Editorial
The Gist
- Strategy insight. Pricing strategies significantly impact revenue, with 25% higher ARR for firms that revise theirs.
- B2B focus. In B2B, pricing influences perception and can make or break a deal in a tight economy.
- CFO involvement. CFOs play a key role in pricing, especially in tech and manufacturing sectors where deal sizes are larger.
How companies price what they sell can range from the precise and data-driven to the seemingly arbitrary. While most will scrutinize pricing with some regularity, not all are making pricing decisions based on value.
Let's take a look at pricing strategies.
Unlocking Revenue: Master Your Pricing Strategies
Research by OpenView in 2021 found that just over three quarters of SaaS companies revisit their pricing at least once a year. But fewer than two-in-five companies (39%) base their pricing on value. The rest make a judgment call (27%), copy from competitors (24%) or take a cost-plus approach (10%).
Yet pricing strategies have an extremely powerful impact on revenue growth. The same report found two-in-five companies that altered their pricing reported a 25% higher increase in ARR as a result.
From a brand perspective, pricing can also have a bearing on where a product or service is positioned against its competitors. Are you the low-cost, no-frills option? Or are you the premium offering with white-glove service to match?
B2B Pricing Strategy: Perception and Profit
In B2B purchase decisions, does B2B pricing strategy really impact how you’re perceived by customers? With a tight economy and the finance team examining every purchase, you’d expect so.
Looking across comments that regularly appear on social media, you’ll often see complaints about how difficult it is to access pricing information on many vendors’ sites. But in recent research by Considered Content, this didn’t seem to be a deal-breaker for B2B buyers. Surprisingly, just 18% put this in their top three key factors for making purchase decisions faster and easier.
Of course, B2B sales tend to involve several people, and CFOs are often part of buying teams. Cost-conscious purse-string holders can make or break sales, especially in times when business spending is far from frivolous. With that in mind, B2B pricing strategies should never become a friction point.
Related Article: Revamp Your B2B Playbook for Smarter Marketing
Marketers' Growing Role in B2B Pricing Strategy
This may be why senior decision makers are turning to marketers for insight. New research by the B2B Effectiveness Engine across three different sectors has revealed that 85% of marketers in tech are deeply involved in pricing decisions. This goes up to 87% in manufacturing, but drops to 60% in professional services.
Deal size appears to have an impact. In tech and manufacturing, the larger the deal, the more likely marketers are to have involvement. For tech deals of over £500k, 93% have involvement in setting B2B pricing. For those under £120k, this drops to 68%.
It’s a similar picture in manufacturing. For deals over £500k, 92% have involvement. For those under £120k, this drops to 58%.
Related Article: What B2B Buyers Want, and Ways to Align Your Customer Journeys
Brand Differentiation Boosts Pricing Strategy Input
But the opposite is true in professional services. For deals over £500k, 52% have involvement. For those under £120k, this rises to 64%. One conclusion we can draw from this is that the larger professional services firms may see marketing as less valuable to the business.
What’s interesting is that, across all three sectors, those marketers that have managed to carve out a differentiated position for their brands, are more likely to have input on pricing. In tech it rises from 85% to 91%, in manufacturing it goes from 87% to 94% and in professional services we see a massive jump from 60% to 91%.
Why? For a start, marketers who have crafted a properly differentiated position are simply doing a better job. The same data set reveals they are significantly more likely to be top performers in lead generation, demand generation and brand building. It’s likely that this translates into them being seen as more important to the business than an average performer.
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Marketers who’ve differentiated their brands are also closer to their customer, and can offer quality intelligence and data that can inform decision making on pricing.
Related Article: Top Industry Insights on Differentiating Your CX Program to Drive Growth
Value Trumps B2B Pricing Strategy Decisions
It’s worth remembering that while pricing strategies are important, value is even more important. Those marketers who really understand — and have helped to craft — their company’s value proposition, have data to back it up and are demonstrating significant impact in the business. It’s only right, therefore, that they get a seat at the table where the big decisions are made.
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