This week on the podcast, Andy & Brian discuss the pros and cons of B2B companies making their pricing available in online channels.
They’re mostly aligned with the common wisdom that pricing should be transparent, but they offer 4 reasons why it may make sense to hide some prices:
1) Withholding prices gives the seller pricing power.
2) Making the customer call for price raises their commitment to complete the buying journey.
3) The “price available upon request” notice carries an aura of exclusivity and status.
4) Withholding prices selectively pushed the customer to certain items and away from others.
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Brian Beck: Welcome to Friday 15 with Master B2B. My name is Brian Beck and I’m here with Andy Hoar, my co-founder in this thought leadership and B2B e-commerce community. Andy, happy Friday.
Andy Hoar: Pricing is a topic we have a lot of conversations about and not only does it never get old, it also seems to never go away.
Brian: Yes, that’s true. And yes, constant, constant debate. And we’re going to get into that. A lot of comments this week on our LinkedIn post. But before we do that, let’s talk about some news. Andy, did you see this? Of course you saw this. Shopify stock soars 20% on very strong Q2 report and provides upbeat guidance. Andy, Shopify is bucking the trend. I saw some data just today that came in from McKinsey talking about overall investment in technology being down by 40%, likely due to challenging macroeconomic environments. And elevated interest rates they’re talking about overall but then we looked even this past week at what’s happened with the stock market and some of the big tech firms you know their stocks getting hammered Shopify is bucking the trend. And one of the things we’re seeing here is it’s about B2B it’s creeping in here. Our friends at Cleveland Research shared some data with us- some research reports – on their interpretation of what’s happening And they cited B2B, the quote from their recent release, “B2B growth accelerated sequentially to 140% year-over-year in quarter two, with online orders, B2B online orders, growing six times on a year-over-year basis.” And they cited continuous innovation, including manual payment methods, deposits at checkout. They’re rolling out and clearly focused on B2B. Andy, what’s your thought?
Andy: So to the McKinsey thing, yeah, overall spending on tech year over year has declined. It continues to increase unabated if you compare it to what it was 10 years ago. It continues to increase because it’s labor for capital substitution from Economics 101. It’s a lot less expensive to have software do something than it is to have people do it. But bucking the trend is Shopify and also e-commerce spending, which is what we’re seeing. And the reason why is because people are spending more money online. It’s pretty simple. They have to invest in infrastructure to support that ongoing increase in online spending. Shopify is definitely… making a push into B2B. It’s all over what they’re talking about publicly, et cetera. I think they realize that it’s a market that’s under-potentialized, especially on the SMB mid-market end of things.
Brian: It’s exciting to see this. And clearly, you know, at the end of the day, benefiting the B2B buyer. But let’s move into our topic today, Andy, which is all about pricing. This is a hot topic, still. We know we dealt with this in consumer years ago should B2B be fully transparent with online pricing. Apparently it’s still a burning question and you know there’s been a lot of data that we found that that implies that it should be let’s talk about some of that. So we did our State of B2B e-Commerce report. It’s just released and available on our website. But we found that in our survey of hundreds of buyers and sellers that B2B buyers are looking for price. Eighty seven percent of B2B buyers are being asked to research prices well before making a purchase. Similarly, they’re looking where? Online. 64% of B2B buyers are researching online before making a purchase. So, they’re looking for price and they’re looking online, right? So, you know, so you think about, is this a new story? The answer is “no” – price has consistently been what matters most this is some research from DC360 from about I think about four years ago and they asked the question what matters most to B2B buyers. Number one almost 70 percent said very important price. Okay, so clearly there’s a message here. And when we asked our community, we got lots of feedback on our LinkedIn poll. I love this comment here from Beth Doling, who’s that global director of marketing technology at Kimberly Clark. She says, “if you don’t show pricing, you may as well tell your customer or potential customer to go do business with your competitors”. So, clearly there’s an argument hereto show pricing and people like, you know, sort of knee jerk reaction. Pricing has got to be available. But there’s other cases, too. What are your thoughts on this, Andy?
Andy: Well, actually, what Beth said, she went on to say, in addition to this great quote, she said, “if you’re still questioning making pricing transparent to customers, either have a legal slash compliance reasoning or you have a hidden agenda.” And then she said “job protection or relationship building is not a reason in 2024 to keep pricing hidden.” I don’t know about you, but when I talk to B2B companies, that’s often what the essence of the objection is. We don’t want our competitors to see the pricing in particular, which is nonsense because you can get it anywhere, right? You can call them and get it. So I guess you make it a little easier for people to find out what they could find out anyway. And you play like a shell game. I mean, it’s called mystery pricing or secret pricing. We’re going to talk about this in a moment – There’s a counter argument here. It’s a weak one, I would argue. But somebody else actually, in one of the comments on LinkedIn, made a great point about this: People who focus on price often imply that that might be the only differentiation they actually have. So if they’re holding back on the price, that could literally be the only lever they have that separates them from anybody else. So in this sea of sameness where you’ve got all these distributors who are offering the same product, instead of offering services, value-added services, building some kind of deeper understanding of the business, et cetera, lending domain expertise. It could be that pricing in a widget-only game is the only thing they got. And I thought that’s a really good point because if that is the only thing, then you have to hold it back. But my God, if you’re doing that, there’s a bigger problem here.
