When you first considered your business’s pricing strategy, you most likely adhered to industry standards, thinking if you varied too much from your competitors you’d end up on the losing end of the deal. After all, “they” (your competitors) must know what they’re doing, right?
According to global management consultants at Bain and Company, accepting prevailing prices in the market is a common myth most B2B businesses fall prey to. Plus, businesses feel constrained when setting prices because they don’t want to risk losing customers or keep their sales representatives from closing deals.
Fortunately, pricing isn’t always the biggest concern for prospective B2B customers. High quality, reliable delivery, and excellent support are just some of the requirements that customers value over pricing. Here are 10 things to remember when pricing your product or service:
1. What’s your perceived value?
Companies will pay higher prices for things that have a high-perceived value and may be hard to get or are limited in supply.
2. Don’t rely on a competitive comparison
Your customers may not be exactly who your competitor’s customers are, so you can’t always go by another business’s prices.
3. Test different strategies and price points
Testing can help you determine what works for your business. Try these strategies:
- Cost plus markup focuses on your costs and then determines a predictable profit margin.
- Cost plus perceived value takes into account your costs and then adjusts the markup based on a perception of value.
- Premium pricing is for products or services with a unique advantage.
- Psychological pricing is based on factors such as perception of product quality, popular price points, and what the consumer perceives to be a fair value.
- Economy pricing demands your costs of marketing and any manufacturing are kept at a minimum.
4. Pricing should be fluid
Don’t be afraid to let your pricing change with market trends. Once you find a formula that works, you can’t just sit back and watch the profits roll in. Keep testing with a mix of offerings and different price points.
5. Not all your customers are the same
They won’t all want the same services or products. Develop different tiers to appeal to different customers so they have the option of upgrading.
6. Prevent decision fatigue and analysis paralysis
While offering several tiers is a smart idea, don’t overwhelm your customers with too many choices.
7. Don’t discount without a good reason
Too many B2B businesses discount low-volume customers or offer discounts to ensure renewals. Once customers frequently get a discount, they expect it every time. Good reasons to discount include long-term commitments or cash paid up front.
8. Watch your sales reps
Make sure sales reps don’t price too low just to meet internal goals or bonus levels.
9. List prices matter!
They’re a signal to prospects and customers that your business is a viable option and that you’re in sync with current market trends.
10. Today’s B2B customers are savvy and well-informed
Thanks to the internet, they know more than ever about your products, your services, and your competition. Being upfront about pricing is just one part of the sales process. Demonstrating your expertise and value will help customers feel comfortable about giving you their business.