How to Drive Outstanding Customer Experiences with Dynamic Pricing
Great Ecommerce Experiences Can Be Ruined by Bad Pricing
In today’s fast-paced market environment, business success is all about delivering outstanding customer experiences. Brands from all industries are competing to be the best at it. As a result, many companies have made significant investments to meet the needs of modern buyers and their evolving shopping expectations. Similar to B2C interactions, B2B customers now demand simpler shopping experiences, a high degree of transparency and control over the buying process, and instant responsiveness across every sales channel they engage with, in a way that is consistent and personalized to their constantly evolving needs.
However, with the coronavirus pandemic and the accelerated shift to digital, the majority of B2B companies are realizing that slow and lagging pricing affects their ability to ensure a seamless buying experience. Additionally, the lack of market-relevant prices is creating distrust in the offers that businesses display to customers. For most organizations, customer expectations are evolving way too quickly to keep up with buyer perception of the right price. Siloed systems, manual processes, and the inability to harmonize pricing between ecommerce and traditional sales channels are some of the reasons why B2B organizations struggle to deliver winning buying experiences.
In this blog post, we focus on how dynamic pricing can help businesses adapt successfully to the new digital and market reality and continue to grow and serve their customers with consistency across all sales channels.
Why Dynamic Pricing is More Critical than Ever for Ecommerce
COVID-19 put significant pressure on B2B relationships and disrupted the supply chain across many industries. Reduced economic demand in some sectors and increased demand in others, created a highly volatile environment that continues to put extreme pressure on both pricing and the ability of organizations to manage risk and secure business continuity. These uncertainties combined with the leap to digital channels created a huge need for pricing discipline, more coordinated efforts across all sales teams, and agile pricing management practices that could enable businesses to continue to serve their customers effectively and fairly in an omnichannel world. As buyers shift part of their wallet share to digital purchasing channels, many businesses are not prepared to respond to the requirements of successful online selling. The businesses that do leverage the vast opportunities ecommerce presents are empowered to drive accelerated sales workflows and consistent buying experiences across all go-to-market channels with the help of personalized, real-time pricing.
What is Dynamic Pricing?
Dynamic pricing strategy enables businesses to define prices for their products or services based on the latest market conditions so that the business can respond quickly to market changes triggered by external and internal events. Based on changes to cost, supply and demand, and other attributes, prices are adjusted in real time by applying artificial intelligence (AI) and machine learning techniques. With dynamic pricing, B2B organizations can reflect the perceived value of products in their pricing more easily to ensure that buyers receive real-time, market-relevant prices independent of the sales channel. Manually re-pricing thousands or millions of SKUs for different channels, regions, and product categories to maintain a competitive edge when the market situation changes can be quite a burden for pricing teams. That’s why businesses that apply dynamic pricing are much more efficient and successful in their pricing calculations and execution, no matter how complex the selling scenario.
When it comes to applying different sales tactics, dynamic pricing allows businesses to be more proactive when addressing market disruptions and seasonal trends, and to meet customer expectations in digital channels more efficiently. If ecommerce conversions are decreasing and inventory levels are high, dynamic pricing can help B2B organizations drive more sales and revenue for their business in specific channels by optimizing their prices to be more competitive, while protecting margins. When companies want to leverage increased market demand for their products and services, they can automatically adjust prices and margins at scale, ultimately maximizing their profitability. Another use case is fixing performance issues that cause online stores to load price information too slowly, leaving buyers frustrated with waiting and driving them to shop in competitor marketplaces. In this situation, dynamic pricing can address the performance issue to ensure speed and real-time price responses in ecommerce channels. Businesses can also use dynamic pricing strategy to incentivize specific customer segments to purchase more from digital sales channels. Optimizing pricing to shifts in demand can help drive increased conversions and revenue with the right amount of profits for the company, while preserving price attainment.
What Drives Perceptions of Fairness in Pricing?
As buyers continue to shift their wallet share to ecommerce and self-service portals, setting the right digital selling strategy is crucial for a company’s success. In an omnichannel world, businesses engage with customers through multiple touchpoints, but ultimately buyers convert in their channel of preference. Static list prices cannot reflect the value of those experiences and are no longer perceived as competitive or even acceptable, because buying preferences and market conditions are continuously changing.
Pricing fairness is at the core of customer loyalty. Consumers’ assessment on whether a price is fair is based not on emotions, but rather on the perception of the value of the offer and the logical comparison with prices displayed by other sellers, prices of past purchases, prices paid by other consumers, and market demand and supply. Price channel conflicts and inconsistencies in pricing often lead to the perception of unfairness, directly impacting customer experiences and loyalty. The pandemic especially magnified the importance of pricing fairness because consumers changed the way they shop and perceive value. Imagine how a loyal buyer using a new ecommerce platform from a business they interact with regularly feels when they see irrational prices for familiar products that they have consistently bought from sales reps? The answer is easy: the buyer will look to shop elsewhere.
The fluidity of the modern customer journey requires agile buyer engagement strategies, real-time prices, and higher transparency in the pricing formation and logic. In superb omnichannel experiences prices correspond to online and offline engagements, reflecting the perception for reasonable pricing and customer value. Many B2B organizations, however, struggle to address channel fluidity and pricing rationalization effectively, losing market positions and customer trust and widening the gap between channel, customer, product, and price.
