Abstract
In today’s competitive market, leveraging AI to enhance pricing strategies and drive long-term customer value is more crucial than ever. Join industry experts Josh Bardell and John Bruno in this engaging on-demand webinar as they reveal how AI-powered pricing strategies can transform your approach to maximizing customer lifetime value. Discover actionable insights on optimizing pricing models, implementing effective rebate programs, and transitioning to subscription-based pricing. Learn how to harness AI to predict customer behavior, customize pricing, and improve your top and bottom lines.
Speakers
Josh Bardell, Principal Strategic Consultant, PROS
John Bruno, VP, Commerce Strategy, PROS
Full Transcript
To everyone who’s just gotten into the room, we are here for today’s webinar, pricing strategies to maximize customer lifetime value. I’m Alex from Professional Pricing Society, and I’m so glad to have you all here. We’ve got two great speakers with us today, Joshua Bardell, principal strategic consultant at PROS, and John Bruno, vice president of strategy at PROS.
…
Both bring a wealth of experience in strategic pricing, AI driven insights, and customer centric approaches to pricing optimization.
Josh and John, thank you again for being here. How are you?
I’m doing well. Thank you very much.
I’m doing great. Thank you.
Yeah. I wanna thank Kevin Mitchell and the entire PPS team for hosting us today. This is a absolutely wonderful venue and exciting platform to talk about creating customer lifetime value. Again, I’m Josh Bardell.
I’ve been with PROS for over six years.
Prior to that, I’ve led pricing teams for over twenty five years from retail, manufacturing, distribution, and the airline businesses, from pricing teams as small as one, which I’m sure some of you can relate to, to as large as, pricing teams with over thirty people on it. So I’m looking forward to today’s session. John, over to you.
Yeah. Hi, everyone. My name is John Bruno. I’m vice president of strategy at PROS. I’ve been at PROS for about five years now. My background has always been somewhere on the intersection, depending on the side, of business and technology.
Most recently, I was the head of product at a late stage start up, but spent about five years at Forrester Research where I own both the configure price book and pricing research practices over there.
Alright. So today, what we’re gonna be talking about is how you can drive better customer lifetime value. So it’s a shift in thinking from being able to support your customers in producing one time orders to building and nurturing relationships, that last a lifetime.
Right?
Relationships that are both mutually beneficial for the buyer, but also your organization.
And as we think about that, you know, we’re faced with a myriad of different challenges in accomplishing those objectives today.
Right? We’ve lived through a really radical last five years, you know, dealing with the global pandemic and all of the disruptions that came about. And although I don’t have a crystal ball in front of me and I can’t accurately predict the future, I think we could say with a high degree of confidence that as we move forward, we should expect more volatility, more uncertainty, whether it’s the geopolitical climate, whether it is tariffs, whether it is the occasional ship turning sideways in the Suez Canal and the resulting supply chain disruptions, your businesses are going to need to adapt and evolve at a faster pace than ever before.
So we rewind the clock back just just a little bit and look at some organizations that have actually struggled in that charter to adapt and evolve. Companies like Sears, Circuit City, and Blockbuster all come to mind. You know, Sears grew to its fame by sending catalogs in the mail, allowing buyers to shop and place orders that way. You know, Circuit City became that one stop shop for a lot of your, technical DIYers, and Blockbuster seemingly was a mainstay for, you know, every family on a Friday evening going into their weekends. But each of these businesses faced a different set of disruptions.
Sears, Circuit City, you think of the advent of digital technologies and allowing shoppers to embrace more through digital self-service forms. And then you have companies out there like Blockbuster, who had a really robust business model and seemingly were as, ever present as your local Starbucks.
But all three of these got disrupted, the latter, you know, by a company, in Netflix that had turned the business model entirely on its head. What if you didn’t need to go anywhere to, you know, get your entertainment needs fulfilled?
So disruption is really, you know, facing us from every angle.
Dawn, speaking of some disruption, I think I’ve got a match, that looks like the presentation may be backstage.
