Trends and opportunities within price realisation
By Michelle Vestergaard
In our previous blog, we explored the nature of price realisation and some of the common problems businesses encounter when translating pricing strategies into actual financial outcomes. In part 2 of our series of price realisation, we’re going to dig deeper into the topic, examining the external trends and opportunities that shape price realisation.
The dynamic reality of price realisation
With today’s market best characterised by rapid change and heightened complexity, external factors like economic fluctuations, geopolitical events and shifting consumer preferences all play major roles in shaping price realisation. For instance, inflationary pressures and the ongoing war in Ukraine have altered cost structures for many businesses.
With the rising costs of raw materials, transportation and labor forcing companies to adjust prices on a regular basis, this has resulted in customer confusion (to put it politely) and the disruption of established price points. The question, "What is the cost of a piece of bread?" is becoming increasingly difficult to answer.
In addition to inflationary factors, the rise of digital commerce has made price comparisons easier for consumers, creating a more competitive arena in which buyers are better informed than ever before. With a wealth of information at their fingertips, customers can quickly assess the value of products and services relative to their costs. While this impacts B2B companies less directly due to the complex and built-to-order nature of most global businesses, the fact that consumers are becoming more price-savvy, flows over into the mindset of B2B buyers, whether they are foraging into commerce-solutions or not.
This shift has heightened expectations for transparency and accountability, requiring businesses to provide clear justifications for their pricing policies. It’s no longer enough to simply state a price – companies need to explain the unique benefits their products or services provide compared to competitors. It’s a new reality that requires organisations to be far more agile and responsive.
The growing complexity of the buying process
As global businesses have grown in size and complexity, so have their expectations to professionalism of a potential vendor, as well as their own internal processes for approving large purchases of products essential to their operations. On top of this, the average B2B product has grown more complex in nature. Driven by the service-as-a-business or servitisation trend, the modern products typically embody both a product and a service component, making the pricing process of the full bundle that much more complex and, sometimes, untransparent.
This has increased the complexity and length of the buying process since companies now need to contend with a multitude of stakeholders involved in purchasing decisions. Gone are the days when one buyer made the vendor decision with full authority. Instead, selling and pricing has become subject to approval from finance, procurement, IT, pricing boards, and quality departments, to name a few – each group bringing its own set of priorities and concerns to the table.
The modern B2B buyer is no longer your best golfing buddy, it is a fragmented group of departments who can’t necessarily tell you in straight terms, what the ultimate vendor decision will depend on or who will get the final say. For instance, while procurement might prioritise cost-saving measures, the IT department could be focused on aligning solutions to their tech stack, and customer service could prioritise swift resolution times to customer issues.
What’s more, the increased complexity of the buying process can lead to decision fatigue among buyers. As more stakeholders get involved, the potential for conflicting opinions increases, complicating the purchasing decision. This can result in delays and even lost opportunities if companies are unable to effectively manage the intricacies of the buying environment.
In short, the modern buying process is growing ever-more complex and so is the buyer.
What challenges and opportunities does it bring forward?
As you might imagine, the changing landscape of price realisation comes with both opportunities and challenges. The easiest way to outline the implications, is to break it down according to the value chain. It is our thesis that all departments play a role in gaining full price realisation, and as such, each trend has different implications for each department as laid out below.
Product management & pricing: From same-procedure-as-last-year to conceptual portfolio managers
While the sales rep is typically at the center of attention in pricing realization, the most foundational work nowadays is done by the product development & pricing department who must be attuned to the full scope of a given product to fully value each component. Due to competitive pressure and “servitisation”, they can no longer rely on incremental development of stand-alone products, or annual list price adjustments alone as has been the norm in many B2B companies for years past.
Instead, they must take a portfolio view of their offerings, taking into account the full scope of downstream services, add-on products, terms and fees such as payment terms, delivery terms or rebates. They must do so to lay the foundation for measuring and following up on profitability of product components across departments and markets through strict and well-aligned definitions. And they must do so to allow sales reps to play around with a flexible pricing model depending on the customer’s needs and preferences to optimise profitability from a portfolio point of view. This nurtures a culture of accountability and alignment within an organisation, as all teams need to work together to support the pricing strategy.
