Win more work and protect margin – how B2B marketers can influence price
Whatever happened to the fourth P?
We're always asking how B2B marketers can have a greater impact on the metrics that matter most to the business – namely the big three: revenue; cost; and profit. It’s debated at all the industry events I attend. But debate typically focuses on sales growth and almost never on price. As one of the biggest strategic levers we can pull to drive ‘profitable growth’ – great blog here by Doug Kessler on the profit metric – we're missing a trick. The forgotten fourth P definitely deserves a little more attention.
Brian Macreadie, Head of Brand & Campaigns at Bryan Cave Leighton Paisner, and Gemma Davies, Director of Global ABM Strategy at ServiceNow, got me thinking. At a recent BMC event – So what’s the future of B2B Marketing? – Brian asked: “How many B2B marketers would know how a 1% increase in price, for example, could impact annual growth targets?” I'm pretty confident most could do the maths, but I think the real question is: how many ask that question in the first place and then go on to devise strategies to influence price?
An HBR study (Harvard Business Review) found that 85% of B2B organisations don't rate their pricing capability, whereas the most successful by market share excel in pricing to maximise margin. This presents a real opportunity for marketers to prove their commercial credentials. It may be an area in which we rarely get involved, but our skills are well suited to supporting more ambitious pricing strategies.
Two ways B2B marketers can influence price
Competitive RFIs, reverse auctions and procurement-led tenders are now standard practice. When there is little to distinguish one provider from another, there is often pressure to compete on price. If all providers are able to do a great job – which is often the case with most high-value B2B RFIs – clients can drive down price without sacrificing quality. It is no coincidence that a lot of briefs we receive at Stack boil down to a recurring problem in B2B: how do we win more with work without sacrificing margin? Being able to command a price consummate with your value and that protects hard-won profit is an important part of the answer.
At the BMC event, Brian McCreadie made a strong case for investing in a strong brand to influence pricing, but I think there are quicker and more tangible wins for marketers.
The HBR study I referred to earlier, identified three variables that the most successful B2B organisations understand better than their rivals that enables pricing to maximise profit:
Attributes and benefits that each customer truly values, and how much value is created for them.
Alternatives and the competitive intensity in the industry.
True profitability of the transaction after accounting for leakage in areas such as rebates, freight, terms, and inventory holding.
Knowing this, B2B marketers can certainly postively influence price by developing killer propositions, which is a skill every marketer should have. Propositions that 1) create more value in the eyes of the buyer and 2) reduce competitive intensity, can help to command pricing that protects margin and still win the work.
#1 Create more value by knowing your clients’ high-level goals
B2B buyers value partners who can create opportunities or solve problems that help them achieve their high-level goals. Knowing what these goals are – above and beyond what is stated in a client brief – and demonstrating how you are able to help achieve these goals better, faster, or at less risk and cost than the competition, creates a valuable and differentiated proposition that clients will pay for.
#2 Reduce competitive intensity by getting ahead of the RFI
The best way to reduce competitive intensity is to not wait for an RFI, but to create new opportunities that you are best placed to win – eliminating rivals and price competition.
Winning propositions find new ways to help client make money, reduce cost or mitigate risk they have yet to spot. In the pursuit of their high-level goals, how could clients be more successful? What have they and your competititors missed or overlooked that you are best placed to shine a light on?
Without a strong proposition, B2B organisations are vunerable to price competition and their margins at risk. But the good news is, marketers are well places to create more value in the eyes of the buyer. By crafting propositions that clearly point to a source of differentiation and create new opportunities ahead of the competition, marketers can support pricing to maximise profit – helping to win more work and protect margin.
For more on creating a winning proposition, check out: Bin the old B2B sales funnel and get to revenue quicker.