Can we get that published to the main stage, please, if to make sure everyone can see it?
It is showing on stage here. The two of you able to see it?
I can see it.
Okay. I’m gonna go ahead and log back in then. I’ll be right back. Carry on, John.
Okay. It looks like we see a note from the audience that, the folks on the line can see it. And so what’s interesting is that although we like to hearken back to businesses like Sears, Circular City, and Blockbuster, really the disruption they faced about two decades ago, you know, the same still holds true today. And so I found myself thinking, what are some businesses that have faced kind of different levels of disruption, and what role does pricing and pricing strategy play into that?
And so and just in the past couple of years, we saw companies like Bed Bathmeon file for bankruptcy. And what’s really interesting is because they were a mainstay in the kind of the home goods space, and I think they became very, very popular for doing things like sending mailers out there for twenty percent off an individual product or an order. And what they did through that pricing and discounting strategy is they they actually condition their customers not to go into the store and not to shop from them. They condition their customers to wait for those kinds of incentives, to show up and then ultimately buy only the one item that they need at a massive discount really hurting the business from a a top line revenue standpoint, but also from a margin and profitability standpoint.
The second organization that comes to mind for me is actually one that you might not think as one that’s struggling, but absolutely is.
And that’s CVS, the pharmacy. Right? They built this model on being an ever present pharmacy in your local neighborhoods. And, oh, by the way, they could sell you a lot of other household items at a strong markup, really helping their margins.
With the challenge that they’re facing is that pharmacies have become somewhat commoditized.
Now you can walk into a local Target, for example, and leverage their pharmacy there. All the meanwhile, being able to shop for all those same household items, but also clothes, technology, and other things of the sort, and do so with a lot more advantageous pricing, shifting consumer sentiment to move more towards those pharmacy locations.
And then another one that’s also struggling right now is actually Netflix. I talked about how Netflix disrupted Blockbuster, but Netflix is being disrupted today. You know, they had built a business on one that generated and created a lot of net new customers even though the business itself was not producing profit.
And now we find ourselves in a world where, information, video content, entertainment is so pervasive. You can get it anywhere.
And Netflix, in its path to try to get to profitability, has been relegated to increasing its pricing nearly year over year over year. And so for those of you who aren’t paying attention at home, Netflix pricing is going up to twenty five dollars per month starting in March, and they faced an absolute backlash and a lot of customers moving beyond.
So as we move forward, what is the major disruption that’s shaping the industry today?
I think for a lot of the b b b businesses, that disruption is still digital technologies and the amount of pie that is eaten up by digital technologies when it comes time to the channels that b two b buyers choose to purchase in.
So if you look at, as a good barometer, the total amount of sales done through ecommerce channels in the US, if you look at where that was predicted to fall in twenty twenty three, is about one point eight trillion dollars. And what actually happened, thanks in part to the pandemic, was that forecast was blown out of the water by two hundred billion dollars.
So when Forrester Research redid that forecast for twenty twenty seven, they see, US ecommerce sales growing to three trillion dollars by twenty twenty seven. So, it wasn’t a flash in the pan. It was not a fluke. Digital technologies are here to stay, and it’s here to shape how buyers engage and how businesses find, serve, and retain their customers.
So interestingly, because more b two b buyers are finding themselves interacting through digital technologies, it’s actually made it harder for businesses to capture new demand.
And the reason why it’s become harder is because customer acquisition costs are shooting through the roof. Digital is the great equalizer. You don’t need, you know, thousands or even tens of thousands of salespeople to go up there and connect with your customers. Your customers can find you online, and so we’ve seen a massive uptick in customer acquisition costs, namely around digital spend.
And when we look at why those customer acquisition ratios are getting so high, well, it should be no surprise. It’s all because of who you’re selling to.
So interestingly, over here on the right hand side, you have a graph from even twenty twenty two. So it’s a couple of years old, but what it did is it showed the composition of who today’s b to b buyers are. I remember a few short years ago, we were kind of beside ourselves to think that millennials were were taking up a sizable portion of that pie. But in reality, millennials are overwhelmingly the predominant buyers in today’s b to b, landscape.
