How to Differentiate the Value of Your Customers

How to Differentiate the Value of Your Customers

In a challenging economic climate, the majority of companies are shifting their focus to survival mode pursuing all pounds of revenue at all costs. While this approach can be effective as a short-term option, the long-term consequences can be severe and can result in significant margin compressions with profit loss. To sustain margins and gain more business, a company needs to adopt more strategic approaches. One crucial strategy to address economic challenges is effectively pricing; however, this tactic has been ignored by even the largest corporations for several years. In recent years, pricing has started gaining momentum based on three key factors:

  • Measurable results – the successful pricing techniques delivered as proven value across industries.
  • Untapped opportunities – only a few businesses are aware of the overall value of pricing.
  • Low costs and high returns – for a reduced investment amount, businesses are able to acquire substantial value.

So, how can companies leverage pricing to not only increase sales revenues but also sustain profits at the same time? This article provides information on the top five practices for a business to reap the rewards of pricing and become a more client-centric company.

Tip #1: Focusing On Pricing-Decision Support

Almost all businesses invest in a CRM system; however, the majority of companies utilise the system for data collection instead of decision support. As time passes, the companies collect a large amount of transaction and deal data that, if effectively leveraged, can translate into more successful pricing and deal negotiation options. For instance, businesses using transaction data to create informed pricing targets are able to offer guidance and support to sales teams when they interact and negotiate deals with potential customers.

Proving CRM as well as CQI training for your employees will mean they can, not only navigate efficiently around the system but will also possess the knowledge and technique required to turn the data into improved service for the clients.

Tip #2: Segment Clients and Products

Businesses typically utilise a ‘one size fits all’ approach when interacting with buyers. While this approach can be successful, it often fails to differentiate between highly unprofitable buyers with reduced potential and highly profitable clients with high potential for future interactions. Similarly, the majority of companies do not differentiate how a client values their products.

For instance, product A may represent critical input to developing goods in a manufacturing industry; however, it may not be as important when used in the chemical industry. In this situation, the business should segment the item based on the final-use application. Pricing guidelines to sell product A in the automobile industry can be more stringent as compared to the pricing guidelines for the item’s sale in other industries, such as the chemical industry.

Tip #3: Arming the Sales Team

When interacting with potential customers, the sales team requires crucial pricing insights to make certain decisions that can increase revenues and overall profits. In many cases, discounts offered during negotiations are driven by those with negotiation skills rather than the sales person’s knowledge of customer profitability, purchase history, product value, and future potential of product sales. When a company arms their teams with pricing guidelines, it should be based on specific sales profiles; thereby, allowing representatives to tailor the negotiations according to the case. This will ensure the pricing terms are consistent with the client profile and the deal can help the company protect their profit margin.

Tip #4: Improving the Price Responsiveness

In today’s competitive market, timely price alterations can be the cause of either losing or winning a sales negotiation. Businesses selling thousands of products in various industries and channels have millions of price points operating simultaneously. Their ability to fine-tune prices according to market volatility can assist them in negotiating positive deals at a reasonable profit margin, versus winning the deal but making a loss.

Tip #5: Investing in Technology

Few businesses have considered using pricing as a strategy or have made the investments to leverage pricing when interacting with customers. Existing enterprise resource planning and CRM systems lack the capabilities to streamline this procedure; therefore, to meet this need, pricing optimisation and management solutions must be obtained. This type of solution includes price setting, pricing analytics, and deal negotiation functionality. The solutions are integrated into the systems and can help companies improve their transactions using suitable pricing techniques.

Categories: Business

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