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B2B Product Pricing
This document discusses strategic considerations for business-to-business product pricing. It emphasizes that pricing encapsulates a company's value proposition, communicates its brand value, and positions the company relative to customers, markets, and competitors. Pricing must balance operational metrics like costs and volume with the intersection of supply and demand determined by customer value and competitiveness. The document also covers pricing schemes, revenue models, margins and profits, tiered pricing, discounting, and developing an advanced pricing model.
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B2B Product Pricing
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- 2. PRICING STRATEGIC ROLE OFPRICING ▸ Pricing is the integration point of your Go-To-Market ▸ Encapsulate your Value Proposition ▸ Communicate your Value , your Brand ▸ Position you to the Customers and Markets ▸ Position you within your Competition ▸ Last but not least , make your revenues and investment ! ▸ And Use pricing to scare away the customers you don’t want ;) ▸ Pricing Power !
- 3. PRICING PRICING IS PARAMOUNT! ▸ What’s your average selling price? ▸ Intersection of supply and demand which measures external factors ▸ customer value ▸ competitiveness ▸ while it constrains operational metrics like ▸ Costs ▸ Volume ▸ Risk ▸ Your ASP places a ceiling on your CAC, which in turn draw sales model(s)
- 4. PRICING PRICING SCHEME ▸ Customerfinancial view : OPEX vs. CAPEX ▸ Transactional : License fee plus annual maintenance fees -> CAPEX ▸ Subscription based as SAAS - > OPEX ▸ Do not leave money on the table ! ▸ Professional Services, Training, Certification ▸ Accounts Up Sell , Cross Sell . Partnerships ▸ Discounts management ▸ Freemium ? (e.g Box, Dropbox)
- 5. PRICING PRICING <- REVENUEMODEL <- STRATEGY ▸ What’ s your Pricing Strategy ▸ Value based pricing is based on product benefits ▸ Competitor Pricing is based on being below, at, above competition pricing ▸ Cost Plus pricing is based on cost to plus margin ▸ Gain vs. Save and Vitamin vs. Painkiller , ROI and TCO ▸ Start with a Value Based Pricing aligned with your GTM and value position ▸ Identify your discounts policies, pricing structure by segments, compensations ▸ What’s your CAC and LTV ? does it allow you to be sustainable and grow ? ▸ And likely , you are undercharging !
- 6. PRICING MARGINS , PROFITS ▸Net sales = Gross sales – Discounts, Rebates ▸ Gross profit = Net sales – COGS ▸ (e.g : 80% in SAAS , 20% in eCommerce) ▸ Operating Profit = Gross Profit – OPEX ▸ Net profit = Operating Profit – taxes – interest ▸ Total and Segment these
- 7. PRICING TIERED PRICING ▸ STARTER- PRO - ENTERPRISE e.g ▸ Typical for SAAS ▸ Revenue advantage over Volume Pricing ▸ Segmentation , tiers fences ▸ How many customers you expect to enter at each tier ▸ How many customers you expect to upsell over what period of time ▸ How much churn you expect at each level ▸ Discount for yearly , multi year contracts with payment upfront
- 8. PRICING DISCOUNTING ▸ Why doyou discount ?? ▸ Investment in a Logo, references ▸ Contract length ▸ Competition, Market ▸ Deal size ▸ Because….. ▸ Your pricing should take in account discounting upfront ▸ Make sure that there is a ROI for you ▸ Align with your Revenue Management ▸ Draw the red lines per segment, channels ▸ Do not accept upfront discount asked by a customer, acknowledge and reframe it to your value first ▸ Beware of not dragging down your overall pricing , get a return in exchange ▸ Beware of payment terms which should be discussed upfront prior negotiation
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- 10. THANKS YOU ! CONTACTME AT LUC@ROCKSVENTURES.COM @LUCBOILLY LINKEDIN ANGELLIST