Even more interesting to me is that we even start to see Gen z come into the fold. And so when you look at these generations, these generations are marked by the experiences they grew up around. And for everyone in that millennial generation and below, technology was in their home from their earliest years. Access to the Internet was something that these individuals grew up on, and so they’ve become more technically savvy and they’ve become more self sufficient. And so we find that these types of buyers tend to move around a lot more than, let’s say, buyers of the baby boomer or Gen X generation.
So here in lies the problem. Right? If you are looking to grow, a profitable business in twenty twenty five and beyond, right, your goal is to continue to serve all of the customers you serve today.
Ideally, you want to be able to sell more products into that same customer base, while at the same time attracting new customers.
But because of the role digital technologies play, and because of the behaviors and sentiments shared by the predominant, number of today’s b two b buyers, they’re more willing to move around. Right? So if you’re operating on a strategy where you’re trying to navigate in price on a deal by deal basis, in all likelihood, you’re going to see some of your existing customer base start to churn.
So what that means for your business is if you see any aspect of churn, it offsets the impact that you’re able to make from a growth standpoint.
So for each year, you need to not only cover the gap of churn that has occurred, but you also need to grow the business, organically above that.
So that being said, the real challenge businesses need to think about goes back to that topic of customer lifetime value and goes back to how do you keep the customers you have today happy, and how do you get them to spend more.
And so when you look at this, you know, we often talk about the worlds of b two b and b two c increasingly colliding with one another. And when you think about what creates a really positive customer experience, well, for the consumer side of the world, it boils down to three key attributes. One is ease of the experience. How seamless was it? Was I able to, get through the experience easily and efficiently?
Number two is effectiveness.
Was I able to complete the job that I set out to do? If I wanted to go up there, educate myself on an on a product and make a purchase, was I able to perform that task?
And thirdly, for consumers, it’s emotion. How did that make me feel? You know, for me, I’m kind of a a techie nerd, so I like to buy different pieces of technology. I always feel good when I do it.
But if you juxtapose that against b to b, we do see a lot of similarities.
Similarities that b two b buyers want an easy, seamless experience, and they want to complete the task at hand so they can get back to the core aspects of their job.
The area where b to b experience does deviate from b to c is around trust.
Do I think the information and the offer that was shared with me was accurate and fair?
And trust is really important.
If we look at some data from Forrester Research, it’s clear. Trust is not only a part of the b to b experience, it is what drives b to b loyalty the most.
And so when you think about the role that trust plays, some of the data here just jumps off the page.
For customers that trust a business, they’re thirty seven percent more likely to recommend that business to others in their organization and elsewhere.
They’re thirty percent more likely to keep doing business with that company. That speaks to, that retention.
If we go further down the page, they’re thirty one percent more likely to purchase additional products and services from that company. That’s the expansion.
And if they trust the business that they’re working with, they’re actually thirty percent more likely to pay a premium to work with that company.
So now we get to the philosophical question behind today’s presentation.
How do we create trust, and how do we start shifting our customers from a transactional mindset to a relationship mindset?
So I know for for many of us, our pricing strategies show up when we put orders and quotes up there for our customers to react to.
At the start of this presentation, we talked about how some organizations have been disrupted and so how some organizations are being the disruptors.
One example we talked about was Netflix in the advent of a subscription business model. And I think there’s something to be learned from that that every business can can kinda take and adapt to meet their needs. And that is the notion of how do I create and define a commercial relationship that is mutually advantageous for not only me, but the customers that I do business with.
And so here at PROS, we see really three key vectors for how businesses can leverage long standing commercial relationships to foster stronger retention, to improve expansion, and ultimately achieve what we’re all after, which is improving customer lifetime value.
And those three aspects that we see are, one, recurring orders. The ability to negotiate sales agreements or customer specific pricing. Right? Pricing that I know is fair and equitable and I can order off of at a moment’s notice.
