Strategic pricing in B2B markets

A leading company in the construction materials sector enjoyed a strong market position thanks to the technical superiority of its employees and excellent customer service. However, the company had been losing market share for some time due to the intense price wars among smaller competitors. Although it offered volume and early payment discounts, the company had traditionally maintained and respected a non-negotiable pricing policy. When a change in company leadership occurred, the new management decided to reverse this trend. Sales executives were authorized to offer special discounts to retain clients when a deal was at risk, as long as it was profitable. This move had an immediate positive impact on sales and market share. However, it wasn’t long before customers began talking among themselves and realized that some were paying more for the same quality and service that better-negotiating customers received. The result was disastrous: previously loyal customers started bidding all their purchases, seeking the lowest prices. This affected not only the company’s average prices but those of the entire category.

When the price menu is missing
The previous case illustrates just one of the many problems companies face in industrial (B2B) markets. The lack of a formal pricing structure primarily generates two serious issues in business dynamics.

First, it encourages haggling among customers, turning each sale into a tedious negotiation that the buyer almost always wins. This practice reduces the role of sales executives to simple order takers and discount negotiators.

The second problem caused by the absence of a formal pricing structure is operational and sales management related. Since there are no proactive pricing policies, each commercial proposal presentation becomes a process involving multiple company areas and can take days or even weeks. Anyone who has experienced the absence of pricing policies in industrial market companies has likely witnessed the enormous operational burden of financially evaluating each exception raised by sales executives.

The magic of offering options
How can these problems be solved? The best way to create a formal pricing structure that ensures proactivity, transparency, and agility is through the implementation of a price menu.

On one hand, this tool can reduce haggling dynamics by up to 90%; when clients are presented with options of different price and value levels, their attention focuses on understanding the advantages and disadvantages of each, diverting it from the usual tendency to haggle over a single option. This scheme works as long as the price-value relationship of the options presented is appropriate, and at least one of the options has a sufficiently competitive price.

Finally, since the price menu considers all possible combinations of products or services that target customers may request, determining the price of a specific solution takes seconds, and preparing a complete commercial proposal is accomplished in minutes.

In summary...
Creating and adhering to a fixed pricing policy through the implementation of a price menu prevents what happened to the company in the initial case: “good” customers finding economic incentives to become “difficult.” Additionally, systematically using a price menu allows companies not only to preserve the value of their business and category but also to achieve enormous operational savings by evaluating exceptions on a daily basis. Finally, to ensure the competitiveness, relevance, and effectiveness of the price menu as a commercial tool, it must be updated periodically to respond to market conditions.