Brian: Well, here’s the thing, Andy. I think this is a very subtle and complex issue. On its surface, it feels like – it’s the same thing with cars, right? When you go buy a car at a car dealership, it’s no longer about the price. You can get this full price transparency there. You can go online. You know what you should pay for the car before you go in. So how do car dealers differentiate? They differentiate on service. They differentiate on the contract. They differentiate on the maintenance. It’s not really about the price because savvy car dealers know that it’s not – the customer is going to know, if you’re dealing with sophisticated customers, what you should pay for that vehicle. So the same dynamic is here, but I think it is actually – more complex and subtle than just saying “should you know should you show all your prices or not.” I think it varies by product, and I think it varies by industry, and I think it varies by complexity of the sale. I think there’s a lot of things and so there are real I think arguments to hide quote unquote pricing.
Andy: But that’s our spectrum of high availability and low availability of pricing. It’s a shame that more B2B companies put themselves on the low availability end of things. There is a spectrum for sure. And you can find companies that fit into each one of those ends of the spectrum. The problem is too many B2B companies put themselves in the low availability end of the spectrum saying, well, we can’t possibly share this information. And before we hit this slide, one interesting side note here about pricing. It is worth noting that when you don’t show a price, you disable a whole process that a lot of B2B buyers actually have, which is they have to go get approval for the purchase of something. It’s not a problem in B2C. I don’t have to get approval to buy a shirt. But if I’m going to buy a thousand units of something, typically what B2B companies do, a lot of people bastardize the shopping cart for this. They put it in the shopping cart. Somebody has a login and they go look at it. They see it. They approve it by actually adding it and making the purchase itself. What are you supposed to do in that process if you can’t even see the price? What am I asking my boss to actually approve?
Brian: That’s a good point, Andy. But hey, by the way, as an aside, you should probably get approval for judging by the shirt you’re wearing. You probably want to have Cindy make approvals of your shirt purchases.
Andy: Well, I will say it’s always a good idea for Cindy to know what I’m wearing. I will say that 100 times out of 100.
Brian: It is a great point. One of the things I talk about in my book is about eliminating friction and making this buyer’s job easier in B2B and by hiding pricing – guess what, you’re making it harder. But I do think there’s a scale here and there are arguments to hide pricing. There was this great article that you found from this company called the Pricing Conundrum so apparently there’s a whole group that focuses on this. And they talk about why hide pricing? And there’s several arguments they make. Why would you do it? Well, think about this. Withholding prices can give the seller pricing power. If you have something that’s very compelling. And you’re not you’re not presenting the pricing online. Well, you know, they have to the second point here, call for price or inquire for the price. And when you’re doing that, it gives them more of a commitment. There’s more of a commitment to completing the buying journey. They want to know if you’ve got something really compelling and perhaps more complex and require solutioning. I think there’s an argument for that.
Andy: It assumes motivation. That’s the problem here. They make it seem like everybody’s trying to get – remember those shoes several years are called Yeezys that Adidas put out and they had a limited window of time when you could buy them. My nephew was big into this. And then we have like two hours on a certain day when they could buy it. Everybody’s trying to create this exclusivity around pricing. The problem with that is my nephew was highly motivated to get those shoes. In this scenario, I don’t think a lot of B2B buyers are highly motivated to go on a scavenger hunt to figure out what the price is for a product. For every customer willing to call you for pricing, three others find pricing online somewhere else and never call. And so I think that’s the issue. There are some people who do want to be kind of enticed and alerted into finding out like it’s a prize on the other end of the phone. But there are several others who don’t even bother with that.
Brian: That’s true. Thanks for your comment here. Jason Hein said, “The flip side is also applicable. Price available upon request can also imply you don’t have a good relationship with that supplier and you aren’t keeping that connection live.” Interesting point, Jason. Thanks for that. You know, we also got a comment from Tim Peterson on our LinkedIn. He said value adds behind secret pricing better be amazing. But in most cases, they are not. Fair enough. But hey, this last point here, guys, I think is really interesting, which is withholding pricing selectively pushes the customer to certain items and away from others. I actually think there’s a case for that because, you know, think about it, Andy. If you’re shopping for something – These are psychological games you can play. Call for price on certain items. And there must be something really special about that item, right? Why do I need to call for a price on this one? So I think there’s some interesting sort of psychological games that can happen here and motivations. We got a comment from Andy Carlson. Andy’s the chief marketing officer at Distributor Data Solutions. And Andy’s been in this industry as a practitioner for a long time. He was at Brady. He was at Antilia as a CMO. So he’s been around this. And his quote, what he said is, “earlier in my career, we were asked to test the impact of showing a price online versus call for price with the hypothesis that more people would call us, right? Because, hey, we’ve got this special product. People found, though, the experience frustrating and ended up going to competitors. I have yet to find a B2B e-commerce customer that prefers the ‘no price’ experience, regardless of the site or the company’s historical norms.” Andy, thanks for that comment. Really interesting. And I think it’s right on point. This is practically people seeing this. I think this is the age of transparency. I’ve said that before. What are your thoughts, Andy?
