We work with both startups and established firms and one of the most interesting areas we provide assistance on is pricing. Honestly, pricing as a new B2B product or service is not easy as there are a variety of things to consider. Questions like, “What stage are you at in your business?” “Are you a brand new company with a brand new product and no track record of success?” Or, “Are you an established firm launching a new product line, but have been in the market for decades with other products?” “What kind of product or service is it?” “Does it require a capital expenditure to purchase or is it an operating expense?” “Are you charging a one-time fee or a monthly subscription model?”

I think one of the key things is to provide yourself with a certain amount of flexibility because you may not nail the pricing strategy right off the bat.

When developing your B2B pricing strategies there are a number of things to consider:

1. Your Goals

What are your goals? Do you want to rapidly penetrate the marketplace or do you want to slowly establish a footprint? We are working with a startup now and one of the things we are considering is offering highly aggressive pricing to build a beachhead quickly and try to knock our competition out of the market. We are looking at commoditizing pricing in a nascent market.

2. Competitor Pricing

You definitely have to take a look at this when deciding on how you price and position your product in the market. Can you charge more because your solution does more? Do you charge less and try to drive a fast adoption rate? Is the pricing moving to a SaaS model or does a traditional model work better? You also need to consider what indirect competitors are doing as you are competing not just on a product level you are competing for finite budget.

3. Leverage Existing Contacts

It makes sense to reach out to people in your network for feedback on proposed pricing strategies particularly if they have worked in that industry before. For some clients, we have reached out to our friendlies and been provided with detailed competitive pricing which has helped greatly.

4. Value Proposition

What value (savings, liability reduction, additional revenue or efficiency) can your solution provide and how much do your prospects value it? This crucial element should absolutely be factored into your B2B pricing strategies. We have a client that provides equipment rental services on a project based and long-term basis. What is so interesting about their model is that their pricing is not the cheapest. Rather, it appears more expensive as it covers licensing, plating and maintenance of the equipment. Their big differentiator is on term. The equipment can be returned at any time with no penalty, versus a traditional equipment leasing model where you are locked into a set term or number of payments.

5. Speak to Prospects

There is no better way to get feedback than to speak to potential customers. I have found in many cases that simply asking a prospect for their feedback on pricing can be helpful. Learning details on how a competitor may be pricing or information on how the firm they work for manages budget and vendor selection is key.

5. Be Creative

There is no right answer and often you will be operating in a grey area when working out an initial pricing strategy. If you are a startup, I often encourage creativity when it comes to developing a pricing strategy. There are very few prospects that want to be your first customer. Why? Because there is a risk with that. So, what do you do to overcome that? You provide them with a deal they simply can’t say no to and then build your customer portfolio over time.

I know for one client we had them price their first two deals at cost basically, this allowed the customer to say yes and feel as though they were mitigating their risk with the very aggressive price point they received. The deal with the customer was not just on price but also included a component that if the implementation went well, within 1 month we would have a reference letter.

For another client, we suggested that instead of providing a traditional pricing solution they consider doing a number of revenue share deals the risk is shared between the buyer and the supplier. This can be particularly effective when the technology being sold is use.

Even after settling on a B2B pricing strategy, it should never be set in stone. You should regularly validate your revenue model to ensure it is realistic, competitive, and is meeting your customers’ and your own expectations.

If you need help with developing a sales strategy, including B2B pricing assistance, don’t hesitate to contact me.