Three Varieties of Smoke & Mirrors in B2B Pricing
The amounts of money involved in a typical B2B sale are typically far larger than those for a consumer product or service—often in the range of tens or hundreds of thousands of dollars—which sets the stage for far greater variability. While that reality makes B2B pricing inherently more complex than consumer pricing, understanding key sources of uncertainty can help avoid missteps as you conduct research on competitor pricing:
- Many B2B purchases are not self-serve. In contrast to consumer goods that you can easily comparison shop for online, prices for higher-cost B2B products are often quoted in person by sales reps, reducing transparency and potentially allowing prices to be set on the spot at the discretion of the sales team.
- Complex discounting can make MSRP largely meaningless. Discounts from vendors and resellers alike often tailor pricing dramatically to individual customers, so that list prices may not accurately represent what customers actually pay for a product or service. Vendors that have a suite of offerings will often also bundle certain products in the solution so that they are nearly free to customers who may also be considering niche solutions.
- Even forthcoming, verifiable information sources can be misleading. Another manifestation of the complex, individualized pricing common in B2B deals is that accurate pricing information from one customer may not accurately represent the pricing that others may get.
As a result, it’s important to dig into not just what the price seems to be, but what’s the competitor’s strategy around this product? Is this a cash cow and they are somewhat unwilling to drop prices? Is this a new entrant, and their goal is to get share at any cost? Any pricing research should include good analysis of the competitors goals, not just their numbers.
This is the first installment in a series of three blog posts about competitive intelligence techniques to uncover your competitors’ pricing structures. The second one, “Three Reasons to Bring on the Humans!,” reveals why human intelligence is a vital and irreplaceable part of the process, and the third, “Three Ways Pricing’s Not as Secret as You Think,” discusses the implications of the fact that competitor pricing is really an open secret, rather than closely held confidential information.
By Sean Campbell
By Scott Swigart