Why (and How) B2Bs Should Raise Prices Right Now

posted on February 8, 2022

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In March 2021, a massive ship named the Ever Given ran aground in Egypt’s Suez Canal, which had knock-on effects around the world. Since then, and as we have headed out of the pandemic, other serious supply chain issues have surfaced. More recently, the great resignation has made it harder than ever to find top talent, and a recent study found that 88% of Americans are worried about inflation as we head into the holiday season. Nowadays, there is more concern than ever about something bad happening to the economy. All these issues can squeeze company profits. What should B2B companies do about it?

When profitability suffers, the first order of business is to lower company costs. For example, Lean Process Improvement can have lasting positive effects on the bottom-line. Businesses can and should also consider outsourcing functions like IT, payroll, and even manufacturing. There may be alternate raw material suppliers, contractors, or temps that are capable of bringing instant skills to your organization.

Cost reductions aside, to maintain profitability in these strange times, companies will also need to take pricing action. Different approaches are available for raising prices, but increases must be carefully implemented, with an eye to the competition. It is also important to look out for possible disruptors lurking in the shadows. 

Strategy

Any pricing initiative should start with an understanding of company growth engines and the important sources of volume. Don’t jeopardize those. It is also necessary to have good tabs on market participants, since competition and differential value sets the boundaries for pricing. Improving the differential value of offerings makes it easier for customers to pay more! 

At the core of business strategy is segmentation, based on a solid understanding of customers performance needs, purchasing process and criteria. Do they want to buy direct or through a distributor, and where are there price sensitivities? Less profitable SKUs can be sold through alternate channels like ebusiness.

Be more aggressive with price in segments where there are no clear substitutes. Make sure value propositions are fine tuned for each target segment. Do the company offerings help customers reduce cost (e.g. faster adhering glue for speedy processing), or increase revenue (maybe enabling a green claim with water based auto paint). There is nothing wrong with charging different prices in different markets.

1. Re-frame the Price

Products, services and parts can be classified by how unique they are. Custom products and parts can be marked up, while items like nuts, bolts and hose need to be lower priced to avoid substitution. Having Good, Better and Best products for entry level, target level and show off products allows pricing flexibility. Lower price offerings with higher margins, like private label items or insourced entry level products also have their place in the product range.  

Items that are usually bought together can be bundled into an assembly or dispersion that makes subsequent processing faster. Parts used for routine maintenance, including consumables, lend themselves well to bundling. Imagine the convenience of a kit for gasket replacement, saving time and trips to the hardware store. Bundles can be priced slightly lower than the sum of the parts, or higher if there are efficiency gains.

If an offering is late in its life- cycle and sales are declining, customers can be migrated to SKUs with better margins. Exploit price elasticity when switching costs are high, or there is a great degree of customization.

2. Re-define the Product

Product definition can be changed by adding a valuable service component like installation or vendor managed inventory to a physical product. Delivery or maintenance contracts can be branded and productized for better price differentiation. Changes in product packaging are relatively easy -adding color coding on boxes, or offering tote quantities of liquids both offer opportunities for price adjustments. Price structure can be modified with a different unit of measure, and charging by activity like hours flown, gallons pumped or number of students trained. Industrial customers often prefer renting over buying, whereas Government customers may have easier access to capital budgets. 

Subscription models are popular in software and can also be used for consumables or rental equipment. Automatic renewals make the relationship stickier. The same product can be offered with different variations of fixed and variable price. Certain customers will prefer a monthly fixed fee with a variable usage charge, over a higher fixed fee with a capped variable. 

3. Communicate Value 

Many companies are shy about communicating quality and value. Be explicit about a product’s price position in the market. Don’t let prospects guess -if you have a unique or premium product, say so to justify a higher price. Research customer operations in detail, and determine what end benefit your product contributes. Then value- price accordingly, while being very collaborative around innovation and product development. Stimulate new demand with an offering and pricing configurator tool on the website.

4. Active Use of Terms 

Change the price context and mark up freight and rush orders, and have a surcharge for small orders. New clients can be hooked with a basic service, then offered self-serve upsell for more functionality. Changing cut-offs and target levels for volume discounts and rebates helps improve margins. Enforce surcharge rules in contracts for fuel, shipping costs or raw material price pass-throughs. Optimize price for high use/ high utility SKUs. If price increases are risky, there might still be a share of wallet to be had. 

If there is a great need to differentiate pricing between customers, payment terms can be adjusted.

Implementation

Before implementing price increases, charter a cross-functional pricing team including Sales, Marketing, Finance, and Operations. When deciding on pricing adjustments, reexamine prices line by line. SKUs that have not had increases recently may be priced too low, hence there will be less resistance to increases. Always make sure to provide product and service options to retain price sensitive customers. Cheaper, stripped-down “Good” versions work well for retaining customers, as do lower priced offerings made available in limited quantities only. 

