29 Ways to Raise Prices in B2B

As we come out of the first waves of the pandemic, and businesses plan for a “new normal”, serious supply issues have popped up. There aren’t enough container ships, even ocean containers and pallets are in short supply. The great resignation makes it harder to find workers, and there is pressure on wages. Company profits are squeezed. What to do?

Cost reductions aside, to maintain profitability in these strange times companies need to take pricing action. Different approaches are available for raising prices, but increases must be carefully implemented. Protect company growth engines and the important sources of volume. Be crystal clear about who owns your target segments and why, since competition and differential value sets the boundaries for pricing.

29 ways to make your case

I have published 29 daily tips on how to raise prices, here is the full list:

1.?????Segment your customers. Understand performance needs, purchasing process and criteria. Figure out if they want to buy direct or through a distributor, and what the price sensitivities are. Be aggressive with price in segments where there is less competition!

2.?????Take a hard look at value propositions for each target segment. Your offerings can help customers reduce cost with e.g. fast adhering glue for speedy processing, or increase revenue, for example by enabling a green claim with water-based auto paint. There is nothing wrong with charging different prices in different markets.

3.?????Reconsider framing of price. Offer Good, Better and Best pricing for entry level, target level and "show off" products, respectively.

4.?????If an offering is late in its life- cycle and sales are declining, raise prices aggressively and at the same time migrate customers to newer SKUs with better margins.

5.?????Is it time to change go- to- market strategy? Less profitable SKUs can be sold through a lower cost channel, like e-business.

6.?????Communicate quality and value better! Be explicit about a product's price position in the market. Don’t let prospects guess -if you have a unique or premium product, say so to justify a higher price.

7.?????Research customer operations in detail, and determine what end benefit in $$ your product contributes. Then value-price accordingly, while being very collaborative around innovation and product development.

8.?????Classify products, services and parts by how unique they are. Mark up custom products, and lower the prices for common items like nuts, bolts or hose to help customers avoid runs to the hardware store.

9.?????Launch lower price offerings with higher margins, like private label items or insourced entry-level products.

10.?Bundle all parts needed for routine maintenance like gasket or belt replacement, including consumables. Charge more for the bundle than the components -it will still be cheaper than having a tech make several runs to the hardware store.

11.?Physically bundle SKUs that are usually bought together into an assembly or dispersion that facilitates subsequent manufacturing or operations. This provides value by improving customer manufacturing efficiency.

12.?If products and services are highly customized and difficult to replace, or if customer switching costs are high, exploit the price elasticity to adjust prices.

13.?Optimize price up for high use/ high utility SKUs. If price increases are risky, there might still be share of wallet to be had, and increased margin $$.

14.?When replacing or selling older equipment, try auctioning them. Many types of used machinery are in high demand and sell at favorable prices.

15.?Change how you define the product -add a valuable service component like installation or vendor-managed inventory to the physical product. Beware of negative add- ons that can destroy value and make it harder to extract price.

16.?Put Service offerings to work. Branding and productizing services allows for differentiation and higher price.

"Before implementing price increases, charter a cross-functional pricing team including Sales, Marketing, Finance and Operations."

17.?Change product packaging. Make it user-friendly with color-coding or find a returnable/ recyclable alternative. Or try broadening the range of options by offering bulk or tote quantities.

18.?Modify price structure with a different unit of measure. Activity-based pricing is used by companies billing by customer activity like hours run, gallons pumped, number of paint cans made, or number of students trained.

19.?Don’t over-complicate price lists and discount schedules, tempting small customers to haggle. Use payment terms to differentiate pricing between large and small accounts.

20.?Understand customer preferences -buy or rent? Sometimes it is easier for customers to pay for service contracts or rentals than to have capital budgets approved.

21.?Subscription models are popular in software and can also be used for consumables or rental equipment. Make the relationship stickier with automatic renewals as long as the contract is not cancelled.

22.?Experiment with combinations of fixed and variable price. For example, charge a monthly fixed fee with variable charge based on usage, or a higher fixed fee with a capped variable and see what works best for customers.

23.?New clients can be hooked with a basic product and offered self-serve upsell for more functionality like more frequent service visits, or consumables included.

24.?Change cut-offs and target levels for volume discounts and rebates. Base rebates on usage and lot size, but also consider how the customer makes decisions, and territory maturity.

25.?Enforce existing contractual price pass-throughs and surcharges in place for fuel, shipping costs and raw materials.

26.?Change the pricing context and mark up freight and rush orders. Levy a surcharge for small orders that are costly to service.

27.?Launch new offerings that are easy to create, dovetail with existing sales and are of help for the customer. Items like multi-year service contracts or delivery and set-up of equipment can be profitable extra sources of revenue.

28.?Stimulate new demand with an offering and pricing configurator tool on the website. This lets a prospect try different combinations not previously considered. Gate it and generate a lead at the same time!

29.?Analyze customer spend with your company, leverage switching costs when they are high and be bold with pricing where your offering represents only a small percentage of customer overall spend.

Implementation -the Devil in the Details

Before implementing price increases, charter a cross-functional pricing team including Sales, Marketing, Finance and Operations. Reexamine prices individually -some may be too low and easier to raise. Be a leader and signal pending price increases through trade media. This way competitors will have a chance to follow the leader, to the benefit of all.

Make sure to provide product and service options to retain price-sensitive customers. Cheaper, stripped-down “Good” versions work well, as do lower-priced?offerings available in limited quantities.

Tip from the Trenches

When communicating price increases, provide an explanation around cost run-ups and how long it’s been since prices were adjusted the last time. Don’t shy away from highlighting how much the customers have raised their prices.

Per Ohstrom is a fractional CMO with Chief Outsiders, the nation’s fastest growing “executive-as-a-service” company. He works with industrial and other B2B companies to find sustainable growth.