B2B pricing study
Pricing Levels & Structure
Assessing opportunities in pricing: what buyers will pay, what they will trade away to get it, and how the price list should be laid out.
Chapter 01
When price follows cost-plus or the last competitor quote
In many B2B companies the price list is a historical document. Someone built it from cost plus a margin, a competitor undercut it once, a large account negotiated a discount that quietly became the norm, and the structure has been patched ever since. Nobody planned the result. Price is also one of the fastest levers a company has, which makes the gap between what the list says and what buyers would actually accept expensive in both directions. Price too high and deals stall. Price too low and margin walks out the door unnoticed.
Power Decisions treats a pricing question as a decision to be framed before it is researched. Our Decision-Research Matrix starts with the choice in front of you: raise a price, introduce a tier, bundle a service, respond to a challenger. The decision you face drives the research that is needed. A question about a single list price calls for a different study than a question about how three product lines should relate to one another.
We begin by listening. Your sales team already knows where price comes up in conversations and where it is used as a smokescreen for something else. We bring that knowledge into the study design, and the engagement plan is approved by you before any buyer is contacted.
An antique brass balance scale on a walnut desk, one pan sitting lower
Conjoint pricing sensitivity analysis and what buyers trade off
Asking a buyer what they would pay tends to produce a low number and a polite shrug. Conjoint pricing sensitivity analysis works differently. Respondents are shown realistic combinations of features and prices and asked to choose, which reveals how much each feature is worth to them by what they give up to get it. The result is a measured trade-off rather than a stated wish.
Hewlett Packard used this approach with Power Decisions on several B2B assignments involving printers and DMD disk memory. The studies used advanced online survey methods with respondent-adaptive questionnaires, and the conjoint pricing sensitivity analysis identified opportunities to build buyer preference by calculating the optimum price-performance mix for each B2B product line. For a private-label food producer, an 18-month multistage entry into a branded consumer category included pricing research using conjoint trade-off analysis alongside brand positioning, name idea generation and concept testing.
Conversations still matter, because numbers explain what buyers chose and not why. For Teletrac, the commercial vehicle GPS systems provider, two studies of Teletrac customers gathered price sensitivity, brand image and repeat purchase preference through one-to-one phone interviews. We pair Kinetic Depth Interviews with a quantitative phase when the audience is large enough to justify one, so the reasoning behind the trade-offs is on record next to the measurements.
Chapter 03
Setting price levels and structure you can defend to your own team
Levels are the numbers on the list. Structure is how the list is built: good, better and best tiers, options sold separately or bundled, volume breaks, service attached or priced apart. Buyers read structure as a signal about what the product is, so a clean design often matters as much as a small move in the headline number. The research is aimed at both.
We deliver an executive brief with the pricing options set out as real choices, following the same robust-decision discipline Power Decisions applies to every strategy question: two or more workable options laid side by side, with the evidence for each, rather than a single recommendation to accept or refuse. Sales leaders get the buyer language they need to explain the price, and finance gets the reasoning behind it.
Pricing work often sits next to B2B brand equity, since a brand that buyers rank above its competitors can carry a different price than one they see as interchangeable. If you are weighing a price decision now, call Thomas Brown, Senior Consultant, at 415-328-7927 or write to Tom@powerdecisions.com. A short call is usually enough to see which part of the question needs measuring first.
Power Decisions, Forest Knolls, California. Call 415-328-7927.