When communicating price increases, provide an explanation for your decision. Don’t shy away from mentioning how long it’s been since prices were previously adjusted, or highlighting how much the customer has raised their selling prices. It is also a good idea to signal pending price increases directly to important customers. Announcing upcoming price moves through trade press is not collusion, and gives competitors a chance to follow suit, increasing industry profitability across the board. 

Bottom Line

It is difficult to make a conventional price increase stick. Effective pricing starts with segmentation of the market, based on customer needs. With pain points well understood, an offering meeting segment needs can be designed and priced according to the value it provides. Adding service components to products can add differentiation, as can innovative pricing models like subscriptions or activity-based pricing. No matter how a company arrives at a price, it is important to communicate the value of each product and service.

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4 Points of Failure in B2B E-Commerce

posted on August 14, 2021

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B2B e-Commerce market is on the rise these days. Due to innovation in digital marketing and e-commerce, more companies are looking for B2B business solutions so that they can easily interact and trade with big businesses. B2B e-commerce allows companies to reach businesses around the globe in no time. Cloud-based e-Commerce makes inventory and order processing a smooth task. Businesses can not only find new customers but also retain clients for longer prospects. 

But, that is all the bright side! 

Another side of the coin is that not many B2B e-Commerce businesses are able to survive and they fail quickly. What could be the reasons? In this article, I am sharing 4 points of failure in B2B e-Commerce. Start noticing these red flags from the beginning so that you can leverage all the benefits that this industry has to offer.

1. You do not have a well-designed website 

Many businesses think that well-designed, organised and structured websites are for individual customers and not for businesses. This is why they do not pay much attention to creating an eye-catching website for B2B e-commerce. However, this is a bad practice and can easily lead to the failure of your business. Here are a few ways how you can ensure a well-designed website: 

  • Just like B2C customers, B2B customers are looking for websites that can be navigated easily. So make sure your website has optimised navigation
  • B2B customers expect a clear, concise and smooth checkout process
  • Branding and reputation are equally important in B2B businesses just like B2C businesses 
  • B2B websites must include CTA’s (a lot of them!) because without them it might be difficult to attract the customers 
  • An estimated pricing calculator will spruce the website up and will make buying much easier for B2B customers

If your website is nothing like this, it is time to revamp it and turn your steering towards success. 

2. You are not building a social media presence

We all know that people nowadays devote more time and energy to social media. They not only use it to communicate with their friends and family but also to give their opinions on topics and say how they are feeling. So if you think that being a B2B e-Commerce business, you do not need a social media presence, you must think twice! Here’s how social media can prevent your B2B e-Commerce from failure: 

  • You can use social media as a marketing tool and release important information to your customers 
  • You can use social media as a sales tool and find potential buyers and new leads
  • You can use social media as a feedback and support system where you can seek feedback from your customers and also provide them with customer support whenever required 
  • You can use features like storytelling to engage with your audience and build a reputation for your brand 

By not using social media properly, your B2B e-Commerce business is missing out on many things. 

3. Not providing sufficient product data to customers

B2B e-Commerce is all about product information. You must provide your customers with all the necessary information about a product so that they can make a purchase. Only the product name and price will not be enough as other competitors will be providing the same. If you want your B2B e-Commerce to succeed, you have to think beyond the syndicated content provided by manufacturers. Here are a few ways by which you can set yourself apart: 

  • Add a variety of product images such as 360-degree interactive images, specification tables and specification calculators 
  • Include information such as installation guides, warranty information, and additional safety information for your customers
  • Provide clear and detailed product descriptions and promote transparency 
  • Include product videos, tutorials or demonstrations to engage customers with your products  

Do not assume that your customer already knows about a product. Even if they do know, reading all the information on your website can help them make a clear choice. 

4. Not giving much importance to user experience 

Many B2B business owners have this notion that they do not need to please the customer or provide a great user experience. This could be a reason for the downfall of their B2B e-Commerce business. You must be able to convince customers that you are providing them with a high-quality product and doing business with you will bring them long-term benefits. Your product will not only benefit them but also their customers. Here are a few ways to make it possible: 

  • Use the power of storytelling to engage your audience (it could be a short video, a testimonial or infographic) 
  • Add a live chat option on your website enabling customers to get quick answers to their queries 
  • Allow your customers to talk to any of your account managers who can provide them with personalised guidance while they buy a product 
  • Optimise site navigation, search, check out, listing pages and shopping cart to meet the latest standards of buyers 

Treat your clients as people, not businesses. When decision-makers buy something for their business, they think like people buying things for themselves. They have the same expectations and questions in their minds. 

Wrapping up

Did you notice any of these red flags in your B2B e-Commerce business? If yes, then it is time to make things right and run your e-Commerce business the correct way! Just remember that your website must be well-designed, organised and optimised for customers. Include a variety of CTA’s on your website. Work on building a social media presence because that is the best way to stay connected with your customers and find new leads. 

Make sure that you are providing enough information about your products on your website that sets you apart from your competitors. Lastly, treat your customers as people and not just any other business. Take care of their expectations and provide them with a seamless user experience. Follow these tips and in no time, your B2B e-Commerce business will experience great success! 