How Dynamic Pricing Helps You Drive Your Conversion Funnel
Personalized Pricing for Customers via Real-Time Delivery
Digital channels present new and more advanced selling opportunities to B2B businesses, enabling them to strategize and more effectively target their sales activities. Digital platforms are a very efficient way to expand a company’s global market reach because they allow companies to connect with new customers and increase customer loyalty with lower operating costs and minimal sales efforts. Companies can leverage ecommerce to display individual contract prices and discounts, allowing existing customers to self-serve online for simple or repeat purchases, while leveraging sales reps for complex deals where high touch is more appropriate.
Moreover, digital mediums are also a great way for businesses to encourage upselling and cross-selling possibilities. With personalized AI-based pricing recommendations, buyers can be motivated to expand their wallet share across other services and product categories. According to our research, 63 percent of B2B buyers claim that they purchase more from organizations that allow them to place orders in a self-serve fashion. If organizations want to grow their ecommerce beyond a static online product catalog with list prices, they need to allow customers to purchase off their pre-negotiated, personalized price lists in these self-serve channels, providing consistent and market-relevant offers and experiences. Key factors to achieving your digital selling objectives in that aspect are:
- Your dynamic pricing must be always available to shoppers, without any site downtime for maintenance.
- Dynamic pricing must scale as demand increases to meet the growing volume of daily price requests from the online store during peak sales periods and holiday shopping seasons.
- Your ecommerce channel must deliver optimized dynamic prices in real time, enabling a great buying experience and empowering customers to return and purchase from your ecommerce channel again.
Real-Time Price Optimization for New Buyers
To capture increased demand and maintain a competitive digital market position, B2B businesses need pricing responsiveness which considers real time changes in variables like costs, competitor prices, market indices, and buyer behavior. Due to old and siloed systems, pricing experts often take a reactive approach, which lacks the precision or speed that ecommerce platforms need and digital buyers expect. To adjust prices the old-fashioned way, pricing analysts must gather and analyze market and competitive data, and then use it to manually recalculate and upload their new prices across all sales channels.
So, how can you deliver the right personalized prices to ecommerce customers every single time, especially during peak demand? Besides leveraging flexible dynamic pricing strategies that continuously adapt and scale to fluctuating market conditions and buyer behavior, businesses can use AI capabilities to predict the sales volume response to potential price changes and use this information to dynamically optimize pricing for changing demand. With this approach, a business can adjust prices either to optimize margins or to maximize sales conversions in ecommerce channels. Real-time price calculation and smart pricing optimization ensures that the right price is presented every time in context of each unique customer profile, current market conditions, and desired business strategy. This strategy delivers a high-quality and personalized buying experience in ecommerce channels and self-service portals so that buyers are happy to continue transacting with you, increasing their basket size and improving their online reviews.
Harmonization of Pricing Across Channels
In a highly competitive environment, B2B companies engage with new buyers and existing customers across different touchpoints. To deliver consistent and personalized buying experiences, pricing, sales, and ecommerce, teams must be aligned and their operational tactics coordinated. Misalignment across these three functions means ineffective and unprofitable sales as well as minimal or no digital channel adoption among buyers. Strengthening that interdepartmental collaboration is critical to achieving your business goals, and pricing plays a key role in the process. By establishing rationalization in pricing and successful coordination between every sales channel your business uses, your direct sales, resellers, and ecommerce teams will not be competing for the same potential customers. Harmonizing price strategies across traditional and digital sales channels is essential because it helps eliminate channel conflicts and pricing discrepancies, which usually lead to decreased revenues, erosion of profitability, damaged brand image, and even compromised customer relationships.
By using a single-source of pricing truth for governance, analytics, management, and optimization, businesses can centralize and streamline their strategic and tactical pricing initiatives to support better commercial operations and buying experiences across all go-to-market channels. Pricing teams can also better analyze all aspects of business performance, such as regions, channels, products, and customer segments, and apply that information in real time to drive digital business decisions and dynamic price strategies. The overall benefit to your business is having empowered ecommerce leaders who can play a more strategic role in your organization and its long-term success.
Dynamic Pricing: The Most Powerful Lever Your Business Can Rely on to Grow Profitably
The main roadblock to great omnichannel buying experiences is pricing consistency and execution excellence. To empower B2B companies to drive more conversions and increase adoption of their digital sales channels, PROS Platform for Pricing fully integrates with all leading ecommerce platforms, instantly delivering the right transactable prices to buyers and enabling them to seamlessly and effectively purchase online, even for the most complex buying scenarios. By centralizing all data, pricing calculation and optimization logic, and business rules, B2B organizations can accurately execute harmonized, real-time pricing strategies across all their sales channels, driving profitability for the business and ensuring new buyers and existing customers enjoy great personalized shopping experiences.
Don’t be left behind! For more information on how you can adopt best pricing practices that will help you maximize profits and increase conversions in your ecommerce channels, check out our eBook with 5 Pricing Tips for Magento Commerce.