Sales: From golfing buddies to data-savvy project managers
The role of sales representatives has changed as well, as they now find themselves acting more like project managers than traditional salespeople, coordinating efforts across various departments to deliver successful price realisation.
Gone are the days when a sales rep could simply close a deal over a casual dinner or a game of golf. Now, sourcing teams conduct thorough market comparisons, finance departments scrutinise margins, and IT must ensure compatibility with existing systems. The sales cycle is lengthening and deepening, and the sales rep’s job, therefore, has become a balancing act, requiring them to engage with and manage expectations from various internal and external parties.
To manage this terrain effectively, sales reps need to adopt a consultative approach, positioning themselves as trusted advisors rather than just salespeople. This shift requires a deep understanding of a client’s business challenges and the ability to clearly demonstrate how a proposed solution delivers value. Increasingly, this value extends beyond the product itself, meaning that the salesperson must have intimate knowledge of service operations and the ability to clearly articulate how they will deliver value to a potential customer. While salespeople may have traditionally had the ‘gift of the gab’, the modern environment requires even more refined communication and collaboration skills, allowing them to align the goals of different stakeholders with an organisation’s pricing strategy. This alignment builds trust and encourages transparency, ultimately improving the customer experience and driving long-term success.
Sales representatives are also increasingly expected to engage with data and analytics to support and justify their pricing discussions. By analysing market trends and customer behaviour, they can provide insights that inform pricing strategies and help justify decisions – like which parts of the full product/service bundle is valued more highly in a given customer segment – a data-driven approach that allows companies to better align themselves with customer expectations and market realities. Customer Relationship Management (CRM) systems, pricing optimization tools and AI-based data analytics platforms are becoming essential tools for businesses looking to streamline their pricing processes and improve alignment between departments.
This raises the bar for upskilling and modernising the workforce, enabling with technology, and most importantly, working with sales teams, rather than individual reps only.
Service: From secondary support function to key differentiator
Moving further down the value chain, the fulfilment and service departments are also impacted by the new reality of price realisation, especially the increasing “servitisation” of products. As the service department, both fulfilment, field service and traditional customer service, suddenly take a central role in delivering a core part of the offering, their importance increases exponentially. This implies that KPIs, incentives, and process descriptions must be clearer than ever to protect profitability and a consistent customer experience, but also that the war for talent and training takes a step up, as they could be the reason you win – or lose – a customer.
Moreover, the service department must take on a commercial role – at least as a guard dog for margin protection and lead generation, but potentially even as mini sales reps for add-ons or up-sells. Since they will be executing the contracted services, a new awareness of entitlements is required. They must know at the click of a button, which services have actually been sold and paid for according to the contract. It is not an option to flip through hundreds of pages of a PDF contract every time a service request arises. And they must know when a requested service is a sales opportunity to be fed back to the sales department rather than a service to be executed.
“Companies that can shift their focus from mere pricing to value delivery will not only improve their price realisation efforts but also build stronger, more resilient relationships with their clients.”
Does our mindset need to change?
In summary, the new reality of price realisation impacts all departments across the value chain, from product management & pricing to sales & service.
Historically, the responsibility of salespeople was to sell products. As the pricing and selling process has grown more complicated over the years, salespeople now need to sell ideas – not just to customers but to everyone involved in the pricing process. And they need to base them on conceptual portfolio frameworks developed by product managers that take a more strategic view on the definition and pricing of offerings, including services, terms and fees. And finally, downstream fulfilment and service departments must be given mandate and tools to effectively deliver what is sold – and only what is sold – to protect margins and customer experience at the same time.
Companies that can shift their focus from mere pricing to value delivery will not only improve their price realisation efforts but also build stronger, more resilient relationships with their clients.
Ultimately, the question is how can organisations effectively transform their approach to pricing in light of these pressures? In our next blog, we’ll explore solutions to these challenges, providing practical insights on how businesses can improve their price realisation strategies. So stay tuned.
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