Pricing

Free Goods Engender Entitlement – B2B Pricing

By Ben Blaney
May 6, 2012

I fly a lot. And, as one of the top 3% of customers of my preferred airline, they treat me pretty well, on the whole. I don’t pay a fee to check a bag; there is sometimes an accelerated lane at the security check; I board the aircraft first, so I can be sure of overhead bin space. Most of all: they give me free upgrades to a better seat.

In the 40-ish flights I’ve taken this year with a premium cabin, I’ve been upgraded every time but once. That one time, boy – was I a ghastly pouting snob, silently furious at my perceived ill-treatment (and this blog piece can be regarded as penance for that shameful reaction).

free

There’s a serious B2B pricing point here. Giving products or services, which ordinarily come at a price, for free, is a serious matter, and companies should think very carefully indeed before implementing these policies.

Firstly, it communicates to the customer that they need not pay; this is fundamentally a bad message to send.

Secondly, in many cases it’s based on very spurious logic. The airlines, to go back to my illustration, could claim that it’s worth foregoing to potential revenue from the premium seat, to ensure my revenue for the rest of the year. This might be true, but it’s such a crude instrument that it ignores a crucial aspect – how profitable I am. Remember – a firm’s most profitable customers need not be their largest in revenue.

Additionally, the practice of giving free goods or services ignores a key selling technique – upgrade the mix. This can be rewarding for both vendor and customer, when done with skill and flair.

Here at Vendavo, we’re always interested in hearing your feedback. If you didn’t manage to make it to our Profit Summit this year, we’d love to see you next year. And in the interim, maybe I’ll see you in an airport somewhere – I’ll be the guy checking the upgrade list.

 

  • B2B , potential , pricing , product , profit , Profit summit , revenue , service

    Ben Blaney

    Ben has deep experience in all areas related to enterprise pricing solutions. He has helped some of the world’s largest companies redesign their pricing and commercial models (systems, processes, and priorities). Ben has also sold enterprise software and cloud solutions that changed the game for Fortune 500 companies, and he has managed large teams in executing digital transformation projects in unpredictable combat zones.