A Practical Guide to B2B Pricing
Ian Tidswell shares a guide on B2B price guidance, why it’s important, and what type of price guidance to give.
(Sorry, this one’s a bit long. It’s also a key to superior B2B pricing)
Providing high-quality price guidance to your sales teams as they negotiate with customers can result in measurable profit increases. It really should be a core process.
However, I’ve rarely seen clear quality-price guidance. Here are some key questions to ask:
- Why is price guidance important?
When your company hires sales reps, how important are Excel skills? Do you test them for data-driven insights? I didn’t think so. Yet somehow pushing a pricing dashboard at them is going to get them to the optimal price. I think that’s misguided: better to give them simple guidance on prices that aligns with your strategic goals, backed up by robust approval processes for when the (inevitable) exceptions occur.
Of course, an alternative approach is to have pricing decisions made by a ‘deal desk’. That’s a perfectly valid approach in many cases, although that sales process will feel very different.
- What type of price guidance to give?
Using the price waterfall concept, there are two basic options:
- Guidance on individual price adjustments, or
- Guidance on specific price points.
Price point based management almost always the better option when you have many products, and specifically the Pocket Price point. Trying to manage individual adjustments – like discounts and rebates – is too complex. They can be managed as part of annual contract or campaign processes. You just need to make them fit within the price guidance.
Key points include:
- The price corridor
- The price realization score
- Pricing segmentation
Read the full article, Five steps to effective B2B price guidance, on LinkedIn.