How to grow sales and raise prices

How to grow sales and raise prices?

Don’t let price be the first casualty in highly competitive B2B world

Price is often the first casualty in the highly competitive world of B2B. The problem is further worsened in 2020 as B2B companies compete in markets shrinking due to the pandemic. 

However, it is true that some companies manage to earn a higher price vs their competitors for seemingly comparable products. Someone once said, “anyone can grow sales”, “anyone can raise prices”. However, very few can “grow sales and increase prices at the same time”. This view was also echoed by Warren Buffet in his interview here.

Read further to learn how can you grow sales and increase prices at the same time.

Speed of response is often more important than price 

McKinsey conducted a survey of about 1000 B2B decision makers in 2016. It found that lack of speed in interactions with their suppliers was the number one pain point! Further, speed was mentioned twice as often as price. Today, with digital channels at its disposal, a B2B company can offer a speedy service consistently to its customers. It can then earn a price premium and a greater share of wallet if speed of response matters to its customers.

Example of one company that grew sales and raised prices 

A leading horticulture company maintained a higher share and margins with its largest customers even for a seemingly me-too product. How was that possible? One may think that the company had stronger relationships with those customers. But there was more to this success story. This company offered EDI based ordering and online delivery tracking. But, its closest competitor was using excel and email-based ordering process that was cumbersome for the customers. Further, this competitor needed 48 hours to confirm orders. However, this leading company was able to offer same-day order confirmation. The competitor also lacked online order and delivery tracking. Its customers had to call customer service and wait for an update. Even in this example, the customers would have negotiated on price with all its vendors. However, the customers valued speed of order to delivery and were willing to pay a premium for it. 

Superior customer experience can help you to grow sales and raise prices – even for commodities 

Bain & Co. conducted a survey of more than 400 purchasing executives in 2014. It showed that customers are willing to pay a 3% price premium for reliable delivery. This was true even for bulk raw materials.  Such commoditised products are often sold on low margins. So a 3% price premium can offer a significant upside to the vendors.

Bain survey

Why is it possible to earn a premium price even on commodities? This is because customers pay for the entire experience and not just the product – even in B2B! A B2B competitor may be able to replicate your product’s specifications. But it is harder for a competitor to replicate customer experience offered by you. This is because, capabilities to deliver a superior customer experience need to be hard-wired in the company. This includes business processes, systems, talent, and organisation culture. Replicating this DNA is difficult and takes time. So, a superior customer experience, is a source of sustained competitive advantage.  This in turn can help you to sell more and earn a price premium

Customers say they choose vendors on price – but that is never the full story

We have worked with several large public and smaller private equity owned B2B companies. All B2B sales teams say that they face price pressure from their customers. But then we always ask them what else will the customers say? Will your customers ever ask you to raise prices or not scoff at higher prices? B2B sales teams often only speak with their customer’s procurement team. It is the job of the procurement team to reduce procurement costs. So, the perceived pricing pressure keeps rising year-on-year! 

If you engage with your customer beyond its procurement function, you can uncover customer’s true needs. These will go beyond product specifications or price, and include the customer’s goals and challenges. The needs may not be limited to speed of response or those from the Bain survey. You need to discover it for yourself. Furthermore, the needs and their relative importance will also vary across your customer segments. 

You can also grow sales and raise prices! 

If you can uncover your customer’s needs beyond price, and deliver those, you can differentiate your offer. The cross-functional engagement required to uncover your customer’s needs also has an added advantage. It can give you a reality check on your competitive position as perceived by your customers. This can help you to further fine tune and differentiate your offer. 

By differentiating your proposition vs your competitors, you can avoid competing only on price. You can then earn a price premium and/or earn a higher share of customer’s wallet. Indeed, you can sell more and raise prices – and still keep your customers happy!

To start a conversation on how you can sell more and raise prices, please submit your email id below.

 

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About the authors:

 

Kedar Gharpure is the Director of B2B Growth Consulting Ltd. He has served heads of several Fortune 250 and Private Equity owned B2B companies on growth strategy and commercial transformation.

 

Vidya Ranade is the founder of Decodexis. He provides bespoke analytics and consulting services to clients in marketing & sales, operations and R&D.

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