Over 62% of enterprise B2B companies expect eCommerce to be their dominant sales channel in the next five years. And with that, more than 50% of their business will transact with little or no help from a sales professional. In this new environment of self-serve business transactions, delivering the right price, every time, is critical. Yet most B2B companies have maintained list pricing as part of their core product pricing strategy, which
falls short of delivering the right price in the eCommerce world. List prices are reference points for beginning sales negotiations, primarily derived in either of two ways: As B2B enterprises rely more on eCommerce and omni-channel sales strategies, list pricing strategies fall short. But why? In the self-serve eCommerce channel, the negotiation aspect of the sale is taken away. Remember, a key principle of a list product pricing strategy is to set great
prices to begin a negotiation. To make a quick transition to capturing the online market, many businesses make the mistake of using one of their catalog prices for their online product catalog. The savvy buyer is very quickly turned away, since it is not in the ballpark of a realistic price. Costs are fluctuating at a higher rate than ever beforeCost fluctuations mean higher end-consumer prices. One of the reasons for fluctuations is changing business models. Fewer buyers are willing to get locked into the terms of a three-year contract, or all-you-can-eat licenses. The preference is to reduce the risk of the purchase by leveraging subscriptions (pay as you go) to achieve better alignment to value received. Traditional list pricing practices of biannual and even quarterly mass price updates are simply not frequent enough; these prices are out of date the day after publishing. High non-negotiated list prices imply a direct loss of businessImplied loss of business can curtail market share growth of new customers and business. The negative impact is compounded by the inability to react to the market fast enough. This affects the buyer’s perception of the vendor’s ability to do business, causing a loss in trust and driving them to look for other vendors. How can B2B companies leverage a smart dynamic pricing strategy as a driving factor for omni-channel success? In order to stay ahead, companies will need to move away from list pricing and adopt different product pricing strategies. Ensure Prices are Tailored and Non-NegotiableEnsure that prices are tailored for every unique customer interaction with the important assumption that no negotiation will take place. This will serve today’s modern buyers, who are choosing self-serve channels because they want the fastest way to order their products and services. How? Pre-calculating the near-infinite number of potential interactions is not the answer. It is a waste of expensive time and storage, since a high percentage of these generated prices will never be used. Let’s explore a practical approach for a dynamic pricing strategy. The foundation is established by setting up pricing rules based on three main inputs of your dynamic pricing strategy: Value to BuyerUse a price optimization algorithm to ensure the value of the product to the buyer has been accurately captured.
Competitive LandscapeSet up rules to ensure you are within relative range to your competition.
Profitability Set up rules to ensure you are maintaining the expected profitability of your product lines.
Establish processes to measure and learnLong-term dynamic pricing success requires an iterative process to measure, learn and adjust. For example, there are going to be situations where competition is undercutting your revenue and profitability. Monitoring abandoned carts, market trends and relationships are important to ensure that you are relaxing or tightening your rules on a periodic basis. This iterative approach will help your business stay close to the changing needs of buyers. Deliver across all sales channelsDelivering dynamic pricing strategies across all sales channels is key. Ensure that your organization invests in tools that can provide the capabilities of a real-time pricing engine. This further ensures that you are not only providing the right price to your eCommerce channel, but that these prices are harmonized across all your sales channels. What is the Smartest Price Strategy for You?The right solution always starts with defining an end goal and a strategy to feed that goal. If your long-term vision includes driving share through eCommerce, consider whether you're taking the right steps today to get there. Start small, e.g. focus on your most volatile products, where end consumers are more accepting of price fluctuations. Create a tailored pricing structure, such as the one mentioned above for one of your product lines. Measure the success rates, learn from the outcomes, iterate and expand! Potential customers are trolling your website as you read this article, but are they buying from you? PROS Control and Dynamic PricingPotential customers are trolling your website as you read this article, but are they buying from you? Learn more about the benefits of PROS dynamic pricing in this video: Why prices should reflect only the cost of making a product or delivering a service?The price charged to customers for a good or service must exceed the firm's cost to deliver so as to enable the firm to achieve the goal of making a profit. In making the strategic pricing decision, the management should set prices that attract customers compared to alternative products.
What does the price of a product or service reflect?Review prices frequently to assure that they reflect the dynamics of cost, market demand, response to the competition, and profit objectives. Prices must be established to assure sales.
Should prices reflect value?No. Price is the amount asked. Value will be reflected by the amount PAID.
Do you believe that prices should reflect the value that consumers are willing to pay or should prices primarily reflect the cost involved in making a product or service?Answer and Explanation: I believe that prices should reflect the value that consumers are willing to pay for a given product or service. This is because the sole aim for many business owners/entrepreneurs is to make profit which is made as a result of sales he makes.
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