Willingness to pay is the maximum amount a customer is willing to spend on a product or service. Being aware of your customers willingness-to-pay can be the key to a successful price strategy. We will focus here on using willingness to pay in a B2B context.
The good news is if you want to get anywhere at within pricing in the early days, you’ll have a handful of Excel files in place. Which is great. In fact, it’s amazing.
Getting control of your pricing and putting a price framework in place is though. Who wants to run prices by another person and have the time to collect, clean and package the data needed for better pricing? And you did it.
And yet …
It probably won’t be enough. 5 Excel files, 50 sheets, whatever the number is. It’s not scalable. In fact, it may seem like you will everything would fall apart if you left the company.
I get it, I’ve been there. In fact, most price managers have. At one point its simply time to leverage up to a price management software and leave the Excel files behind. You will know when.
Sounds familiar? You’re not alone.
I have seen it so many times. How companies cure the aftermarket business with the same medicine used for their other businesses.
And guess what… they usually end up giving away margin, losing sales volume, and sometimes even destroying their brand reputation.
Have you seen it too?
So how can you optimize your aftermarket without ending up in any of these pit-falls? Well, the first thing you need to do is understand how your aftermarket is different from other parts of the business.
Have you also been to that meeting?
The meeting where the local team talks about why they need to own the aftermarket pricing? That they know the market better. How they adapt to the very special situation of their market. How your central pricing is all theory and not reality.
Well… I have been there. Many times. And according to me, the local teams are wrong believing that they are best served setting spare part prices themselves.
For this blog post, we are looking at how to build a pricing strategy in 4 easy steps. We will look at what’s happening today and understand some of the reasons behind failed pricing activities, as well as explain why it’s essential for your business to have a pricing strategy.
What are the benefits of having a pricing strategy?
1. A strategy will give you a set of objectives that are aimed to achieve.
2. It will enable you to understand why you are trying to achieve these objectives.
3. The objectives will have some KPIs (Key Performance Indicators) allowing you to measure and assess what you are doing.
4. It will provide clarity to your pricing and at what frequency you need to reprice.
What happens when you don’t have a strategy?
Often businesses miss out on these benefits because they jump reactively from a pricing need to pricing. The results are as follows. Continue reading »
Why You Need to Start with Your Pricing ObjectivesMay 15, 2018 in Blog
Learn here why pricing objectives are important, and what type of objectives are most relevant in today’s market.
Creating a pricing strategy is never an easy task. For both B2B and B2C markets, first be clear on what is your pricing “destination”. That should translate into clear, measurable business objectives. Think in terms of: “increase market share by 10%” or “increase customer satisfaction by 20%“. Sync the pricing destination with the overall business objectives of the company as pricing objectives need to work towards the business’s plans for the future. Of course, depending on the specific needs of your company, you can have multiple objectives or even change them along the way.
When choosing your pricing objectives, keep in mind that pricing is intertwined with the financial, sales, and marketing departments. Hence, your pricing objectives should relate to all 3 of these key aspects:
Continue reading »
Spoiler alert: We had an all-around fantastic retreat 😊
Two weeks ago, the Stockholm and Bucharest office spent a couple of great days together in Sintra outside Lisbon, to work together, reconnect, and get some key development tickets kickstarted. It appears from the photos that we mostly ate, drank and laughed, but truth be told, when we get together, mostly we get a lot of stuff done including a bunch of ping pong games 😉.
Since we are a distributed team working form different locations (4 from Sweden, 6 from Bucharest and 1 from Vienna), we usually all only get to work togheter as two-dimensional people over Skype and Slack calls.
Our main goal for when we get together each year is to create shared memories. This means spending quality face time with each other, cooking, eating, doing yoga (Radu & Radu) and getting key discussions and decisions made. Basically, the idea is to recharge our emotional batteries for the months ahead and ahve a clear plan on how to proceed with our projects, when we each go back to our seperate offices.
We also use the retreats to talk strategy as a team and have company-wide conversations if needed, but that’s only a small part of the retreat, as it eats into the having fun time!
This years retreat was our second retreat together. The last one was in New York during the spring of 2016, which included some crazy nights including a visit to one of Håkan Hellströms local gigs.
We always try to avoid hotel accommodations; nothing against them, but we prefer to spend our retreats in a more comfy and relaxed space where we feel at home.
This year the choice was easy as we could combine a visit to the NYPS pricing conference with our own retreat. Hence the selected to rent a large villa in lovely Sintra just outside Lisbon.
What happened lately that made dynamic pricing such a priority? Well, the answer is easy. It’s been Amazon.
We must recognize Amazon as the driving force behind dynamic pricing. Their adaptability to a vast and diverse inventory has set a benchmark for competitors to follow in their footsteps.
How to Overcome 5 Common Blockers for Better B2B PricingMarch 28, 2018 in Blog
Analysis has shown that a 1% increase in realized price brings an 8% improvement in operating profit, whilst a 1% improvement in market share or variable costs brings about only 4%. This makes it clear that the beliefs against changes in pricing should be overcome, else money is left on the table and the door is open for competitors who understand the power of pricing.