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3 Big Sources of Pricing Power

In B2B, pricing is a broad and complex practice. There are a lot elements fighting for attention and it’s hard to know where to focus to have the greatest impact. And here at PricingBrew, we field a number of questions from subscribers about what’s most important when it comes to pricing improvement.

Of course, every situation is somewhat unique and what’s most important at a particular point in time can vary greatly, company to company. But when you step back a bit and ask a slightly different question, it’s possible to identify a small handful of areas that are far more powerful than others.

So here’s a question for you to ponder:

If your pricing function could excel at three things—and only three things—what would those three things be?

Questions like these are good “forcing” mechanisms. They force you make tradeoffs and delineate between the core elements and the nice-to-haves. They force you to get beyond the hype and think about where the real pricing power lies. And, questions like these can help you prioritize your efforts and focus your approach.

For those that are interested, here are our answers:

  • Understanding how prospects and customers perceive value.
  • Developing accurate and robust price segmentation models.
  • Understanding segment-level price elasticity or price response.

From our perspective, these are the primary sources of pricing power in a B2B environment. And by excelling in just these three areas, a company would be able to:

  • Develop offerings that are inherently more appealing and more profitable.
  • Meet the needs of different customer groups that exist in the marketplace.
  • Win the business they want to win, at maximum revenue and margin levels.

Of course, each of our three choices is a huge undertaking in its own right. But when the genie is granting wishes you don’t want to be thinking small, right?

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