Online platforms are increasingly in competition, which makes pricing important as a strategic lever. B2B platforms in particular tie their customers in through longer-term contracts, which makes later price increases more difficult. This makes it all the more important to continuously develop price models further and to expand the platform consistently along the willingness to pay of the individual customer segments. Pricing for the online platform is a central building block for increasing profit.
Together with CustomersX®, the existing price model was critically evaluated, a new pricing mechanism introduced, pricing aligned to different customer-value segments, and a clear product roadmap developed. This was linked to concrete potential for future price increases. The result: a profit increase for the platform of five percent already in the first year.
Customer Value-based Decision Making
Customer-centric Transformation
Co-Creation
Customer Management
Compared with product providers, online platforms face the danger that, due to the high flexibility of creating offerings, numerous features are developed that individual customers may want but that do not trigger a higher willingness to pay across the customer base. One reason for this is also that most management and steering frameworks focus only on customer needs, not on willingness to pay.
To establish customer-centric pricing, we use our DTC approach. Not infrequently, we find that customer-centric pricing is reduced to the methods for measuring customers' willingness to pay. And since not every method can be used for every company, confusion can easily arise. But customer-centric pricing does not aim only at willingness to pay and price elasticity (which are certainly at the core). It is also about identifying the underlying value drivers and possible price-model and price-differentiation options — combined with a customer-value-increasing approach to discount management. On the basis of our pricing consulting, we proceeded in four steps.
As a first step
the starting situation was analysed comprehensively. The focus was on a deep understanding of the previous activities in offer management and pricing, and the duration of the individual customer contracts. It quickly became clear that, in the past, the offering had been consolidated too much, which created the challenge of offering added value specifically to the individual customer segments. In addition, offer management had become entangled in numerous functions, so that a quick technical change had to be ruled out. In a further step, the individual pricing mechanisms and price models were critically considered.
As a second step
the company's employees were comprehensively trained. Communication and the service area also need to be included in this training, not just product management and sales. A customer survey was then conducted in order to underpin the general pricing strategy with customer insights. In addition, a lighthouse project was defined in order to demonstrate concrete added value from the new pricing competencies right at the start of the project. Otherwise, pricing in industry can quickly get caught up in day-to-day business.
As a third step
the pricing strategy for the company was optimised. For this, the customer insights from the customer survey (willingness to pay, price elasticities, value-driver importance and different price segments) were compared with internal data such as customer value. This information was used, for example, to systematically increase cross-selling or the customer value of the D and parts of the C customers. A central insight in a customer-centric pricing project — and this was the case here too — is that, so far, terms have been used in communication and sales that do not strongly reflect customers' willingness to pay. Customer-centric pricing can develop its full power when the offering and communication are aligned to the value drivers from the customers' perspective. Here, price measurement with customers delivers the greatest added value. In addition, a system for price differentiation by customer value and an understandable price model were developed. As a result, the industrial company had a clear system in pricing.
As a final step
implementation support was provided. For this, the training on price measurement was repeated. A roadmap was developed for how pricing in the company is to be developed further in the coming years, and price controlling was established. In addition, a playbook was developed for implementing the pricing strategy and the lighthouse project. As a result, the company was able to increase profit by 8% already in the first year and is working further on improving its profit.
In summary
customer-centric pricing in industry offers very great added value. But it is not enough to carry out just one project and optimise the prices of individual offerings. Pricing needs to be established in the company and, above all, sales needs to be held much more accountable. This requires management to recognise the added value of customer-centric pricing in industry, and sales to be aligned not to revenue growth but to profit growth.
*We take confidentiality towards our clients seriously. The name has been changed; the results are real.
