10 Ideas for Pricing to Global B2B Customers

When pricing to global B2B customers who buy from you in different places around the world there are many things to watch out for:

1) Global pricing does not necessarily mean global price. You can still keep a differentiated price based on local dynamics, willingness to pay, competitive level and other variables.
2) Establish internal transparency. Make sure you understand your full price waterfall in each market where you sell to this global customer. The customer will often know more about this than you. The investment ratio in global pricing tools is 7:1 between procurement and sales. In other words, the buyer spends 7 times as much money on knowing your global prices as you do.
3) Making data comparable between markets does NOT mean a single global price list.
4) Make the internal transparency a repeatable process. It is no good if takes you three months to collect spreadsheets from around the globe and consolidate the data.
5) Get a tool that will allow you to both a) collect data as frequently as you want; b) compare and consolidate without manual work; c) simulate scenarios; and d) make deals and quotes globally as well as locally.
6) Have staff who look after global pricing, but do not necessarily always appoint “Global Account Managers” or “Global Coordinators”. That is like painting a bull’s-eye on someone for the customer to target and negotiate with. If the customer can only negotiate locally but you have internal coordination, it puts you in a stronger negotiation position than if you have one single point of global negotiation.
7) Bundle global products with local products or services to muddle the price picture.
8) Consider moving discounts from on-invoice to off-invoice. Most buying organizations find it more difficult to collect and compare data on off-invoice elements.
9) Make local discounts (on-invoice and off-invoice) truly dependent on a counter-performance by the customer (e.g. supply chain, finance, sell-through etc). This makes it much easier to argue for net price differences.
10) In industries where global harmonization of prices is considered inevitable (I doubt it really is in most cases but for argument’s sake let us say it is so), try to maintain some local discounts, local services and acceptance of local business practices. It will give your more freedom to keep a differentiated price.
 

10 Ideas for International Price Differentiation in B2B

by Finn Helmo Hansen, Founder & CEO, Stratinis


1. Having different prices in different markets based on willingness-to-pay is solid pricing strategy, just like customer or product segmentation based on willingness-to-pay in a single country.

2. One single global price is leaving money on the table, except for very special cases where only selling to truly global clients.
3. Build a set of parameters to evaluate your pricing power and potential in each market. This can be market position, maturity, customers’ switching costs, levels of perceived competition, nature of customers (many/few vs local/global). Set international pricing guidelines based on these parameters.
4. Use a pricing corridor framework, with a floor price and a ceiling price, to guide local teams on minimum and maximum prices. This gives global control over price levels but allows markets to adapt to local practices as long as they stay within the corridor. Allow local pricing freedom and let local teams exploit pricing potential in their markets. Most pricing opportunity insights come from local teams, if provided with the amount of freedom to price.
5. Build a database with your price waterfalls around the world, in order to establish internal understanding of differences and opportunities. Make sure your database can reflect differences in local prices rather than using the database project to harmonize prices/discounts/rebates/terms.
6. Competitor-benchmarking is a local exercise. Talking from experience, most competitors are not consistent in their global pricing, so do not tie your global pricing approach to them. However, do consider competitor pricing locally, where relevant.
7. Value-pricing is theoretically superior to cost-based pricing, but remember that customers’ willingness-to-pay varies from country to country, so make sure to look at differentiating value drivers too.
8. If you are dealing with cross-border customers who buy your products or services in several countries then make a strategy for how to make price differentiation stick with them too. Some elements of the price waterfall can/should be adjusted to local specifics and thus resulting in a differentiated pocket price.
9. Parallel trade can be annoying but normally it makes up a small percentage of total sales. Financial benefits of a properly executed pricing strategy with higher prices in certain markets will outweigh the downsides. Parallel trade should never be a reason for harmonizing all prices around the globe. 
10. Always stay within the law. Typical topics to consider in international pricing practices are around not blocking free trade such as in the European Union or general pricing law.

To learn how Stratinis can help you manage pricing challenges like these, visit us at www.stratinis.com