Snap Chart
One-size-fits-all pricing actually fits no one. Yet it’s not unusual for sales executives at B2B companies to admit that their ability to tailor prices at the customer and transaction level is rudimentary, or that they are not even aware of how much profit margin they make on deals. By contrast, more advanced companies tailor their pricing carefully for each combination of customer and product, continually working to maximize total margin. They bring data and business intelligence to bear on three variables for setting target prices:
- The attributes and benefits that customers truly value, and how much value is created for them
- The alternatives and competitive intensity in the business
- The true profitability of the transaction after netting out leakage in areas such as rebates, freight, and inventory holding, as the chart shows for one North American manufacturer
Ron Kermisch and David Burns are partners with Bain & Company’s Customer Strategy & Marketing practice. Kermisch is a leader of Bain’s pricing work, and Burns is an expert in building pricing capabilities. They are based, respectively, in Boston and Chicago.
Is Pricing Killing Your Profits?
How the best B2B companies set and get the right price.
Published in July 2018