Number two is a subscription, and you might think of subscriptions as being something that are more, germane for, let’s say, manufacturers, but we even see a lot of folks in distribution today doing things like offering service contracts or, offering their product as a service moving forward.
And thirdly, rebates. Right? We often talk about the role that price plays and customer specific pricing to drive incentives.
Rebates are another flavor of incentive.
But rather than giving away my margin at the onset of the relationship, why don’t I provide an incentive for you, the customer, to spend more, purchase more with me. And when you hit those thresholds, you get that kickback in return.
And so what I wanna do now is I wanna turn it over to my colleague, Josh, who’s gonna walk us through a couple of things that you could all keep top of mind as you think about making a transition like this and as you think about, you know, changing your objectives from selling more to generating greater customer lifetime value.
Yeah. Thanks, John. You know, I would love to see people’s comments here in the chat, which is on your right hand side. If we go back one slide, John, you know, you you bring up a really good point about the transition between kind of spot orders to more of a reoccurring order system.
And when we think about the bubble on the bottom right, it’s subscriptions. Right? We’ve all started to become immersed in the subscription world. The younger generations, if we think about the iGen, they really kind of built their, say, cell phone plans off of a subscription. But I know when I started my cell phone plan, it was you buy your cell phone and then you have a monthly plan.
And if you wanted a new cell phone, you just had to buy a new cell phone. There wasn’t this continual subscription upgrade. So in the chat on the right hand side, I would like to have you think about all the types of subscriptions you have in your personal life right now, whether that’s Netflix or Disney plus or maybe a car subscription, radio subscription, cell phone subscriptions, how many can you count over the next sixty seconds? So I’m gonna take a sixty second pause here.
Think of all the subscriptions that you are personally subscribed to. I’d like to see those pop up in the chat because as we kinda go through the next set of slides, it’s really about how can you build that reoccurring revenue because this is sustainable business that your financial teams, Wall Street, your shareholders can all be accounted for understanding of what is going to be guaranteed revenue coming through your door. So I’d love to see those pop up. I think a lot of people get surprised when we do this exercise.
I thought I had three or four. I currently have eighteen different subscriptions in my life. So it’s fascinating.
Happening. And as you rattle off all of various types of subscriptions, I could feel the hole in my pocket getting bigger and bigger and bigger. Hopefully, you can’t see the biggest sweat dripping down my face.
That’s that’s right.
So as we carry on, as people start kinda populating in oh, thank you so much. I see we got, our first one in here. We got six. We’ve got eight, twelve. Angie, you’ve got twelve subscriptions.
I wonder how many people at the end of today’s session are actually gonna start going through their subscription list and saying, do I actually still use that or not?
But what’s fascinating is it is kind of, you know, this we subscribe to it and then we forget about it, and it’s this convenience in our life that is always there. It’s kinda like air and water that we breathe and drink every day. You get so used to having that convenience, that luxury of that life. So when we kinda think about moving into the next slide here, John, is as pricers, as business people, finance people for everyone in the room, you know, we’re really thinking about what is our goal in a business, and that is to optimize every buying and selling experience. So whether our customers are coming to us for that spot order, that contract order, or whether we’re gonna go through and have a particular type of agreement, We wanna think about what is that total experience to our customers.
Wow. Looks like we got thirteen’s our record. Does anyone else have greater than thirteen? It sounds like I need to skinny mine down.
John, are you doing your counts in the back of your head?
I have, very consciously avoided doing that because I think you can be today’s winner with the greatest number.
So what we wanna do is we want to give kind of five key actions that we can leave you with today.
It’s great to hear a presentation and some fantastic facts, but all of us, when we walk away from one of these as well, what can I do? So what? Where can we go with this? And so let’s look at action number one that we wanna talk about, which is focusing on speed.
What’s fascinating is as we’ve become into this digital world of everything is at our fingertips, whether it’s your laptop, your iPad, or or other tablet type device, your cell phone, you can purchase almost anything at a moment’s notice. Even whether that’s your groceries or an automobile can go digital now. And what our data shows and all of the data that’s out there in the marketplace is that people will pay for that instant transaction.
