It’s hard to believe but around 80% B2B eCommerce organizations feel their pricing strategy needs improvement.
At first we could barely believe but that’s true. Although an increase in prices of only 1 percent may lead to a rise in profit of 11 percent, many B2B companies certainly do not prioritise their pricing strategies.
Any guesses? Well, the intricacy of the process, although it should not. Ineffective pricing implies that your firm risks loss of income and reduced consumer satisfaction.
If you realise your B2B company needs a stronger pricing plan and you’re not sure where to start.then you have landed in the right place.
In this article, we’ll be discussing the fundamentals of B2B eCommerce pricing, the best strategies you can employ and the pricing mistakes you must avoid in order to stay ahead in this competitive market.
So without any further ado, let’s begin.
B2B eCommerce pricing : An overview
B2B pricing is the practise of determining prices for products or services in order to advertise them and to sell them to other companies and not to consumers directly.
Pricing your items correctly is essential for any organisation. But how can you know whether your pricing represents their value and demand correctly? You leave money on the table at too low pricing; you get too high a price and you lose customers.
The optimum pricing depends on the goods, the consumer and the market. Successful B2B eCommerce enterprises are continuously altering their price strategies for maximising customer and product profit and while offering numerous eCommerce payment gates.
However, if you want to stand out among your competitors, determining the right pricing strategy for your B2B eCommerce business is essential.
First things first: what’s this new term pricing strategy? In simple words, it’s a method to determine the price of all your products/ services.
Primarily, there are 3 pricing strategies used in the B2B industry
We’ll start with the most complicated of the three, but it’s also considered the greatest choice – when firms can do it efficiently.
Worth based pricing refers to your product’s actual and perceived value. This worth will rely on a number of elements, including the customer segment, competition price and industry reputation.
For example – a man is about to buy a new vehicle. When he goes to the dealership, two alternatives are shown.
The first option, a used car, five years old, needs some maintenance, but the driving condition is spectacular. The pricing is a fantastic deal.
Next, a fresh new sports vehicle convertible. It costs more than a decent down payment on a brand new luxury apartment, but it offers cutting-edge features
What do you think? Which option will he go for?
It depends, of course. In order to get the answer, you need to ask a lot of questions about who this individual is, how much money he has and about what he cares about.
This is the fundamental basis of value pricing.
Things become a little more difficult when this pricing strategy is applied. A value-driven pricing strategy needs substantial research into your target customers and market environment in order to determine the true and perceived merits of your product.
You would then apply a value-based pricing to your offerings with a data-driven methodology. But this technique may be quite complex and always somewhat subjective even with evidence to back your judgement.
The correct value-based price point is determined by experience and industry expertise.
Competitive pricing strips out customer value and concentrates only on other rivals’ price on the market.
Fundamentally, competitive pricing is like having the highest to the shortest classroom of primary school kids. The tallest children are in the forefront simply because they are tall, which is great on the surface because the line-up is easy to comprehend and is straightforward.
But it doesn’t tell you a lot about every kid, not even what their actual height is.
However if you’re able to bring the same kids together in a couple of months, the ordering will change. Some children could be right now at the forefront of the line since their growth spurt occurred sooner, but their height in the centre will decline in the long run.
Moreover, there’s a possibility some children might be wearing platform shoes which means they might be standing in the wrong order.
Similar to this high lineup, a competitive price plan makes your market position reasonably obvious and easy to grasp for clients. This is a low-risk method and might be a fantastic alternative for your buyers to save costs.
But it’s possibly imprecise, too. If you place your firm on a competitive pricing alone, you don’t actually see the comparison of value. You also trust that the viewpoint of other firms is true when they can only wear platform shoes.
We all agree with this fact that cost-plus pricing is simplest among the three pricing strategies.
Imagine yourself sitting in your fourth-grade maths test and solving a word problem like this:
Archie is selling customized t-shirts for an upcoming event at school. His aim is to earn $5 profit per t-shirt. If it costs Archie $4 to make each t-shirt, how much should he charge to earn the desired profit?
The answer is $9. If you’re able to solve this math problem which we hope you do, then you have understood what cost-plus pricing is.
In case you don’t, cost-plus pricing is calculating the price that goes into manufacturing and delivering the product and then adding the desired profit you want to earn. The total you get is your final sale price.
Comparing the three strategies
As we know, each strategy has its own pros and cons. However, there are some specific situations where a competitive or cost-plus strategy is the most suitable option to choose.
On the contrary, most of the B2B eCommerce companies prefer to choose value-based strategies since they’re the most-effective ones.
