backed pricing strategies that maximize revenue while providing fair value to customers. In today’s data-rich landscape, AI is an invaluable tool for pricing strategists to make informed decisions.
Employ a CRM Software
CRM Software with pricing management features can help streamline pricing in B2B transactions. With a CRM system, you can analyze customer data, monitor purchasing behaviors, and pinpoint pricing strategies that match customer preferences and market trends. However, before diving into pricing strategies, it’s essential to clean your CRM data. This can ensure that your decisions are based on accurate information, minimizing the impact of any inconsistencies or outliers. By taking a data-driven approach, you can fine-tune pricing decisions and enhance profitability in the B2B sector.
Share bonuses
Everybody loves receiving gifts. That’s why it makes sense to surprise your clients with bonuses and fights once they make a purchase. Bonuses may include ebooks or access to limited-edition features. Not only does it make the customers more loyal, but it also brings additional value to your product. Such a gesture makes customers feel appreciated and worthwhile.
Experiment
A theory is good but it won’t bring you results. To succeed in what you’re doing, you need to experiment and keep your mind open. Before you find the right price for your product, you will have to test various methods and price points, analyze, and try again.
Top B2B pricing strategy mistakes
Set it and forget it. Don’t treat your pricing strategy as an afterthought. It is the process that must be continually tested. To determine the right price that appeals to your customers, you should experiment with product prices. A/B tests may allow you to evaluate the performance of multiple strategies to understand what performs best.
Pricing is based on the wrong criteria. Make sure that your customers are paying for your product according to the benefits they receive from it. It means that your pricing strategy should be based on the value metrics your customers care about. For example, CRMs such as Salesforce set the price along the value metric of users – the more people use the CRM, the higher the price. This benefit is what justifies charging for each additional user.
Providing too many or too few pricing options. You should strive to simplify your pricing page in a way that balances making your customer informed and making the information about the pricing transparent and easy to understand. Some businesses provide too many pricing options, while others provide too few. In both cases, companies make a huge mistake. The correct amount of pricing tiers for your business will align with your unique buyer personas. The solution is quite simple – try to realign the number of pricing options. Ideally, you need one tier per pricing persona.