Time is becoming the valuable metric out there that people want to get more time back. So the ability to be able to create a very fast and efficient quote allows you also to be able to charge more for that quote, and that’s a very powerful thing.
So when I kinda think about one percent, we’ll pay sixty one percent of people, we’ll pay one percent more for instant pricing.
But if we look, forty eight will per well, forty eight percent of the people polled will pay will pay five percent more, maybe about five hundred basis points. We’re out there trying to to squeeze out a hundred or a hundred and twenty five basis points by just creating speed and how fast. So whether that’s a CPQ engine that’s dynamic configurable, whether that’s a spot price, whether that’s your ecommerce price. So another statistic out there that says if your ecommerce engine takes three seconds to generate a price callback when the people type in an item, you’re fifty percent likely that they’re gonna leave and abandon that cart.
So all the transactions and as the world becomes more digital, speed is your key.
Dan, do you have anything you’d like to add to that?
Yeah. Josh, I was gonna say, you know, earlier, we talked about the role that, trust plays, right, in driving transactions, driving retention, driving expansion. Here, we’re talking about speed. You talked a little bit about that ecommerce experience, but what happens when somebody leaves that page? Or what happens, you know, when the buyer feels like they’re not getting what they need when they need it? What do they do next?
Yeah. That’s a fantastic question. So if they’re not getting that, they are looking to get their needs net elsewhere. Right? And one of the things that we have seen not only with our our our current systems that are out there that are legacy based, whether you’re an old a s four hundred green screen that’s that’s not able to process in three hundred milliseconds or faster on these updates, is that those customers might who have been very loyal to you in the past are gonna start to shop one or two items, maybe not their core items, maybe not what I’m gonna call the milk and eggs, but they’re gonna take something out there like the candy bars, right, that we all occasionally buy, and they’re gonna check that with your competition.
How fast can they get the price back to them, the product in their hands? And they’re gonna do it with their secondary or those long tail SKUs that they just occasionally buy. Once they find that someone else can serve their needs faster, they are willing to pay more for that, and then they’re gonna start shifting over all of the core items that you’ve been selling them. And so that’s really one of the things that we start to see out there with people who can’t respond fast enough is that the competition takes that b or c item, but it quickly becomes the a item. Within thirty to ninety days, you can start to abandon not only the cart, but the entire customer churn.
Great. Alright. So, yes, Ryan, we’ll absolutely share, the data sources for these. This is actually all external data, and that’ll be coming out with the notes in our presentation. So thank you for that.
So the second one that we wanna talk about here that you can do is how you can segment your business.
So one of the things you wanna think about is you have the high touch complex sales. Right?
Those sales can be very complex configurations.
Maybe, you know, I’m gonna go as far as saying you’re configuring an entire helicopter, thousands of different parts, or even a high touch configuration of an office with all of the computers and the printers that you have.
Those configurations, you’re gonna have a sales rep, whether it’s inside rep, outside rep, or some type of third party that’s gonna be working together on that. That’s that top right corner.
The middle section is where there’s a lot of growth opportunities.
Those opportunities are really around self-service.
You want your customers to be able to go to a website, be able to walk into, you know, even a brick and mortar store and be able to self-service that experience. I don’t wanna talk to a sales rep and literally as a buyer have that need or need that knowledge. Otherwise, I wanna be able to go about my business, quickly grab everything I want, and be able to check out. Again, digital or in person.
So when you kinda think about that, not everything in the world is going to be digital, but that your customers want to have that option when it’s convenient for them. We’ve all been through that. We wanna run into a store. We wanna get out. B two b buying is the same type of process.
If I know that every single week I am purchasing twenty cases of latex gloves because I work in an operating room, I wanna know that I can just go online, get the price that’s the right price for me, that you’re gonna have the inventory, and it’s gonna get shipped out, and I’m gonna have that when my doctors and medical staff need that. So when you kinda think about the alignment that you wanna have across all your organization, You have sales and finance. Your commission and and incentive structures get impacted here. Because if we’re moving from a high touch sales rep to self-service, that’s that sales being shifted.