5 B2B eCommerce pricing mistakes you must avoid
If you are trying to enhance your pricing strategies for B2B eCommerce, we have collected five most frequent errors, which B2B firms typically do when it comes to pricing, and which measures may be taken to avoid these blunders.
Mistake #1 Being rigid with your pricing strategy
While we can all agree that price is an important component of B2B businesses, the majority of firms prioritise product development and marketing over pricing.
Effective product development, marketing, and pricing must all operate in tandem to ensure the success of any B2B business: if any of the three links is weak, the entire chain will fall short of its full potential.
While developing a quality product and growing market awareness are unquestionably critical, one might argue that price has a greater impact on the success of your B2B business than anything else—nothing influences client purchase choices more.
Without a doubt, no other aspect of your organisation can be altered to get favourable outcomes in terms of price.
If your pricing approach is inflexible, you should immediately change it. Rather of treating pricing as an afterthought, treat it as a critical component.
Pricing is an ongoing review and testing process to discover the optimal mix of prices and bundles that appeal to your consumers.
Mistake #2 Having fear of experimenting with your pricing
As previously said, it is critical to continually evaluate and test your price. Unfortunately, many businesses are ignorant of how to do so.
A/B testing enables you to evaluate the success of the various tactics you’re using in order to discover which elements of each work effectively.
This can assist your company in determining the ideal combination of product features and prices that will entice buyers.
Checking price is another thing, but most businesses avoid experimenting with pricing, which leaves them unable to determine what customers want from them and what adjustments are necessary to meet those demands.
If you’re the kind that shies away from playing with your price, give this a try. A/B testing should be incorporated into a business’s pricing arsenal since it enables you to analyse several price methods before settling on the final one.
Mistake # 3 Pricing products based on wrong value metrics
In a nutshell, value metrics are concerned with how and what you charge. The importance of utilising the correct value measurements cannot be emphasised in the B2B eCommerce industry.
The appropriate value measurements guarantee that your consumers pay for your product in proportion to the advantages and value it provides.
If you continue to use incorrect value metrics, you need to pull your socks up. It is critical that you use the appropriate value measurements and that your pricing plan makes sense to your consumers.
Mistake # 4 Offering unlimited discounts
Customers like discounts, and we feel that giving discounts is an excellent technique for increasing product/service sales. However, if you provide discounts arbitrarily, your business image may suffer.
Additionally, your clients will develop a taste for it, which might be detrimental to your business in the future.
Rather than that, develop a plan for offering discounts on special occasions and place a higher premium on client experience.
Mistake # 5 Lack of transparency
Customers place a high premium on high-end, luxury brands because they have demonstrated their longevity and worth over time.
Failure to demonstrate the value of your items raises many issues in the minds of your consumers, such as, ‘Why are they charging so much?’ or ‘How much value am I receiving?’
Keeping the aforementioned factors in mind, transparency is critical. To avoid this error, attempt to convince buyers why they should pay the price you have set for a particular product.
You can accomplish this goal by utilising testimonials and reviews.
5 Best B2B eCommerce pricing strategies you must employ
Staying up to date about what’s happening in the retail sector
Given that retailers are your clients, it’s important to remain current on developments in the B2C retail business, in addition to the wholesale world.
Retailers are your consumers, and their conduct has a direct influence on your business, particularly on your prices.
Consider the consumer sentiments during the worldwide pandemic, which serves as an excellent illustration.
McKinsey has been monitoring consumer sentiments throughout COVID-19 and has gleaned some insightful data. At the start of October, the research found that the majority of consumers believe the pandemic’s impact on their personal finances will endure longer than four months. Additionally, respondents reported a little decrease in discretionary expenditure overall.
As a consequence of current consumer sentiments, some of your buyers may reduce their order sizes or volume thresholds in an attempt to keep up with current customer demand.
As you endeavour to learn and keep current with developments in the retail sector, you’ll be able to make required modifications for your buyers that benefit your merchants, their consumers, and your brand.
Pay attention to wholesale price points
When performing pricing research, it’s critical to keep the fundamental distinction between B2B and B2C in mind.
As we already know, B2C businesses sell directly to consumers, whereas B2B enterprises sell to merchants (businesses).
When conducting pricing research, keep in mind that you are a B2B wholesale company that sells to retailers. This implies that, rather than investigating direct retail or eCommerce pricing, you must investigate competition wholesale prices while still allowing merchants to earn a profit.
