Pricing a B2B solution is complex. People are quick to debate pricing models and numbers. Sellers and buyers alike can fall prey to emotions over reason when considering dollar signs associated with a solution. And it is a challenging concept: What is the buyer willing to invest for the target outcome this solution delivers? What should the value this solution provides cost a buyer? What is it all worth?
The leading B2B organizations do not leave pricing up to chance. They treat pricing as an art and science.
In part one of this four-part series, let’s look at the leaders who should be driving pricing power forward in the organization and what key roles they play.
WHO IS IN CHARGE OF PRICING?
These key leaders within a B2B organization should play an active role in the information-gathering, discussions and roll-out of pricing and its policies. Importantly, for pricing to work well, these leaders must be working in unison with clear role expectations and regular communications.
FINANCE’S ROLE: Finance creates the internal strategic context for pricing models and decisions by setting financial milestones and direction to achieve the overall business plan. Recent movement towards subscription revenue models are an example of this context setting.
- Annual Plans
- Policy Compliance
PRODUCT MARKETING’S ROLE: Product Marketing interaction with external players (e.g. customers, analysts, competitive sensing) provides key insights into broad market and specific competitor trends. Alignment of the differentiated value proposition to the pricing approach is critical.
- Market Sensing
- Analyst Input
- Messaging and Differentiation
OPERATIONS AND SUPPORT’S ROLE: The Operations team provides key cost and risk information needed to model pricing impacts on margin and investment decisions. As an example, for software companies hosting solutions in a cloud environment, fully understanding cost drivers is critical to the pricing model.
- Cost Information
- Efficiency Plans
SALES’ ROLE: Sales complements Product Marketing’s input with more real-time competitive insight and feedback on pricing policy impact on sales performance. Sales representatives’ reaction to pricing models, pricing complexity and approval processes and impact on compensation plans can be a key performance driver.
- Market Insights / Sensing
- Competitive Information
- Policy Compliance
PRODUCT MANAGEMENT’S ROLE: Product Management needs to consider pricing in the context of the Whole Product design, strategic plans and investment roadmap including one solution’s impact on the broader portfolio.
- Physical Product Design
- Future Direction
- Co-Dependency Relationships
- Final Pricing Decision
HOW IS PRICING FINALIZED AND APPROVED?
With so many leadership functions vital to uncovering the right pricing model and approach, it may seem daunting to land on an ultimate decision. Leading pricing committees benefit from developing a formalized process that reduces heated disputes and in-decision.
Key points in the process include:
- Formalization of the pricing process
- Agreement of roles and responsibilities (as outlined above)
- Regular pricing committee meetings (often monthly or quarterly)
- Standard approval process
- Instantiation of a feedback mechanism / loop so the committee can respond quickly to unexpected market or competitive changes
UNLOCK YOUR ULTIMATE PRICING POWER
Download A B2B Leader’s Guide to Pricing Strategy Workbook to discover the four key principles and six steps to a successful pricing strategy.