How the corona crisis will change pricing management in B2B forever.
B2B pricing strategies are experiencing a radical transformation in manufacturing and wholesales.
One of the surprising by-effects of the 2020-2021 pandemic is that employing dynamic pricing software has become unavoidable for manufacturing and industrial distribution companies.
A pricing analytics software supports B2B sales teams by providing accurate pricing prediction. Best-in-Class software usually delivers exceptional performance, reflecting the current market situation and historical developments.
There are at least three ways in which the pandemic has changed B2B pricing strategies:
1. Pricing needs to follow shifted buyer priorities, including dynamic pricing.
2. Successful sales teams take pricing nowadays as interrelated to additional variables, such as customer attrition and potential.
3. Current customers gained in importance for it is a lot harder to win new ones.
Let’s review together these ideas.
The B2B buyer priorities shifted during the pandemic.
How can you keep selling the same way when your customers are buying differently? The IT consultancy Accenture has appropriately argued that the buyer priorities completely changed in B2B.
The pandemic has created a new digitally savvy, experience-oriented type of customer. A recent study conducted by the market research institute Econsultancy for Adobe confirmed the finding: “Digital Trends 2021”. In this investigation, one of each three respondents agreed that customers are buying differently now and tend to switch brands or products more often.
Being online is nowadays not sufficient. The most successful companies have adapted their sales priorities using a solid combination of personal communication, predictive sales, and AI-based recommendations. The pandemic has accelerated undergoing trends in B2B, both from the sales and the purchasing perspective. Companies matching their sales activities to the expectation of their customers are the big winners.
A 2019 market research had already shown that companies able to dynamically line up their sales processes to their customers’ shifting paths could double their win rates increase quota attainment. In that sense, dynamic pricing is maybe one of the most critical capabilities. Can the customer pay more? Charge more. Will you lose the business if you increase your price? Charge less.
Even once a company has implemented dynamic pricing, a further challenge remains: how to charge more and not risk losing a hard-won customer?
Pricing is no longer an independent variable.
Successful after-corona B2B sales teams will employ a pool of KPIs related to customer loyalty, pricing, and sales potential. Furthermore, sales managers understand that the increasing competition and transparent pricing erode all the benefits offered by e-commerce.
The customer will pay more for a given product if he or she is happy with his vendor and the probability of switching is low.
In other words, low attrition risk can (not always though) indicate a readiness to tolerate higher prices.
Similarly, a higher buying probability usually points to a higher price. Pricing was never an independent variable, and Corona has made it more dependent on other KPIs.
As pricing becomes more relevant in the after-pandemic sales world, companies need to craft new pricing discipline, flexibility, and capabilities to create long-term competitive advantages. The consultancy McKinsey strongly recommends developing and maintaining a price discipline to identify pockets of lost value quickly.
Furthermore, pricing is no longer an e-commerce problem only. Remarkably, seven out of ten decision-makers are willing to make a remote purchasing decision for more than 40.000 Euros. Before Corona, buyers took most of the buying decision before contacting the vendor. Now they are willing to place an entire order without human interaction.
A dynamic pricing software helps the salespeople prioritize the accounts where increments on pricing have higher chances of being accepted and actively monitor customer-level profitability.
Sounds like a challenging job? You might be thinking, “let’s find new customers instead of actively handle pricing policies and decisions”, right?
Nowadays is significantly harder to approach new customers.
If the shifting purchase behaviour and the relation growing influence of pricing in churn and cross-selling were not enough arguments, acquiring new customers has become considerably tougher during the pandemic. As a result, selling is now more complicated, and it is tempting to reduce prices to compete.
According to a recent survey “Situation of the Direct Selling Industry in Germany” by the University of Mannheim and the Federal Association of Direct Selling in Germany (BDD), there were 1.05 million direct sales partners in the country in 2020. They found it now a lot harder to sell than before.
There were 932,000 distribution one year before, generating an 18,55 billion euros total turnover. Before Corona hit, the member’s companies expected a 7.2 per cent sales growth. During the year, nevertheless, they revised this forecast to zero.
The Corona Crisis erased the entire expected sales growth.
The findings should not come as a surprise. A similar study from the USA found that two-thirds of salespeople found it difficult to approach new customers during the pandemic. Times of crisis often paralyzes decisions, investments and change of vendors.
A natural response to challenges in sales or overstocks is to reduce prices. Dynamically adjusting prices is, therefore, a necessary capability to survive the crash. But, unfortunately, once your competitors start using dynamic pricing software, there is no way back.
How the corona crisis will change pricing management in B2B forever – Summary.
If the sales world quickly advanced towards automation and dynamic pricing before Corona, this crisis will accelerate the trend.
Successful B2B pricing strategies take account of buyer behaviour, priorities, and preferences. They all have changed due to the pandemic and increased digital adoption. Regrettably, the customer will not get back to the old normal anytime soon.
Although the price in B2B has always depended on further factors such as buying propensity, customer urgency and available alternatives, the Corona Crisis have tangled these dependencies beyond the salespeople comprehension. So here plays sales software using AI a critical role.
The pandemic has made it significantly harder to approach new customers as if the last two factors were not enough. As a result, B2B sales representatives are more dependent than ever on their current customers. Therefore, predictive analytics software, including pricing analytics, is an excellent addition to their toolkit.
Did I forget any way in which the pandemic will change pricing in B2B? Comment below and let us know!