Keep it Personalized: Dynamic Pricing in the B2B Universe
More and more companies are attempting to adopt dynamic pricing as a means for increasing profit and revenue. Many of these companies are B2C retailers. This raises the question: How do rapid price changes in the consumer environment influence the relationship between brands and retailers?
Real-Time Pricing Adjustments
Business revenue is fueled by a number of major factors. One of these factors is pricing. B2B companies usually have a rather fixed pricing strategy that guides them. The more dynamic part is the promotion budget, which can be dynamically allocated between the different retailers in order to maximize its ROI.
Dynamic pricing can help even the most profitable B2B companies increase profit. By automatically analyzing a wide range of variables – consumer trends, competitor behavior, global and local regulations – dynamic pricing platforms can generate real-time promotion recommendations that create larger profit margins for each individual transaction. In an era where service and product providers are expected to respond with lightning quickness, precise pricing adjustments hold significant value.
Establishing a Pricing Strategy
In order for dynamic pricing to actually work, the brand needs to accurately predict, using complex AI technologies, the price changes each promotion will trigger at each channel; and, based on price elasticity, understand how this price change will eventually affect sales, revenue and profit.
Mapping the Variables
Once a pricing strategy is established, brands can use simulation tools in order to optimize their promotion spend and achieve their goals. For example, a certain discount given to a specific retailer may not change the end user price, thus leaving sales as is, adding to the bottom line of the retailer on the brand’s account (zero sum game). For a different retailer, a similar discount may all be transferred to the customer, increasing sales and revenue.
- Buy One Get One Free
MAP Pricing – When the Brand Sets the Price
A MAP price is a minimum amount that resellers agree not to advertise below. For example, if a backpack company sets a MAP price of $50 for its best-selling item, then all resellers including brick and mortar stores and Amazon resellers are obligated to advertise this product at $50 or more.
In this case, the brand is actually pricing like a retailer – and dynamic pricing enables to enforce a more dynamic policy.
Entering the Era of Adaptability
In order to maintain their growth, brands need to be able to continually adapt to dynamic realities. The reality of retailers pricing rapidly and personally, while the brands maintain fixed pricing that does not reflect the economic value of their goods, is being disrupted by the rise of dynamic pricing.