So you need to start thinking about as pricers, how are we bringing in the broader groups of our organization to make sure that if we start to shift our customers of where they go and being able to self serve on the digital, that we’re also not kind of disincentivizing that connection between the sales rep and the customer itself. And then, of course, the third is that instant price. Right?
So those are some actions that you can think about as you shift your business. If you’re not already shifting your business, you wanna be set up to start shifting it very quickly. You wanna have, again, that pricing engine that’s gonna deliver that relevant price, whether it’s a contract, locked in price, whether it’s a sales type of term agreement, or whether it is even a subscription that they can go ahead and replenish one.
So when we think about the third action, it’s if we are starting to create that tailored price for all of the customers and all of the products that we have. In my particular business that I used to work in, right, we had around a million SKUs. We were serving seventy thousand customers.
What you’re really gonna have here is the complexities that Excel can no longer handle that type of technology.
So in order to serve up multiple channels, direct, indirect, your inside sales with your outside sales, you also wanna serve up your ecommerce portal, we think about some of these different channels, is that there’s nuances that the AI science today can can pick up. What it’s gonna allow you to do is find the correlation between a single product and its follow on products, all the other products in that cart, and then calculate the willingness to pay for that one item relative to everything else you have.
This is called product centricity.
And within that, you’re gonna be able to find out what are those core items that the customer is really priced elastic and sensitive to that you need to deliver that sharp price, and what are all the tail items that we subjectively have created in our mind at a broader level. I can now drill that down to a customer SKU level, identify those tail items, make sure I’m maximizing the overall profitability for each and every single SKU and where it fits on that customer’s willingness to pay.
So we also need to think that AI is also looking at share of wallet, total revenue. What is the season? What is the market? Who is the product? What is the customer? What is their frequency?
All of those different variables, right, can become into that engine to generate that precision of price down to the penny level is where everything is getting to, and that’s where the dollars and cents are being made.
So when we think about the difference between, you know, the trust in the AI, I wanna turn it over to John, and then I’m gonna take a look at the chat. I think I saw a question pop up. John, can you expand a little bit on on how you think about where AI has evolved to and how it’s helping pricers today get that precision and serve all the channels that are out there?
Yeah. Absolutely. I think what’s really interesting is that given a specific scenario, today’s pricers have the information at the disposal to make a really good decision. And so I think a lot of you, you know, whether using a software solution or not, are able to, at a moment’s notice, identify the right price for a specific deal.
What makes things a lot more complicated and the role that I see AI play and the real value of it is not necessarily the ability to make that one decision better or more accurate, but the ability to make every decision better and more accurate. I think you mentioned, what, a million SKUs and seventy thousand customers.
You know, that’s not unheard of. That’s that’s not anything surprising to me based on the customers that that we work with and the scale that we see. And so when you think about the variety of customers, the variety of products that you offer, the variety of end markets you serve, the variety of channels that you sell through, the problem of identifying the right price based on a customer’s willingness to pay or the desired objective that your business has, whether it’s revenue growth, margin performance, deal conversion, being able to make all of those decisions accurately in real time, it’s just a a problem that humans alone cannot help, cannot serve.
And so with the the advent of technology and artificial intelligence, really think about it as, you know, the the Iron Man suit to your Tony Stark. Right? Everything that you innately are good at just gets supercharged, and you had now have the ability to make all of those decisions at scale with your discretion and guardrails in place. So AI for me isn’t necessarily a a decision point, benefit.
It it is, but the real benefit comes in when you’re making just tons of decisions at scale and having the confidence that each one of those decisions is accurate and right and will achieve the right outcomes for your business.
I love that. Thank you for adding that. I see, Donald, you have in the chat here a question that says, how does the speed vary by goods versus services and b to b versus b to c.
