In order to develop a holistic pricing strategy that maximizes value, B2B technology companies can distill their choices into a series of specific choice points. Justin Murphy, a partner in Bain's Customer Strategy & Marketing practice, outlines the questions companies can ask themselves when defining their pricing strategy.
Read the Bain Brief: Clearing the Roadblocks to Better B2B Pricing
Related video: Controlling Frontline Discounts
Read the transcript below.
JUSTIN MURPHY: Pricing for technology companies is more challenging than ever. They have all of the traditional opportunities such as managing frontline discounts and channel rebates. But being layered on top of that are big questions around new pricing strategies like as-a-service, subscription, freemium. And it seems to most companies that are struggling with these questions that there's just an endless number of paths that they could take and questions that they're wrestling with like: How do I incentivize trial and yet share in the upside? How do I actually make sure that I'm not being disrupted by some existing start-up and yet protecting my existing profit pool?
The companies that are able to solve this effectively distill these endless choices down into a series of specific choice points that define a pricing strategy. Questions like: What should my price position be―premium to the market, in parity with the market or a value player, pricing a little bit below the market? What's my price meter―dollars per user or dollars per gigabyte? Then, for each of these specific choice points, they bring deep customer and competitive research to bear to really understand what their specific company should be doing in order to maximize value and minimize risk, and the result is that companies are able to put together a holistic pricing strategy that delivers on the company's overall objectives and maximizes the value that that company receives from its customer base.
Clearing the Roadblocks to Better B2B Pricing
Even in commoditized industries, companies can charge a premium for features and enhancements that customers value.
Justin Murphy: Controlling Frontline Discounts
Companies can do three things to optimize their frontline salesforce and deliver value to the bottom line.