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Webinar Recap The Hitchhiker's Guide to B2B Pricing- Part #2

The Hitchhiker's Guide to B2B Pricing-
Part #2

By Roi Ben Daniel & Marcos Rivera

Welcome back to the second part of "The Hitchhiker's Guide to B2B Pricing."
In our previous blog, we embarked on a journey through the complex world of B2B pricing.

In this sequel, we're diving even deeper, unraveling the intricacies of sales-led pricing, custom pricing structures, pricing transparency, and the challenges that arise when it's time to make pricing changes.

So, grab a cup of coffee, and let's continue our exploration into the intriguing realm of B2B pricing.

Sales-Led and Custom Pricing

Custom Pricing

A good B2B pricing structure meets customers where they are, creating a buffet of choices. You want to have 3 layers in your B2B Pricing structure:

1. Base Product

A version of the product that creates the core value.

2. Adds Ons

Bolt-ons that you can add and configure according to the Customer pain and wishes, say 6-7 of these lego blocks.

3. Volume Tiers

Additional usage modules that customers can grow into. This structure creates maneuvering space  and pricing flexibility. 

Custom Pricing, Common Mistakes

1. The ‘all in one, with the fat discount’

Dumping all the features on a Customer, even ones that are not needed, and discounting until the Customer says yes. This kills the sales process, because a confused mind never buys.Being too generous in the entry plan also allows no flexibility and limits LTV, because no one upgrades. The right balance (customer cohorts) is 20% in entry level, 50% in the center (your sweet spot), 30% in premium.

2. Big price jumps

You don’t want a disproportionate price jump between plans and options, it inhibits customers’ ability to scale up with your product. A good range 2-3x jump in the price point, so if you’re entry plan is $1,000, your next plan should be in the $2,000-3,000 range, rather than $10,000.

3. Plans identity crisis

This is when your product evolves, and you don’t change your plans with your product, losing alignment between a plan and the ICP. Think in a simple structure: Good / Better / Best.  Be clear about the value prop, having one sentence on who the plan is for. 

Pricing Transparency

Transparency Thumb Rule

There is a lot of talk about B2B companies needing to put their pricing on their website, but the truth is - people don’t want price transparency. They want you to help them make a good decision without jumping through hoops.  Help them make a good decision without a lot of headaches.

It all depends on complexity and ACV. When your solution is standard - show the price, and when it’s ‘custom-figurable’, you want to be able to contact the Seller. 

It’s probably a good idea to show pricing when the product is simple, and your ACV is less than $5,000 yearly, can be recurring and go on a credit card. You want to make the calculation very easy so they can buy right away. When your complexity and ACV are on the  higher end, you want to show less information. When there are special integration needs, a discovery process, custom value and product can change. 

This isn’t an either/or framework. You can still publish information that will provide customers with clarity about your pricing structure: 

a) What - what are the plans and packages, or what they will get. 

b) How - how you price, (users, features, volume, etc), so give a general idea of the product and pricing structure.

c)  How Much - provide some clarity for customers by anchoring a number that gives a basic idea of the range, such as ‘starting from’ or ‘as low as’.

You can take this framework one step further by providing targeted transparency, through submitting a form on the website. 

Pricing Challenges

Pricing Change

How you communicate the price change is just as important as the actual price increase. The first thing companies think when they see a pricing change is greed, it's hard to recover from that. 

Here is a useful framework:  a) communicate in advance, b) communicate value, c) explain why, d) give them options to downgrade.  

Communicating a price change needs to happen 3-4 months before contract-end.

Use the sandwich framework:

a) Added features -  anchor on additional value that they got, “here’s top 5 features we developed in the last 12 months”.

b) Features to be added - what’s on the product roadmap.

c) Value - what value is the product adding them now. Most importantly, say why you change the pricing, tie into your company vision, and how the price change gets you closer to that vision.

Giving Options

When you do guess work, and you don't have a good model in place, you’ll be squeezed for discounts, or worse - the customer will churn. Structure gives the ability to back into a lower plan instead of canceling, such as volume Tiers that they can play around with. You can also offer free additional support and add ons, or use temporary step down plans.

And there you have it, the second leg of our B2B pricing guide! We hope you've enjoyed this two-part deep dive into the world of B2B pricing.

Remember, pricing is a bit like a spaceship's navigation system - it needs to be flexible, adaptable, and finely tuned to get you where you want to go. Keep experimenting, listening to your customers, and fine-tuning your approach.

See Received's flexible pricing configuration tool.