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B2B Complex pricing

Your B2B eCommerce Platform Must Support Complex Pricing

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In an ideal world and with the perfect B2B eCommerce platform, pricing would be simple – a base price with a hierarchical pricing model, for example. Unfortunately, that’s not how it works today. If you are just getting started in B2B or you are considering a B2B eCommerce platform, expect customers, channels and your sales team to request new pricing models to make it easier for clients to buy, match competitors’ pricing strategies or apply contractual terms to a sale.

In this world of disruption, as you try and figure out whether you are a disruptor or the disrupted, it’s best to assume that how you do business today is not how you will conduct business in the future. As you grow and evolve, pricing needs to become a core competency and your B2B eCommerce platform is key.

Factor in the pace of business today and gone are the days of signing a static annual contract. Customers expect agility. This includes adapting pricing frequently. While your enterprise resource planning (ERP) system may be the source for pricing information, it’s your B2B eCommerce platform that must be flexible and support complex pricing.

No pricing flexibility, no revenue

Let’s start with the bad news: pricing inflexibility will result in lost business. Assuming your base price is calculated using a value-based, cost-plus or a competitive-based model, you still need flexibility. Not every customer or deal can be treated the same. Lifetime customer value, negotiations, contract pricing and buyer segmentation all play a role in pricing decisions. A good sales team or channel partner understands this and will get entrepreneurial to close the deal. It’s what you want – creativity and a willingness to fight for every deal.

Many companies just starting on their B2B digital transformation journey with a B2B eCommerce platform begin with simple hierarchical or tiered pricing like platinum, silver and gold. The assumption is that this is how they will do business in the future. But don’t think a simple, static pricing model will suffice, as you risk:

  • Not being able to respond effectively to new, disruptive business models
  • Ending up with one pricing model across all channels
  • Adding cost to a sale by forcing customers to interact with your call center to get a specific price

It’s well known that pricing in retail is a top reason for consumers not converting. Internet search makes pricing transparent. The B2B buying journey today is evolving with buyers researching before making a purchase or contacting a sales associate. The challenge is making sure that your customer sees the right price – the price in their contract, their entitled price or the lowest price, to ensure they have the information to make the best buying decision.

As part of the customer experience, pricing impacts:

  • Faceted search: Should reflect the customer-specific pricing and not the base price on your site or store.
  • Sorting: When a customer searches a product category for all products less than $20, for example, the results must include all products meeting that customer-specific pricing (Hint: Only one platform delivers this out of the box).
  • Work with SEO: Optimize rankings with search engines like Google and Bing, but may extend out to social networks like Twitter.

ERP supports complex pricing – but it’s not the answer

 Another potential driver to support complex pricing is ERP. Solutions like SAP were designed with the flexibility to support multiple pricing models across multiple industries. As a result, when the business is having discussions with customers on contracts and pricing models, ERP platform capabilities will often drive negotiations.

This is why ERP is not the right solution for managing complex pricing interactions:

  • Not designed to handle the volume of real-time pricing requests from digital channels
  • Lack of rules engine
  • Inability to influence search results
  • Often not a 24/7 solution
  • Often does not have a UX designed for business users

Customers expect dynamic pricing

Whether it’s as a result of a competitor offering a lower price or a new tariff that’s changing your costs, your pricing needs to be more dynamic. The good news is although customers always want the lowest price, buyers are willing to pay more in some circumstances. Consider these metrics from Bain & Company, which analyzed B2B companies across a variety of sectors:

  • 4.2% of customers will pay a premium for higher quality
  • 3.11% of customers will pay a premium for more reliable product delivery
  • 88% of customers will pay at least 2.5% more to avoid switching suppliers

So far, artificial intelligence has not arrived in B2B pricing, so pricing specialists are making decisions based on external factors such as the behavior of customers and competitors, as well as internal factors, including costs, processes and IT systems.

However, business users want control of pricing without waiting for IT. The goal is to avoid manual work arounds or custom upgrades that leave you with performance issues or a system that’s difficult and expensive to migrate to a newer version. Intuitive business-user tooling that manages the pricing business service gives you the power to be dynamic, along with the ability to scale based on the volume of calls or traffic to the service.

Keep in mind, though, the lowest price is not always the best price. Let me explain. The holistic price that the customer pays to acquire your products is impacted by a number of factors, typically laid out in the contract. This includes:

  • Payment terms
  • Shipping costs (ideally free)
  • Better warranty
  • Legal constraints

To further complicate pricing, a customer may have multiple contracts and several orders in flight at the same time. Savvy customers expect their suppliers to aggregate orders to provide volume-based discounts and apply the right contract terms to pricing.

All B2B eCommerce platforms are not created equal

Companies value B2B expertise in their people. The same is true of B2B eCommerce platforms. You want to deploy technology that’s tried and true for B2B – and with complex pricing in its DNA.

Take Amazon as an example. The company started in retail with books and music CDs. Complex pricing wasn’t in their design thinking until much more recently. It also wasn’t in their marketing or their business-user tooling and, as a result, their B2B platform is more applicable to small or medium enterprises selling products one or two at a time. The truth is that it is simply too difficult to retrofit complex pricing into a platform.

From the beginning, WebSphere Commerce was designed with an understanding for complex pricing. Clients model their pricing using the following attributes:

  • Large product lines
  • Entitlements
  • Customer-specific pricing
  • Negotiations
  • Regional pricing
  • Best customer pricing vs contract pricing
  • Pricing by segment / industry
  • Consumer vs business buyers
  • Promotional pricing

Many members of the platform’s original development team came from an ERP background and its B2B capabilities shine through based on a 22-year pedigree. Not only does this B2B eCommerce platform give clients the depth of capability out of the box, but now with an all-new modern commerce architecture, based on an API-first strategy with a series of business services, it has the flexibility to deliver the use cases for B2B with heavy customization. This is combined with a robust architecture capable of handling high transaction volumes, orders with hundreds of line items and transactions worth billions of dollars and the security you expect from IBM.

Want to learn more about complex pricing in B2B? If you are attending the B2B Next Conference and Exhibition in Chicago on September 30 through October 2, visit LiveArea in booth 718. Pick up a copy of our complementary white paper on B2B pricing. 

 

Author

Marshall Freiman

Marshall is an eCommerce industry pioneer, working since the early days as a developer at IBM and then as vice president of Engineering for leading eCommerce solution providers. He has architected groundbreaking omni-channel solutions on WebSphere Commerce for top brands, including REI, Harry & David, West Marine, Sony and Advance Auto Parts.

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