Andy: Well, as usual, the Andys have it on this podcast. He’s absolutely right.It assumes motivation. Yeah, there’s some truth to creating exclusivity and an allure about a particular price that assumes people want to play the damn game. And I just don’t think most people do. Now, if you’ve got a brand new product or you literally have an exclusive on a product, sure, do it. But we know that in B2B, a lot of this is just commoditized, genericized stuff that, especially for distributors, the way you win this is by differentiating based on service and accommodations other than price. And when you get into this price game, almost always it goes right to the bottom, whether you’re playing the game or not. So you might as well find a better way to differentiate yourself other than just on price.
Brian: What about this thing called price shrouding? This is really interesting. So Stubhub – which all of you know probably- is the place you can buy tickets for events and things. They ran an experiment in which they compared a transparent pricing system to a system in which they showed the full base price on the main search page and the full price only at checkout so they added something. So they had historically only they’d shown complete transparency. That was their original mission. They wanted to show everything. But this price shrouding notion says, hey, I’m going to give you a price, and then I’m going to add some things to the end. But this is what they found. StubHub users who weren’t shown fees until checkout spent about 21% more on tickets and were 14% more likely to complete a purchase compared to those who saw the total cost of the ticket up front, and they dropped their transparent pricing. These guys are sophisticated e-commerce players. But what happened next? Can this work? So but then, oh, right. “StubHub tricks people with bait and switch pricing, DC attorney alleges.” So, yeah, OK, so fine. But I don’t know if they won that case. But anyhow, it’s interesting to see. So there is some sort of price fixing or what have you or transparency stuff that the government’s paying attention to. But that’s an interesting case, Andy, right?
Andy: Well, they leaned into this idea. Their argument is that when we are competing against everybody else, show the lowest possible price. And then bait people into completing the purchase. But once they’re invested, once you get them to click on screens, enter information, yes, it becomes a sunk cost. And the psychology says that once people invest time and effort in something, the more likely to complete it. This is an example of that, but I’m not sure price is the way to do it. You run a big risk. And in particular in B2B, you run really big risks of alienating customers. I think with StubHub, these are things that people drive a lot of passion out of attending events, seeing bands, sports events, et cetera. They’re willing to invest the time and it’s their personal money. I don’t know about this environment where people are buying stuff for work and it is other people’s money. I don’t think they care as much about this. They just don’t want anybody jerking their chain on the pricing. And this is, kind of like a mystery reveal. It doesn’t really work with B2B buyers in my experience.
Brian: Where I think it does work, though, is if you’re a distributor and you have certain advantages that you want to provide to a company who’s buying in bulk from you or works and signs up for an account with you, things like that, where perhaps you can achieve better pricing. And you say that through your e-commerce experience. You show your pricing, but at the end of the day, can someone get better pricing from you? Yeah, sure. If they’re doing a greater level of business with you and are a strategic partner or client.
Andy: But then you can be transparent about that. You buy more, you get a better price. David Gordon actually made this point on LinkedIn about it. He’s like, well, there’s a question about what price you should list. Is it the list price? Is the MSRP, which many of you don’t have? Is it the distributor cost? Do you add a distributor margin? It begs the question, what margin? Yeah, he’s right about this. These are all questions that need to be answered, but they’re all, I think, sadly coming from the perspective of the seller. And yet at the end of the day, we know it’s a buyer’s market and it’s a buyer’s experience and it’s a buyer who’s going to determine whether you actually sell the product or not. So David’s right about making sure that you have these kinds of conversations internally, but in terms of what you do and how you go to market and what you show people online, it better be driven by what buyers want.
Brian: Agreed.
Andy: And then to the point earlier, buyers always want to see a price. I’ve never met a buyer who’s like, yeah, don’t show me a price. Let me try and earn it through some time investment.
Brian: But we asked our audience about this on LinkedIn – should B2B companies be fully transparent in listing their prices online? Oh, guess what won? We got a lot of votes on this one. 54% said fully transparent. 32% said partially transparent. Only 14% said non-transparent. So I think the industry sort of violently agrees just in that kind of partially transparent bucket, 32%. What does that mean? So I think there’s a balance here, Andy. I think there may be some cases, but they’re becoming really edge cases. And to your point earlier, leaning into more transparency than less is important, we think, to B2B companies.
Andy: It’s the B2B buyer who’s driving this and to a person, they want more transparency. I mean, I just never, ever talked to a B2B buyer who said, yeah, please don’t show all the pricing information to me. I’d rather lord it over time. So if you just judge it based on that alone, it’s a settled argument.
Brian: You’ve got a lot of new players out there folks like oh I don’t know – Amazon that are showing pricing fully transparently, This ship has sailed in my view.
