Valerie Howard

While the B2B marketplace has operated at an accelerating pace year after year, today’s COVID-19 crisis drives unprecedented market conditions that are forcing businesses to be more agile than ever before. Businesses need to adapt to changing customer demands and stay attuned to changing buyer preferences in order to better serve their clients—downstream businesses who are likely trying to make sense of how to reliably service their own customers in this new environment.

Traditionally, the B2B purchasing engagement has been rather rigid, requiring a tedious dance of price opacity and careful negotiation. With large portions of the global economy under stay-at-home orders, many businesses are forced to move a lot of the traditional sales engagement to digital channels. And selling digitally makes it a lot more difficult to keep prices ambiguous. The businesses that succeed today understand that today’s conditions require differentiated digital experiences—and often that can be achieved with responsiveness, transparency and personalization.

The cost of static ecommerce prices

Many businesses have been hesitant to truly shift sales to digital channels. Instead, they’ve treated their digital presence as an online catalog as a way to protect their pricing. In doing so, they’re operating under the assumption that clients will call to negotiate for the actual price—and are willing to endure haggling and the back-and-forth with a sales representative just to get a market-relevant price.

There are several problems to this approach: the inevitability of price variation and pricing errors, the reduced productivity of salespeople, the missed sales of buyers that just aren’t willing to endure the tedious negotiations, and poor customer experiences.

Problems with price variation start to occur when there is little price governance in place, causing prices to vary as much as the salespeople negotiating them. Businesses that have high price variation will gain a reputation for low price integrity—essentially, driving their customers to negotiate for better deals and causing them to focus on price rather than value. This negative cycle reduces the productivity of sales who then spend a significant amount of time seeking internal discount approvals instead of focusing efforts on educating their clients on the value of their goods and services.

Balancing competitive pricing with profitability

Businesses that seriously want to drive sales through their digital channel know that there is a significant challenge to doing so—balancing the delivery of competitive pricing while protecting profitability.

According to a 2019 study of pricing professionals conducted by Hanover Research, a majority of pricing teams (62%) are updating their eCommerce prices on a cadence of monthly or less frequently. For nearly all industries, prices calculated based on last month’s cost information and market trends will be outdated.

While 38% of these pricing professionals say they are delivering a universal price list for their digital channels, another 38% say they are able to personalize prices through digital channels. Personalized pricing helps balance the delivery of competitive pricing to customers whose contract pricing or volume spend may warrant deeper discounts without sacrificing profitability across the enterprise.

How are businesses delivering this personalized pricing? Many enterprises identify their customers by requiring that they log in to their digital commerce portals to have their prices retrieved from a static, pre-calculated list. Taking this approach ensures that prices can be rapidly retrieved without delaying ecommerce page loads, but pricing teams face many complications with this method.

There are a few challenges with leveraging static, pre-calculated price-lists for ecommerce. First, these prices are calculated based on outdated data. Second, maintaining the coordination and rationality of prices across channels is incredibly difficult and error-prone when prices are retrieved from disparate sources. And finally, this typically requires the pre-calculation, storage, and management of millions of personalized, price combinations—99% of which won’t get calculated on and may not ever be seen by customers.

Agile and dynamic approaches to pricing

So what’s the solution for addressing these challenges? The most sophisticated businesses have addressed this head-on by calculating prices for ecommerce in real time. Instead of leveraging an uploaded list of all the potential personalized price combinations, these businesses have enabled the retrieval of a real-time price calculation for every price that appears on the screen for a potential buyer.

By connecting their ecommerce platform to a real-time price calculation engine, businesses are able to deliver prices that are optimized in the context of current market data and personalized to the unique conditions of each buyer engagement. While pricing teams can’t predict the weather or the market, they can build price calculation strategies that take the current weather and market conditions into account. Even when pricing teams are sleeping or simply offline, they can ensure that their customers are receiving market-relevant, personalized pricing allowing their customers to successfully transact through self-serve channels.

While the most sophisticated are increasingly leaning into dynamic pricing, organizations that are still ramping up their digital channels can still leverage automation and personalization to enable periodic pricing updates to their eCommerce channels. As of 2019, 70% of organizations were updating prices weekly or less frequently, however, 64% believed they should be ideally updating prices at least daily. Many commodities-based industries will schedule intra-day price updates to ensure that they are periodically updating their prices to include the most recent cost information.

Another alternative is leveraging trigger-based updates. Other organizations that may not be ready for real-time price calculation and don’t have the bandwidth to support several intra-day price updates may look to this solution. By setting thresholds that trigger price updates that then propagate the delivery of new prices to digital channels, pricing teams can rest assured that their prices will automatically update in response to significant changes in cost or market conditions.

Regardless of the methodology, your business chooses to deliver personalized, market-relevant pricing through ecommerce, buyers will expect that these prices are coordinated with other purchase channels. Prices do not necessarily need to be consistent across channels, but you’ll want your customers to perceive that prices are rational. Ultimately, buyers want to work with vendors who make a meaningful effort to be fair and transparent in their pricing.

Focus on expanding value

Once a business is able to demonstrate to their customers that they can be trusted to provide market-relevant pricing that aligns to their customers’ perceptions of value, they can move beyond price-haggling and price-following. Moving beyond a focus on price allows businesses to tune into where they can offer expanded value to their client base.

This may mean tuning in to a personalized catalog experience that presents ecommerce buyers with the offers that are most relevant to them, or giving sales teams guidance on how they could consider locking in clients to an incentivized subscription. In these experiences, customers benefit from their vendor’s deeper understanding of their needs and ability to proactively engage with clients on ways in which they can expand value delivery.

Valerie Howard is the solution strategy director at PROS, a provider of online pricing and selling technology and services. Follow her on LinkedIn.