Video
Companies can prioritize statistical intelligence and process flows to make their pricemaking systems work effectively. Justin Murphy, a partner in Bain's Customer Strategy & Marketing practice, outlines the three things companies can do to optimize their frontline salesforce and deliver value to the bottom line.
Read the Bain Brief: Clearing the Roadblocks to Better B2B Pricing
Related video: New Pricing Models for B2B Technology Companies
Read the transcript below.
JUSTIN MURPHY: A lot of B2B companies sell through some sort of frontline salesforce, and from a pricing perspective, the opportunity is that that front line is not always making decisions that are optimizing for the right price points. It's like buying a car. When you walk onto a car lot, you know you're not going to pay the list price that's on the sticker, but you know that you may or may not actually be negotiating a good deal. Many companies have sales makers that are out there not doing a good job of negotiating on their behalf. So you have deals with the exact same characteristic, and one is priced quite high and one is quite low. And as a result, that one that's priced quite low is leaving a lot of money on the table.
To solve this, companies really need to put a series of controls in place. First, they need to actually arm the front line with statistically driven guidance on how to price. If the front line doesn't have the right information, they can't try and drive a customer to the right price point. Second, you need to actually make sure that the folks who are approving those deals are armed with similar types of information and intelligence so that they can actually say yes or no when this frontline sales maker comes and actually asks them for an approval. And third, you really have to optimize the volume of approvals that are being asked of the approvers. Many companies that I've seen will do something like say, "Well, from now on, the CEO has to approve every deal that's discounted more than 10%." And suddenly, the CEO is asked to approve a thousand deals a day, which means that person cannot possibly make a good decision against each one of those.
It's really important to actually think about the statistical intelligence as well as the basic process flows to enable the entire system to work effectively. In our experience, this is one of the most powerful levers that a company can pull from a pricing perspective very quickly in order to drive value to the bottom line.
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First published in mars 2018