Global businesses use software that assists them with pricing, as this is a critical area that needs maximum attention in the B2B environment. It is important for companies to stay on the cutting edge by offering the right price at all times. The phrase garbage in, garbage out can be the problem that will cause artificial intelligence and machine learning to fail. Professionals in B2B marketing have concluded that B2B pricing algorithms will not replace a solid strategy and business judgment; they should be used to augment it.
This is an area where the human touch makes a big difference as quality service can cause a business to do better than a competitor who offers low prices and poor customer service. It has been proven that business on all levels does better when there is an element of trust in the midst of all transactions.
Pricing solutions can be developed based on advanced analytics, sound strategic input by a cross-functional team and segmentation. There was adoption across the company, a pricing structure that everyone could understand and high profitability. This improvement has caused companies to keep on expanding long after they have been implemented.
Even though there is no master algorithm that would produce reliable recommendations all the time, B2B marketers don’t mind as using a specific approach to pricing all the time is not recommended. The best pricing optimization is driven by elasticity and this is not impossible for B2B businesses.
Smart Data Analytics versus Pricing Optimization
There are software that promise optimization using AI solutions but it can be a trick. Smart analytics and pricing optimization are not the same. Using the term pricing optimization often leads to unrealistic expectations that will cause problems after a while.
An elasticity number can be calculated for the customers a B2Bcompany has, it is very easy to calculate an elasticity number for every product and every customer a B2B company has. The only problem is elasticity has some preconditions that you will need to consider. As there will be frequent price changes for customers and products, you’ll need good competitive price data and a high volume of transactions (millions are preferred)
You can find problems with hitting your target if these preconditions were not met, as you could be working with a moving target. The external variables should also be considered, they are inflation, minimum wage, commodity prices and other unstable factors that are not mentioned here. Accounting for these variables can be difficult to do in the B2B environment, even though their impact will be felt.
The other variables that can affect B2B businesses are contracting and negotiations, customizations of offers and poor data quality.
Enhancing B2B pricing can be described with accurate terms such as pricing power or pricing sensitivity.
Measuring the pricing power at the product level and the customer level is possible for B2B businesses and it helps them to achieve a degree of reliability. Industrial and manufacturing businesses need value-based pricing and sound pricing strategies with advanced analytics, to identify price sensitivity that is realistic and achievable and delivers the lasting competitive advantage that B2B executives need to improve their businesses.
We at NextBee will make effective use of big data and put semantic analysis that will perform competitive analysis to work. We will use predictive analysis to improve the projection for revenue and neural networks and will employ effective project managers who will know what to do to grow a business. Reach out to us and let’s talk more.
