Ameeta Soni, innovative marketing executive and business consultant, shares what to consider when pricing your enterprise solution to maximize revenues.
With all of the talk about how digital strategies have changed the buying journey, the price still reigns supreme. Nearly two-thirds of buyers want to talk dollars and cents on the very first prospecting call.
Pricing strategies can make or break any profit-focused enterprise, and all changes, small to large, can have a significant impact on the bottom line. Common B2B pricing strategies are:
- Cost-plus pricing
- Competition-based pricing
- Value-based pricing
Value-based pricing tends to be the most customer-focused of the three approaches and can contribute the most to a company’s revenues. Here are four critical steps to develop value-based pricing strategies for success:
1. Understand the customer
What is the essence of the customer’s business needs? Who makes the buying decisions? Understanding the answers to these questions is the essence of a good pricing strategy, but it’s important to dive deeper. How do unmet needs impact the customer’s financial health? If your offering provides value that meets these needs, you can better justify your price. For example, a client of mine leverages AI to identify improper claims at a much larger scale than using traditional means, enabling payers to recover significantly more dollars and enabling my client to rationalize their pricing.
2. Select the right value metrics
The value metric is essentially what and how you charge and must relate to the customer’s view of value. However, defining the right value metric is not an easy task. I once served as Chief Marketing Officer for a real estate capital planning SaaS provider. Our typical customer would have millions of square feet in their real estate portfolio, but only a handful of users. Pricing based on the common value metric related to the number of users did not capture the value we provided. Basing our price on the square footage, a measure used by the customers, helped foster their acceptance and led to increased revenues for us.
3. Set the right pricing tiers
A common approach is to price based on functionality, e.g., have Bronze, Silver, and Gold levels or a freemium model. Buyer personas, feature preferences, and willingness to pay can help define the features in these tiers. I co-founded a sports technology company that uses a freemium model, providing the app’s basic functionality at no charge and offering a full-featured version for a fee.
Usage levels can also be an excellent way to define tiers, but they must be a manageable number and not confusing or overwhelming.
4. Manage discounts appropriately
Companies often discount far more than needed. When I was CMO of a SaaS company, we used a structured discounting program, discount based on volume purchases and discount based on up-front payments, all which were useful. And while it can be helpful to pre-approve discounts, it’s okay to be discretionary and make exceptions to close deals.
Finally, you can ensure success by involving the salespeople early in the process and making sure they can communicate the value customers will get for their money. (For more on sales enablement, you can read my past blog here). Focus on what’s critical to the customers — product functionality, quality, and reliability as well as integration with other offerings, service delivery, onboarding, and support. Also, test pricing and periodically revisit your strategy. With a little forethought and planning, you can use pricing strategies like these to grow revenues readily.
About the Author
Ameeta Soni focuses on driving revenues and profits for technology and digital health companies as Chief Marketing Officer and consultant. In her consulting practice, she often serves as an interim CMO. Her expertise includes strategy, new product development and launch, demand generation, thought leadership, and business development. Ameeta is a Springboard alum and past chair of the MIT Enterprise Forum of Cambridge.