The post 4 Points of Failure in B2B E-Commerce appeared first on SiteProNews.

Types of E-Commerce – Building a Recession-Proof Online Business

posted on August 7, 2021

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According to Wikipedia, the definition of E-commerce can be defined as any transaction conducted over the internet. The term is actually an abbreviation for “electronic commerceâ€Â. Today we will be discussing the different types of E-commerce businesses that are flourishing today, and how you can build a recession-proof online business in today’s market!

The concept of online buying and selling is nothing new, but few actually know how robust the industry has become. A prime example of how popular E-commerce has become is the company Ebay. 

For those who don’t know, Ebay is one of the most well-known sites for individuals to buy and sell most anything they want. (Ebay is so popular that in 2019 it was estimated that over $22 Billion worth of goods were transferred just that year alone!)

But this kind of E-commerce is just the tip of the iceberg!

The Types of E-Commerce Everyone’s Using (And Why Some of Them Might Not Be Worth It)

A famous quote by the late technological business legend Steve Jobs gives insight into how why certain ideas and businesses are better than others:

“If you really look closely, most overnight successes took a long time.†– Steve Jobs

A study was conducted which revealed that 42% of all businesses fail simply because there is no market demand! (29% fail because of a lack of funds and another 23% fail because of bad team chemistry)

This means that most businesses fail due to a lack of market research! They didn’t even know if their products were in-demand! That shows a lack of research and planning. 

Any recent article discussing business over the last 20 years will mention the digital revolution that has taken place with the internet. If a business isn’t online, it isn’t really competing. (And keeping your E-commerce business relevant is more important than ever!)

1. B2B (Business to Business)

This kind of E-commerce is highly profitable and represents a majority of all transactions done online. When a business buys something from another business, there can be physical products involved, but just as much business is completely virtual between companies. 

You might already see the weakness of this kind of E-commerce, however, since any kind of physical products had an incredibly difficult time being transported and delivered in 2020 during the pandemic. (We are still experiencing this toll on supply chains)

So if a business was only exporting physical stock, the moment that item isn’t in demand (like forklifts or something) and or couldn’t be delivered, suddenly the business is going broke. 

(Another reason many companies were unable to stay afloat in 2020 even if they did have a demand for their goods was because of freight restrictions. Many E-commerce companies rely on freight to fulfill orders, so when borders were closed, suddenly common items were hard to acquire.)

2. B2C (Business to Consumer)

This next one comes as no surprise, Amazon is easily the biggest and most popular E-commerce site in the world used by consumers right now. The online shopping giant claims they made $125.6 billion in the fourth quarter of 2020 alone. 

It was reported that nearly 50% of the US population accessed Amazon via their mobile app in September of 2020. 

How did Amazon perform so well in what many consider a terrible year economically?

Here’s why:

  • 89% of consumers say they trust Amazon and would buy from them.
  • Over 150 million people get free shipping with their Amazon Prime subscriptions. There is a financial incentive to buy on Amazon because of how much money they save on shipping each year.
  • 82% say that the affordable prices on Amazon are the primary factor for them when shopping on the site. 
  • And the ease of access continues to attract mobile and desktop users alike!

How does Amazon pull it off? They don’t sell one thing, they sell practically everything the average consumer wants and needs!

The problem with this business model is that it isn’t reflecting smaller businesses or more niche-specific brands. 

It also doesn’t talk about how many people didn’t buy as much or anything online because they had lost their jobs!

It is important to ask oneself whether the product you’re selling is viable in a good market or a bad one. This is what’s called a “recession-proof†business model.

3. Business Financing

Do you know what the sexiest product in the world is? Money. 

Money is popular and in-demand. 

A 19-year-old waitress, out of a job and quarantined at home in 2020, was stuck at home with no source of income. She turned to a site called OnlyFans, a platform which is notorious for its users selling nudes to paying subscribers.

That’s right, this gal had bills to pay and needed money. (And so do a lot of people. As unemployment is reaching record highs, OnlyFans reports that over 170,000 people are joining the platform every single day!)

Do you want to know who didn’t have to transfer their business online, or join OnlyFans to make a living? Business loan brokers

That’s right, specialists who connected businesses with the funding that they needed to stay afloat. 

This would technically be called “Business to Businessâ€Â, except there is a middleman connecting each party together for a cut. 

79% of small businesses have an outstanding debt, and it isn’t always to stay afloat either. Enterprises are always in need of capital for a myriad of reasons. The point is that money is always at the center of it. 

No matter how bad things get, or how good they get, money is always going to be in demand, just like a business loan broker. (And there are no shipping costs!)

Conclusion

B2B and B2C are becoming synonymous with commerce as a whole, with retail business becoming highly speculative. (There are certainly exceptions, but it is an established fact that more people are doing business online)

By essentially selling money as the middleman, you position yourself as a broker who profits no matter how bad things get. (Because when things get hard, businesses take out loans, and they will contact brokers to help)

That’s a real “recession-proof†business model!

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