There are many ways to set prices in B2B markets, but none will lead to profitable growth without strong communication and coordination across a company’s sales, product, pricing, finance and other departments. Too often, B2B companies rely on internal cost data to set prices, without seeking external information on the features or services customers value, or how competitor prices are moving. What’s more, senior executives may receive little information about pricing trends until it’s too late to take advantage of market shifts.
Why does this matter? If salespeople don’t understand exactly why their products are priced at a premium over those of the competition, they will instinctively discount the target price in order to close deals. Conversely, profits will also suffer if the salesforce has timely market intelligence but doesn’t relay it to a central pricing team. Tuning the operating model for strong cross-functional communication, Bain estimates, can be worth 200 to 400 basis points of margin.
David Burns is a partner and Chuck Davenport is a pricing expert and vice president with Bain & Company’s Customer Strategy & Marketing practice.
The tools are getting better, but they’re no substitute for strong pricing capabilities.