Looking for tips to improve your next price optimization project? Vendavo’s experts have you covered. Darius Fekete, Paul Sansom, Kalle Aerikkala, Mike Slavin, Israel Rodrigo, Dan Cakora, Kamal Sabnani, Robert Irwin, and Aneesa Needel share their expert advice on how to drive your business toward greater success.
Mastering the art of price optimization is a strategic advantage, plus necessary for survival and growth in business. It sharpens your competitive edge, enhances profitability, and boosts customer satisfaction.
But navigating the complexities of pricing can be daunting without the right strategies.
Vendavo’s experts are here to help you get started. We asked them about their essential tips, industry best practices, and proven methodologies for a successful price optimization project. They had plenty of advice to help you make more informed and effective pricing decisions, refine your approach, understand market dynamics, and leverage advanced technologies.
Here’s what you need to know to optimize your pricing strategy and drive your business toward greater success:
1. Commit to comprehensive market research
There’s no substitute for old-fashioned homework. Identify key components of your market, customers, and competition to ensure your pricing hits the sweet spot and that you avoid pitfalls. That helps you avoid pricing too high and scaring away customers or too low and undercutting your value.
Darius Fekete
Senior Director of Value Acceleration at Vendavo
“Don’t underestimate the importance of research. You need to research your market, customers, and competition so you have a deep understanding of the value of your products and services. Don’t risk overpricing or underpricing your offerings.”
Bottom line: Base pricing decisions on thorough research of your market, competitors, and customer expectations to avoid missteps.
2. Aim for ‘Goldilocks prices’
Finding the “just right” price might feel like luck, but it’s much more than that. It’s a delicate dance that can make or break your market success. Strike the perfect balance to draw customers in, keep them coming back, and maximize revenue potential.
Paul Sansom
Business Consultant at Vendavo
“I like to call optimized prices ‘Goldilocks prices.’ They’re not too high and not too low.”
Bottom line: Strong price optimization means your pricing is just right for your target market to maximize revenue without sacrificing customer loyalty.
3. Use data for segmentation and price guidance
Data-driven segmentation is like having a crystal ball for your pricing strategy. Grouping customers according to their willingness to pay, for example, helps you uncover golden opportunities to adjust your prices. Data gives your sales team superpowers, arming them with the insights they need to pitch prices with confidence.
Kalle Aerikkala
Business Consultant at Vendavo
“Price optimization is important for many business reasons, including maximizing profitability, improving your competitive advantage, boosting customer satisfaction, and ensuring you can respond quickly to shifting market dynamics. The result is improved sales volume, inventory management, decision-making, and adaptability to customer preferences, all of which will help you win the deal.”
Bottom line: Data and segmentation are tools for enhancing profitability, competitive advantage, and customer satisfaction.
4. Consider critical metrics and KPIs
Think of metrics like your trusty toolkit. Keep an eye on input costs, competitor prices, regional trends, and inventory levels to steer your pricing strategy in the right direction. It’s all about the ability to make informed decisions that boost your standing in the market and ramp up your profitability.
Mike Slavin
Business Consultant at Vendavo
“Data driven, statistically based segmentation can group together customers with similar willingness to pay to uncover opportunities to get a better price – just like the Expert Salesperson does in his or her head. Floor, target, and expert price guidance guardrails building on willingness to pay can give the rookie salesperson the confidence to ask for a higher price that similar customers have paid.”
Bottom line: Keep tabs on important metrics to gauge effectiveness and adjust your pricing strategy as needed.
5. Promote cross-functional collaboration
Bring everyone from sales and marketing to finance and operations to the table early. This collaborative approach aligns your team, sharpens your focus on the market, and ensures harmony in your pricing strategy. You’ll also want these stakeholders to help determine the metrics that matter, then keep tabs on these factors to mitigate risks.
Israel Rodrigo
Business Consultant at Vendavo
“Businesses looking to optimize their prices must consider input costs, competitor prices, regional pricing, inventory or supply status, product and technology attributes, volume impact based on forecasted volumes for price increases, and revenue impact of the run-rate/recurring business for price decreases.”
Bottom line: Get all hands on deck and focused on critical metrics to better equip your business to thrive in the bustling market.
6. Always be refining
B2B pricing strategies are powerful engines that drive profitability, but only if they match with current conditions. Refine yours regularly to tap into your full business potential and ensure lasting success in a dynamic marketplace. The right pricing software solutions can help make sure you stay ahead of the curve.
Dan Cakora
Business Consultant at Vendavo
“Pricing is the clearest way that companies communicate their value to the market and has the greatest impact on profit compared to any other typical variable. Every company should clearly articulate what it wants to achieve from pricing. Most of the time, a blend of cost-based, market-based, and value-based is optimal. Using a mix will minimize the drawbacks of an individual approach and provide flexibility to align with evolving corporate goals.”
Bottom line: Adapt to shifting market trends and customer needs to stay competitive.
