For decades, airlines have successfully used advanced pricing algorithms to optimize prices and grow margins. In that same time, many B2B companies have seen their gross margins decline or even disappear in many sectors.
Can This Same Advanced Pricing Approach Help Distributors And Manufacturers Reverse The Trend And Dramatically Grow Profitability?
Team Evolutionary Pricing
Darren Taylor, Senior Vice President of Digital at FleetPride
Kristin DeLoach, Senior Director of eCommerce and Digital Marketing at Kimball International
Team Revolutionary Pricing
Enrico Sieni, Vice President, Pricing & Analytics at MSC Industrial Supply
John Bruno, Vice President of Product Marketing at PROS
KEY TAKEAWAYS
Price transparency should be based on the value you bring to your customers: John Bruno is certainly in favor of transparent pricing, but thinks the decision has already been made for companies. “It’s not up to you – the market is already there.” And because B2B customer experience in boils down to how efficient the purchase process is – and how confident your customers are about buying online – transparent pricing is key. But Darren Taylor disagreed somewhat, saying “Don’t start by putting your pricing online, start by giving value to your customer.” You should first consider what your customer values, where pricing fits into that, and then make pricing transparency decisions from there, because it’ll be different for reach company.
The decision to make prices more transparent has far-reach effects: Enrico Sieni stressed that making customers log in to see pricing drives conversion way down. And while companies think about the higher margins they’ll receive from hiding prices, they don’t think enough about all of the lost sales from people abandoning the site. Kristin DeLoach added that many companies don’t consider all of the benefits of making someone log in, including the more personalized site experience you can provide once you know who the visitor is.
Even in a dynamically priced world, contract pricing is still valuable: Contracts aren’t just about prices, they’re also about services provided and guarantees of uptime and more. Plus, they help companies manage their budget and spending so they’re not constantly adjusting those based on the prices they happen to find on a given day. Contenders on both sides of the debate made the point that even in a dynamic pricing world, contract pricing still matters.
The biggest challenge to managing price is that price matters to just about everyone. Andy Hoar agreed with all the contenders who said something about ensuring you understand the value you bring to your customers, but ultimately, he said, “you can’t avoid price.” If none of your competitors show price, you might be OK – until they decide to be transparent. He added that no matter how well you understand your customers, if it becomes clear that your pricing is not competitive, it’s a deal breaker and you’ll lose the customer.
Real-time monitoring is great, but you’re probably not considering everything that that approach entails: DeLoach said that while competitor price monitoring is important, the real question is around what “real time” means to your company. Realistically, how quickly are you going to react to price changes in the market. “And in my experience, doing that in real-time takes a lot of resources that would be better deployed elsewhere.” Taylor added that you need to consider the dynamics in your particular industry. Airlines require actual real-time competitor pricing and the ability to make changes – in real time – to adapt to those changes. But most industries aren’t like that.
Dynamic pricing and static pricing aren’t the only two options: While Siene said that he believes active re-pricing is needed across most industries, it’s a fallacy to say that the only options are the two extremes (constant dynamic pricing and fully static pricing). He said that the balance is testing pricing for customer willingness to pay, while at the same not not eroding customer trust. Bruno suggested that companies A/B test everything else in eCommerce, and wondered why they aren’t doing more to test pricing. Though he may have answered his own question when he said, “The only time customers question pricing is when you get it wrong.”