With B2B distributors under increasing pressure from manufacturers selling directly to their customers and new marketplace entrants, pricing has taken on added importance when it comes to improving margins. But should distributors embrace advanced pricing techniques, such as dynamic pricing, or stick to creating value around the products they sell?
Panelists squared off on the topic of pricing during the latest MasterB2B Un-Webinar, “Can advanced pricing really save your margins?,” hosted by Andy Hoar and Brian Beck.
Hoar, CEO of Paradigm B2B, and Brian Beck, CEO of Beck Ecommerce, divided up onto opposing teams to debate whether B2B distributors and manufacturers should embrace advanced pricing as a means to reverse the negative margin trend.
Beck was the leader of “team evolutionary,” which took the position that advanced pricing isn’t something that distributors needed to do right away. Team evolutionary panelists said distributors are better off optimizing the basics versus implementing complex pricing solutions. Joining Beck on team evolutionary were Kristin DeLoach, senior director of e-commerce at global commercial furniture manufacturer Kimball International, and Darren Taylor, senior vice president for marketing and digital at FleetPride.
Hoar was captain of “team revolutionary,” which took the stance that advanced pricing was easier to implement than most people realize and that it yields returns quickly. Taking up the cause for advanced pricing were panelists John Bruno, vice president for commerce strategy at PROS, and Enrico Sieni, vice president of pricing and analytics at MSC Industrial Supply Co.
The pricing debate took place across three rounds.
Hoar said the biggest issue that prevents people from really having deep conversations about pricing was the issue of price transparency.
“The question we’re going to pose here is, should B2B sellers publish their pricing offers to everyone, including guests to their website, or be more guarded and require a login to see these offers?” Hoar asked.
PROS’ Bruno said distributors should “absolutely” share their pricing transparency because the markets are moving in that direction. Making a customer log-in or “push a button” for pricing causes unneeded friction for customers. “When they have that feeling, whether right or wrong, they’re going to go elsewhere,” Bruno said. “So, getting that out there and giving them some directionality is the first way to welcome them into your four walls.”
FleetPride’s Taylor countered that distributors shouldn’t start with transparent pricing online but instead focus on providing value to the customers by finding out what they care the most about. “You have got to think about what your business is, and think about what’s most important to the customer,” Taylor said. “You’ll get to pricing, maybe differently for commodities than you will for more configurable products. Frictionless customer experience, there’s a lot more to that than just pricing, but that’s a big piece of it. You just need to be thoughtful about it.”
The Round 1 poll question was: Should B2B sellers require guess to login before showing pricing offers? Yes: 64%; No: 36%.
Round 2 asked if B2B sellers needed to monitor competitive pricing in real time. Team revolutionary’s Sieni and Bruno argued that distributors should monitor more than just completive pricing in today’s world of constrained supply chains and chip shortages.
“You obviously want to monitor all of these drivers,” Sieni said. “Not all of them, at the end of the day, require action on one side. There could be specific actions that you take as a company that offset some of these competitive drivers, and therefore you don’t have to change pricing as a result every single time. But turning a blind eye and hoping for the best is just not a smart strategy.”
DeLoach said competitive pricing monitoring was very important to a holistic marking strategy, but it takes a lot of resources to monitor pricing changes in real time. “Honestly, a lot of those resources would be better served managing your internal signals, especially in the current-day environment when you’re facing things such as heavy inflation, out of stocks, and so on,” she said.
Taylor said while Amazon, Walmart and Home Depot go head-to-hear in real time, distributors should be wary of changing prices in real time because that could alienate customers.
“It’s not about taking an action on every single data signal,” Bruno countered. “It’s about being more informed than your competition. And with regard to putting your pricing online first or second, I guess I would ask the question, do you want to be a customer experience leader or a laggard?”
The Round 2 question: Do B2B sellers need to monitor competitive pricing in real time? Yes: 40%; No: 60%.
Round three kicked off with the question, “Should B2B sellers actively re-price products based on changes in competitive pricing or is just occasional and opportunistic repricing good enough?”
“I think active repricing is definitely something that is needed across most industries,” Siena said. “ I think the fallacy is just isolating on the two extremes. ‘Set and forget’ is just not an adequate strategy. Constantly changing price can create some customer trust issues.”
DeLoach responded by saying that B2B purchases are complex and changing prices on e-commerce sites have a ripple effect across other channels.
“The complexity just kind of starts rippling out from there,” she said. “I’d say, in the past, several businesses I’ve worked on; it’s taken a minimum of six months to execute one single price change across the organization.
“If you think about how many different functions are involved in execution of pricing, it’s not just what you display on the e-commerce site. It’s all the backend systems and processes and resources that go into that.”
The Round 3 question: Should B2B sellers actively re-price products based on changes in competitive pricing? Yes: 70%; No: 30%.
The reaction from the two moderators:
“How do you reconcile two and three?” Hoar asked about the second and third poll results. “They’re almost contradictory. But, you know, I do think it’s reflective of the world we live in where people’s eyes are bigger than their stomachs. They want to do active repricing. They want to, but they don’t want to be monitoring things in real time. And they don’t want to have to change anything about their business processes. And I’m sorry, that’s not possible.”
“I think there will always be a role for contract pricing for budgeting reasons,” Beck said. “Folks in the B2B world need to operate off of a budget and there’s internal processes, etc. With that said, there’s going to be a component that I think always has contract pricing. I think there’s also a lot of product, a lot of pricing, that will happen through the sales process, where there’s a lot of consultative activity happening.
“It’s configuring something for a new space or a specific application or what have you, depending on your industry. That said, I do believe there will be a role for contract price or advance pricing and real time pricing.”