7. Navigate pricing variations thoughtfully
Embracing pricing variation is about handling challenges and transforming them into strategic assets. When you skillfully manage variations, you can finely tune your approach to meet customers’ willingness to pay, secure more deals, and optimize value. Sophisticated pricing and margin technologies matter here, because they allow you to identify what drives value for different market segments.
Kamal Sabnani
Principal Pricing Manager at Vendavo
“Pricing variation is inevitable in B2B. Interestingly, many may perceive pricing variation as an issue, but it proves quite useful in estimating customers’ willingness to pay. A pricer may feel confident about a specific price point, for example, but the reality is that sellers respond to both internal and external pressures in their quest to secure deals.”
Bottom line: Understand and strategically manage pricing variations to cater to different customer segments and maximize deal closure rates.
8. Handle price changes strategically
Price optimization – including price changes – is your secret weapon. It helps you clinch deals, boost margins, and cut down on administrative headaches. The importance of price changes can’t be understated, because they touch every part of your organization. Get stakeholders on the same page about price changes early and ensure pricing moves are swift, informed, and united toward common goals.
Dan Cakora
Business Consultant at Vendavo
“Price changes affect every facet of an organization, so collaboration and transparent communication are very important. Involving stakeholders from sales, marketing, finance, operations, and leadership early in the process means companies can mitigate risks and capitalize on opportunities for growth.”
Bottom line: Price changes are most effective when moves are made quickly, backed by data, and tied to your organizational needs.
9. Integrate price and margin optimization tools
Today’s pricing technology is like having a high-powered microscope that zooms in on what truly adds value to your offerings. Price optimization solutions are crucial for pinpointing exactly where the value lies and how much it’s worth across different parts of your business. This is about more than numbers. It’s about smart strategy, tech that empowers your sales team, and turning every opportunity into a win.
Robert Irwin
Senior Vice President of Business Consulting at Vendavo
“The pursuit of value in the modern marketplace runs through price and margin optimization — perhaps the most critical part of today’s pricing technology environment. With such a system, organizations have the key capabilities to identify the drivers of value and define how much that value is worth to any given segment of the business. From there, price and margin optimization allows business leaders to guide the sales team toward the successful capture of that value.”
Bottom line: Make the most of price and margin optimization tools to identify value drivers, quantify their worth, and guide your team toward effective value capture.
10. Blend AI with human expertise
AI is the ultimate pricing assistant, but the real magic happens when its computational power is blended with the nuanced understanding of seasoned professionals. You need human insights. This dynamic duo forms a pricing strategy that’s smart, navigates the subtleties of the market, and helps you make informed business decisions.
Aneesa Needel
Senior Product Marketing Manager at Vendavo
“As AI and its applications change, so do the people who both run them and work in roles that can be amplified – but not replaced – by AI. Human expertise, the experiences you have had with pricing and negotiations, will not be substituted at this time by the machine.”
Bottom line: Blend artificial intelligence with human expertise to enhance pricing strategies, making them more nuanced and effective.
Questions to Ask for Successful Price Optimization Projects
1. Have we conducted sufficient market research?
- Are we fully aware of current trends, customer demands, and competitor strategies?
- How regularly do we update our market research data?
- What data sources are we currently using for price setting and optimization?
- How do we ensure the accuracy and relevance of the data we use?
2. Is our pricing strategy aligned with our overall business strategy?
- Does it support business objectives (growth, market penetration, profitability, etc.)?
- How does it enhance our competitive positioning in the market?
- What tools and technologies are we using for price optimization?
- Could we benefit from more advanced pricing software or AI tools?
- How do we balance automated pricing tools with our team’s strategic intuition?
3. How effective is our segmentation strategy?
- Have we identified all relevant customer segments?
- Does our pricing reflect different customer segments’ willingness to pay?
- How quickly can we respond to unexpected market or competitive changes?
4. How do we measure the success of our pricing strategy?
- What KPIs do we use to evaluate pricing effectiveness?
- How often do we review these metrics?
- What actions do we take based on this analysis?
5. What is the level of internal collaboration regarding pricing decisions?
- How well do sales, marketing, finance, and operations collaborate on pricing?
- Is there a clear communication channel established for strategies and outcomes?
- What processes do we have to adjust prices in a timely and effective manner?
- Do we have a clear strategy for handling price variations and negotiations?
- How do we manage or justify pricing differences across customers or transactions?
Successful Projects Require Strategy
Price optimization is about strategically aligning your pricing practices with market demands and customer expectations. Employing a comprehensive, data-driven approach can dramatically transform the effectiveness of your pricing strategies.
Remember, the journey to optimal pricing involves continuous learning and adaptation, a deep understanding of your market, proactive stakeholder collaboration, and the intelligent use of technology. Embrace these strategies to refine your pricing processes, enhance decision-making, and achieve a stronger competitive position in your industry.
The path to pricing excellence is clear—equip your team with the right tools, insights, and mindset to capture the true value of your offerings and drive sustained business growth. Reach out to Vendavo today to speak with an expert about your price optimization needs.