Keeping a close eye on your competitors’ pricing
When it comes to pricing, the best approach to ensure your rates are competitive is to compare them to those of your competitors. When it comes to wholesale purchasing, B2B buyers have a plethora of brand alternatives. You certainly do not want to price yourself out of the market. If you do, you risk losing your most loyal customers to rival companies who provide comparable items at a lower price.
Competitive pricing refers to a pricing approach in which you base your rates on those of your rivals. It is important to do pricing research and thoroughly examine how other wholesalers set their rates in order to achieve competitive pricing.
While conducting your research, keep in mind to look especially at rivals that provide similar items. For instance, if you are a brand of outdoor leather products, you may gain valuable insights by examining other outdoor shops. It will, however, be ineffective unless you carefully check at the leather goods costs at rival outdoor wholesale businesses.
Similarly, you’ll want to compare the price for the product you’re offering across several verticals. Permit us to return to the leather products example. As you are probably aware, customers may get a leather jacket for $40 at an economical retail store. Additionally, they may purchase a $1600 premium leather jacket. What is your brand’s positioning?
Consider if you’re selling cheap, standard, or premium items while conducting your research, and then compare your price to that of other wholesale brands in the same category.
Use dynamic pricing
Dynamic pricing is based on market demand and enables businesses to charge for their products/services in a flexible manner. Businesses ascertain their consumers’ willingness to pay under specific conditions and change their pricing appropriately.
Dynamic pricing operates in two distinct ways:
Lowering price:Reduced demand for a product/service (for example, during the off-season) causes a company to reduce its pricing, maximising income during the lull. Reduced costs encourage existing consumers to stay loyal and can help attract new ones.
Raising price: Increased demand for a product/service (e.g., during peak season) causes a company to increase its pricing since a greater number of consumers are prepared to pay more. In other situations, such as air travel, most customers are already aware that rates vary according to the season and that busier flights incur greater charges.
Consider the following scenario: a hotel expects a major event that will attract large groups of people from out of town by significantly increasing its rates, knowing that many will pay the higher fee.
In contrast, the hotel reduces its pricing during the colder months in order to attract more guests, particularly those who are price sensitive, and to compensate for the decreased business during this period.
Look into customer-specific pricing
In contrast to dynamic pricing, the goal of customised pricing is to ensure that merchants understand their consumers and reward them with preferable price points depending on their attributes.
Custom pricing is based on the principle that the closer the supplier and customer are, the better the price. This pricing strategy rewards loyal consumers such as distributors and retailers with special incentives. For instance, when a non-logged-in user visits a product page, they will see a $8 price tag, whereas wholesalers would see a $5 price tag.
For businesses who sell to a variety of client segments, B2B customer-specific pricing is a must-have to keep your online shop competitive.
Wholesalers will be embarrassed to discover they are paying the same price as an individual client. Some queries, such as “Why do I purchase a large volume of products for them and yet pay the same price?”; “Does the organization not treat us well enough in comparison to the profit we generate for them?” can emerge in the minds of your B2B clients. It will erode client loyalty to your company over time.
By implementing a clever personalised pricing approach, you not only service clients optimally depending on their financial situation, logistical preferences, and geographic location, but also offer them with important information. They may believe they are getting a good deal from you and will continue to do business with you.
Customer-specific pricing strategies are an effective method to enhance your sales team’s ability to close business. B2B solutions, such as our B2B eCommerce for WooCommerce plugin offer this functionality out of the box and have been shown to boost conversions and enhance customer experience for many years.
B2B eCommerce for WooCommerce is designed to eliminate the friction associated with digitising your B2B operations and satisfying customer expectations for a self-service experience.
Everyone desires to believe they are obtaining a good bargain. Treat them well, provide them a discount, and they’ll return repeatedly.
Your reps can sweeten deals with specific conditions, exclusive discounts, and attractive credit limits, among other things. When your eCommerce website enables prospects to choose from a variety of distinct payment scenarios, it’s simple to discover a win-win situation that fosters working partnerships.
Choosing the right pricing strategy for your B2B eCommerce business
Given the difficulties associated with poor pricing strategy and the critical role that price plays in B2B eCommerce success, it is critical to choose the proper platform for your B2B business.
B2BWoo‘s B2B eCommerce for WooCommerce plugin helps you to manage all aspects of your B2B eCommerce shop and provide the greatest digital experience possible for your clients. You may control not just your whole inventory, but also your price as needed.
Bundled pricing, dynamic pricing, and customised pricing are all options for implementing the price approach that is most appropriate for your company.