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Value and Price

How Much Will Your Customers Pay?

In today’s two percent economy, business-to-business companies are challenged to grow. As such, many of these businesses are sharpening their pencils and digging into all aspects of their business in an effort to uncover growth opportunities. Yet understanding where to look for growth can be a challenge, particularly when it comes to an organization’s pricing strategies. Knowing where pricing premiums can be achieved and applying methods to capture this premium can be difficult when dealing with myriad business and market complexities.

Often, executives in B2B companies intuitively know that they are leaving money on the table but are unable to understand the magnitude of the issue or unable to resolve the issue primarily due to three challenges:

  1. Price Elasticity
  2. Limited market and/or competitor insight
  3. Price Transparency

At Blue Canyon, we find there are typically three things that every company must understand in order to overcome these challenges:

  • A deeper understanding of each customer segment’s needs
  • How each segment realizes benefits from the products/solutions provided
  • How differentiated these products/solutions are for customers in each segment

Understanding and evaluating these three elements will help B2B companies better understand in which segments they have greater pricing power and can hope to realize premium prices. For example, in a segment where customers derive significant benefits from a particular product/solution, and where this product/solution is highly differentiated from competitors, significant pricing premiums can and should be achieved.  Conversely, in segments where lower benefits are realized from a product/solution and/or a product/solution has minimal differentiation, organizations must act as price takers and price at lower premiums in line with the market.

Simply understanding in which segments premiums can be charged is only part of the battle. Being able to capture this value in the face of price transparency and other market complications can be difficult.  One approach is to tailor offerings, with minimal investment, to segments that have greater pricing power.

These ideas, insights, and issues are explored further in our latest white paper, How Much Will Your Customers Pay?  And How Can you Capture This Value?

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