I don’t think it is an overstatement to say that a company’s profitability is directly linked to its pricing. Which makes it all the more shocking that so many businesses only spend six hours focusing on pricing in the course of a company’s lifespan. So, let me ask a question – how much time went into selecting your pricing model, and have you revisited it since? If you are a B2B service provider, I would guess not. So, here is another question – with pricing playing such an integral part of any business, why do B2B brands invest so little time and attention in it?
The problem with professional services B2B pricing
In the B2C sector, pricing has become an art form. It is a fundamental part of the product lifecycle, and is treated as such, even within service industries. In the B2B sector, however, especially in professional services, pricing is typically viewed as a tool; something that can be manipulated in order to secure a deal. This can lead to small margins, lost profit, and even damage in seemingly unconnected areas, such as company culture and brand reputation. So, what is going on, and how can B2B companies remedy the problem?
While there are plenty of differentiators that can influence B2B sales, pricing remains key
I am aware that I am generalising here, but the fundamental truth is that most B2B professional services companies lack a strong pricing strategy. Pricing models are selected not on their merits, but on what everyone else is doing in the sector. Too often, this becomes a copy and paste activity, whereby an established competitor’s model is duplicated and adjusted. This isn’t a strong foundation for any business to work from.
How does a poor pricing model impact B2B businesses
Pricing holds the potential to impact a business on multiple fronts, from sales and loyalty to company culture. With the ‘wrong’ pricing model, it is easy to alienate your customers – while there are plenty of differentiators that can influence B2B sales, pricing remains key. When your prices are inconsistent or ambiguous, you can lose customers before you have even had a chance to negotiate. While consistent over-pricing or under-pricing will inevitably impact your brand reputation. Although customers appreciate the potential of securing a good deal, most don’t want to pick the cheapest option in case the price reflects the quality of the service. Promotions only hold value when they are genuine, and if a customer can’t ascertain what they should be paying for your services, they are not going to appreciate any offer that your sales team might be able to make.
All of the above also has an impact on loyalty. Regardless of the sector you are operating in, if you secure a contract with a ridiculously low opening offer, it’s going to be difficult to maintain it if the margin is too low. In most cases, this means a price hike when it comes to contract renewal, and that will almost certainly give clients a reason to shop around.
Pricing uncertainty can also impact company culture. If your employees don’t see the value in your services, their jobs get tougher, and it is easy for them to feel discouraged. This can lead to higher turnover and drive up recruitment costs. Having a comprehensive pricing structure not only reinforces the idea that the services you offer carry value, but makes the work of your sales team easier, and a lot less stressful. Largely because everything that they do is supported and they have resources to guide their decisions.
Most B2B professional services companies lack a strong pricing strategy
Lastly, there is the matter of brand differentiation. This has been a growing point of focus across industries in recent years, and pricing can play a significant role. If every business in the industry carries the same pricing model and a similar price point, there is little to recommend an individual company to a customer. When you adopt a new pricing model, you gain the opportunity to change how your business is perceived. Pricing can become a selling point, an additional opportunity to promote your services through clarity and transparency. It essentially changes the way your business looks to the customer.
Adopting the ‘right’ pricing model
So, the thing to clarify here is that there isn’t, and never can be, one single ‘right’ pricing model in B2B. It is so much more complex than that. Most businesses will deploy multiple pricing models to suit the different arms of the company, which may include subscription, time/effort, and deliverable/solution-based pricing. It is the latter option that many professional services businesses are now turning towards.
Deliverable-based pricing – also known as asset, solution, or outcome-based pricing – is based upon the end value of delivered services. By attributing a set value to the individual elements of the services a business offers, the company can create a comprehensive menu from which internal teams can easily draw up quotes and pitches. This brings transparency to customers, enabling them to fully comprehend exactly what they are paying for – as well as consistency for the business, and a structural framework for its employees.
With artificial intelligence (AI) deployment creeping in and changing the way that most businesses now operate, deliverable-based pricing also removes the emphasis from how work is completed. When a time/effort-based pricing model is at play, AI can only lead to a reduction in billable hours and therefore a reduction in margin. With deliverable-based pricing, professional services firms are free to complete their scopes of work in the most efficient and effective ways to achieve results for the client. As such, time becomes irrelevant.
How can B2B businesses implement deliverable-based pricing?
To implement deliverable-based pricing, you need to define your menu of services. In most cases, this will benefit from being a collaborative process involving all relevant stakeholders – everyone from management to customer service, the marketing department, and business development team. By using the knowledge and insights of the entire team, you can create a bespoke menu that will truly answer the needs of your customers and differentiate your brand.
Pricing can become a selling point, an additional opportunity to promote your services
Assigning prices should always be research-driven, and in some cases, a business will benefit from bringing in external professionals to support the process. It is complex and I won’t underplay that complexity. But once you have that solid foundation in place, it can bear significant fruit for your business.
The final challenge lies in introducing the change to your clients – and that is always daunting. But by creating a new and transparent pricing structure, you may find a receptive audience. Personally, I would start with the client I have the best relationship with – a brand I am on friendly terms with can be a great place to begin.
Pricing directly impacts profit – this is a fact. Yet, many B2B companies still rely on outdated or arbitrary pricing strategies, even as the industry rapidly evolves. Clients expect more transparency and consistency, and GenAI is reshaping business operations. With a comprehensive pricing model, your business is equipped to tackle and overcome challenges, from fierce competition and heightened customer expectations to the influence of new technology. The time for change is now – waiting is no longer an option. Implementing a strong new pricing strategy today is the foundation for sustainable success tomorrow.