B2B pricing is the process of setting prices on goods or services with the intent of marketing and selling them to other businesses, and not directly to consumers.
Three common B2B pricing strategies are Value-Based Pricing, Cost-Plus Pricing, and Competitor-Based pricing. The most powerful B2B pricing strategy is Value-Based Pricing, as it forces you to look outward at your customers to form the perfect pricing strategy for your B2B business.
B2B pricing strategy should be:
- Always testing its pricing
- Always evaluating its pricing
- Using personas for pricing
- Using the correct value metrics
- Basing price tiers off of pricing personas
- Listening to customers
The pricing process for B2B customers includes the following steps:
Product Understanding -> Price Model -> Price Research -> Price Strategy -> Index Price
B2B Tiered Pricing Model
The tiered pricing model is a pricing method based on different segments in the same price range to attract a wider audience of B2B customers.
In wholesale, since the buying/selling product quantity will often be large, setting different tiers for price and discounts will help stimulate B2B customers to buy more, which often results in higher sales for your business.
This pricing model is best suited for the case of excess stock and category control, especially when you already have an edge of pricing advantage compared to competitors.
B2B Dynamic Pricing Model
Dynamic pricing is a model that does not follow a fixed price but dynamically changes the price to suit the actual situation and the factors affecting it.
Dynamic pricing also isn’t a new pricing model but has been applied a lot in areas such as aviation, transportation, tourism, or even chemicals. These are all areas that require price flexibility to minimize costs/increase profits for each service execution.
Applying dynamic pricing for B2B, prices will need to change flexibly based on your subjective and objective assessment of a different B2B audience or group of customers.
B2B Lead Generation Pricing Model
Typically, only service-related businesses use lead generation pricing models for B2B customers since it depends on the marketing costs for the service.
Price negotiation is a common way for individuals to receive a discount off the posted price. However, not all consumers bargain when given the opportunity. For example, consumer reports indicate that 61% of consumers negotiate prices of goods and services and 33% bargain for expensive home appliances specifically. One explanation for this behavior is that there exists a cost (henceforth called bargaining cost) to initiate a negotiation. This is the fixed psychological cost associated with the decision to haggle, and does not influence the negotiated price (conditional on bargaining). In contrast, bargaining power is the relative bargaining ability of the participants and is the key determinant of the final negotiated price.