In today's highly competitive business environment, pricing strategy is crucial to the success of any B2B enterprise. One of the most effective pricing strategies for B2B businesses is competition-based pricing. It refers to setting prices based on competitors' prices, market trends and customer behaviour.
When competitors drop prices, customers flock to those who have the best deal fitting their budget. In a competitive market, businesses must continue studying the market and tweak prices and their value proposition to stand out.
Moreover, B2B businesses that employ competition-based pricing have numerous advantages that enable them to outperform competitors and increase their market share. However, before moving to the benefits, you should carefully read the competitive pricing factors. Hence, let's look at some of the top advantages of competitive pricing in developing a sustainable pricing strategy.
6 Advantages of Competitive Pricing for B2B Companies
Leveraging a competitive pricing strategy into your pricing process includes considering market trends, competitors' pricing and consumer behaviour to price changes. Then, you can implement the new prices according to your product's value proposition and business rules. And upon doing so, companies have gained a competitive edge. Also, they witnessed growth in sales and profit while maintaining their brand positioning. So, let's closely study the advantages of competitive pricing.
1. Higher Sales Volume
One of the most significant advantages of competitive pricing is that it leads to higher sales volumes. B2B customers are always looking for the best value for their money. So, if you set the optimal prices, considering competitors' prices and the customer behaviour toward specific product categories, you will grow and maintain higher sales volume and, thereby, revenue.
Businesses are more likely to attract customers looking for a good deal by offering competitive prices. When a B2B business uses competition-based pricing while offering products, it incentivises customers to purchase from them rather than competitors. Using this strategy can significantly increase sales volume, leading to higher profits for the business.
2. Improved Customer Retention
One of the benefits of competitive pricing is that it can also improve customer retention. By offering competitive prices, B2B businesses are more likely to retain their existing customers. That's because customers are more likely to continue doing business with a company that offers them the best value for their money.
Moreover, it's always cost-effective for businesses to retain existing customers than acquire more. When customers feel they are getting a good deal, they are more likely to remain loyal to the company. With an AI-driven pricing software, you can do much more. To find out how your profits would stand if you were to change prices, you can set scenarios and run predictions for the future iterations in the market using the tool. Read more on how demand forecasting works in SYMSON.
3. Increased Market Share
Leveraging competitive pricing helps B2B businesses increase their market share. Equipped with a lucrative value proposition and the best price, companies attract new B2B customers who will maintain the partnership in the long run. This gradual increase in new customers who used to transact with competitors will increase market share.
Moreover, this can lead to higher profits for the business. Additionally, by increasing market share, B2B businesses can gain a competitive advantage over their competitors, leading to long-term success.
4. Improved Brand Image
One of the advantages of competitive pricing is that it helps B2B businesses enhance their brand image. When you offer competitive prices consistently over a period of time, customers have a positive perception that your brand is willing to compete and show them the best product for their money.
Furthermore, this positive reputation can increase customer loyalty and higher sales volume. Additionally, when a business is known for offering the best prices, it can attract new customers looking for the best deals. You can also read how to implement competitive pricing.
5. Better Positioning Against Competitors
Competition-based pricing can also help B2B businesses position themselves better against their competitors. When a company offers excellent prices, they are confident in its products and services against its competitors.
Moreover, competition-based pricing helps to establish the business as a serious player in the market and can make it more difficult for competitors to gain an advantage. By positioning themselves in this way, B2B businesses can earn a competitive advantage leading to long-term success.
6. Increased Profitability
Finally, another one of the advantages of competitive pricing is that it can lead to increased profitability for B2B businesses. Although offering products or services at lower prices may result in lower profit margins, the increased sales volume that results from competition-based pricing can offset this.
When a business attracts customers through competitive pricing, it can generate more revenue, leading to higher profits. Additionally, by increasing market share and improving customer retention, companies can create a stable revenue stream that can lead to sustained profitability.
How to Automate Competitive Pricing Strategy
After understanding the advantages of competitive pricing, businesses must apply it to their pricing strategy. However, setting competition-based pricing can get tedious and mundane as enterprises tweak prices more than twice weekly or even daily. Each change requires manual tasks like studying competitors' prices, market trends, customer behaviour, etc. But, doing all of these several times in a day is exhaustive.
Moreover, relying on data and market research information done manually multiple times a day can breed inaccuracy as it may include human errors. Since the price change needs to happen promptly, incorrect prices can make you lose sales and revenue.
Therefore, AI pricing platforms like SYMSON help to automate the pricing process. It leverages mature data quality and scientific algorithms to conduct market analysis, track competitor prices, conduct a competitive pricing analysis, consider your business rules and recommend and implement optimal prices.
One of the crucial benefits of competitive pricing for businesses is that it helps maintain a brand image by claiming the top position as an option when customers lookout to buy. B2B businesses can ace it with a staunch competitive pricing strategy using AI pricing.
In conclusion, competition-based pricing is an effective pricing strategy for B2B businesses that want to outperform competitors and increase their market share. After strategic implementation, you can maintain higher sales volume and revenue from competitive product categories. The advantages of competition-based pricing are manifold and not limited to the points mentioned earlier.
However, it is essential to remember that competitive pricing is not a one-size-fits-all strategy and should be tailored to the business's specific needs.
Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!