In a tough economy, a majority of companies will turn their focus towards a survival mode in pursuit of every single pound of revenue they can – at any cost. Although in the short term that type of approach might be effective, it has serious long-term implications that can result in a significant margin and profit loss. Companies need to adopt best practices and more strategic approaches to obtain more business while also sustaining their margins. One effective strategy that can be used to help address the challenge is effective pricing. However, it tends to be underutilized by even very sophisticated organisations. Yet over the last couple of years, three key factors have led to pricing gaining significant momentum:
Measurable Results: Proven valuable has been delivered across industries by successful pricing strategies
Untapped Opportunity: There only a few companies that have recognised the value that pricing has to offer
High Return/Low Cost: Companies are able to realise significant value for a low investment
So how are organisations able to leverage price in order to sustain profits and increase revenues at the same time? The following are the five best practices that can help your company be more customer-centric and reap the benefits of pricing at the same time.
1. Make Pricing-Decision Support a Priority
Almost all companies have invested in CRM system. However, companies mainly use those systems for collecting data instead of decision support. Companies over time have collected a great amount of transaction information, that if effectively leveraged, can translate into improved deal negotiation and better pricing. For example, transaction data can be used by companies to set more informed pricing floors, guidance and targets for supporting sales teams whenever they are interacting with customers and negotiating. Consulting with data protection companies like Trident Assurance Services will give you a better idea of what information you can legally retain and use and what information you cannot.
2. Segment Products and Customers
Companies often use the same approach for all buyers. That fails to distinguish between highly profitable customers that have high potential for business in the future and highly unprofitable buyers that have only limited potential. Many companies also don’t differentiate the value a customer has for various products. For instance, Product A may be a crucial input for developing products within the manufacturing industry, but the product may not be as important within the chemical industry. In that case, a company can segment their products based on what their end-use applications are. Pricing guidance to sell Product A within the auto industry will be a lot more strict (lower discount based on higher value) compared to the pricing guide for a product being sold within the chemical industry.
3. Make Sure Your Sales Team Is Armed
Whenever your sales team is interacting with buyers, they need to have critical pricing insights in order to make decisions that can improve profits and increase revenues. Discounts are often given during deal negotiations that are driven by negotiation expertise more than the sales representative’s knowledge of key factors about the customer’s future potential, purchase history, expected product value, and profitability. When sales teams are provided with pricing guidance by their companies that are based on a specific customer profile, then the reps are able to tailor their negotiations on an individual case basis and provide consistent pricing terms based on the customer profile. When a sales team is fully armed they will be able to win more deals that can assist the organisation with protecting their profits.
4. Make Improvements to Price Responsiveness
Given how competitive the environment is these days, making timely price changes often can mean the difference between losing and winning a deal. Companies that have thousands of different products to sell across multiple channels, regions, and industries need to manage a million different price points at the same time. Being able to fine-tune prices rapidly to respond to market volatility can assist them with winning deals at decent margins, instead of winning them at a loss.