For the distributor
Price setting in the B2B sector compared to the B2C segment has one additional important aspect – namely individual trading conditions.
Only when these B2B relationships are ‘ad hoc’ can we use methods similar to the B2C market and use a single price list, possibly depending on the volume of the transaction.
However, as a rule, on the B2B market, we talk about product prices that are individually tailored to the customer and the purchasing situation. In addition, in relation to regular customers, we have far more complex possibilities of shaping such business conditions as trade credit, delivery time and cost, service and replacement conditions, etc. – this is the whole package that affects our “value proposition” that we present to the customer and … our costs (which we have to take into account when calculating the final margin).
Customer relationship sustainability and the system of individual pricing have important consequences for pricing strategies in the B2B segment:
First of all, customer segmentation is becoming a critical element of the process, as it should be the basis for building the whole offer, including in particular adjusting the price through appropriately selected discounts (or mark-ups if the price is created “from below”).
Secondly, the sustainability of the relationship gives us much more information necessary to successfully segment the customers.
Finally, the differentiation of discounts makes the process of determining flexibility and cross-flexibility difficult (we have a whole set of product prices with different discounts, and even if we have a consistent discount system (which is however not typical), the customer’s discount usually depends on the whole turnover made by the customer and not the turnover on a particular product, which causes the cause-and-effect price-demand relationship to be lost on the scale of a single product).
Taking into account the above factors and the fact that margins in the distribution segment tend to remain under strong competitive pressure, it is becoming crucial to:
develop a price logic (which depends not only on the product but also on the specific customer and purchasing situation)
design the pricing processes which, due to the need to customise prices, become much more complex than for example in B2C.
We support distributors through:
- Audit of pricing processes
- Development of pricing logic
- Designing price decision support systems