How to grow sales and raise prices?
Speed of response is often more important than price
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.
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!
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!
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.