So what we have seen is a lot of shift where if we go back even just ten years, right, Amazon really kind of flipped that script on the b to c world. They made it to where anything and everything you can imagine that you wanna purchase is in a single, website or app, right, that you can go in and select. And if we are Amazon consumers today, now they’re adding on before you check out all of the groceries that are associated with that. So when we think about the impact of the speed, that has allowed in the b to c world businesses to dominate by being able to produce that product and get it in your hands within twenty four or forty eight hours.
How that has shifted on the b two b world, and I hope I’m answering your question here correctly, let John add in as well, is that us as consumers, since that is where we live most of our day, when we come into the office, we inherently bring that b to c experience into our demands as a b to b buyer.
And so when we think about what pricing used to be acceptable was in a b to b world, it could be, I’m gonna give you a quote in in a single day turnaround.
Fifteen years ago was fantastic.
We go back just five years ago, it was if I can give you a quote in one second.
And if you think about where pricing and AI is at now, it has moved from even seven hundred and fifty milliseconds down to sub three hundred milliseconds is the expectation in order to get that quote converted into an actual sale.
So speed on goods has been moved down to the millisecond time frame in order to win that deal at that moment and at that time, whether that’s a self-service or even being quoted through sales organizations, having the ability to build a three hundred line quote, a five hundred line quote in under five hundred milliseconds, targeting three hundred milliseconds is what the customer’s neurological need is going to be in order for them to feel satisfied, to pay more, and convert that order.
From a services side, John, if I can have you add in a little bit on I don’t work so much on the services.
Love to see if you’ve got some, additional ads you’d like on services or if we can also follow-up with Donald and the rest of the the group, that’s with us today after.
Yeah. Yeah. I’ll touch upon services. I do wanna mention one other point on kind of the tangible good space.
So I was doing some work some years ago with a a manufacturer that is a probably a household name to all of you on this call, and they were reevaluating their ecommerce experience because customer satisfaction, per the comments made earlier, Josh, customer satisfaction was going down. And the reason why it was going down is because as you are browsing their catalog online, they would not show you the price. And so their ability to deliver the experience stood in stark contrast with the what the demands and expectations of their customers were. And the reason why they weren’t able to show you the price was because their ecommerce engine was making direct calls to their ERP.
And if you needed to load twenty four, thirty six, forty eight items on a search, Those are twenty four, thirty six, and forty eight, request to that ERP, and what that resulted in is page load times that were north of a minute. And so what they did, they thought it was the the appropriate approach for their needs then was once you navigate to a product page on their ecommerce site, they prompted you with a button that said, get your price. And so what they were really reducing was the number of API calls to their ERP.
Now still, even then for that single price return, it was a couple of seconds. That’s why their customer experience had been going down. So it’s it’s now indistinguishable, what you do in a b to c world versus what you do in a b to b world. You cannot separate the two as a buyer, and so those expectations really create a bigger burden of responsibility on the business that you’re you’re purchasing from.
Now on the services side, you know, speed and being able to turn around a quote is gonna, in times, involve a lot of collaboration across different, individuals depending on the type of service that you are offering. So if something is truly consultative and one off and bespoke, I think there’s a little bit more willingness and receptivity to a little bit more time from the buyer perspective.
But that being said, we’re seeing a lot of both manufacturers and distributors start to take a service oriented approach to even the tangible goods that they sell. So, for example, a manufacturer in the the medical devices space, that produces equipment to run, let’s say, blood diagnostics, you know, they would routinely have to sell a lot of the consumables that are leveraged by that machine to run those diagnoses. Right? So they’re tangible goods. They’ve taken that tangible good approach and turned it into a service contract. So what they’re now doing is they’re looking at the number of scans and analysis performed by that machine, and based on how frequently it’s used by their customers, they’re automatically replenishing.
And so when we go back earlier and talk about things like sales agreements as a great catalyst for customer lifetime value, that’s exactly what they’re doing. They’re saying, hey. If you’re going to perform five thousand scans per month, we will deliver that outcome to you. And what we’ll provide via service is all of the consumables, and we’ll also do throw in things like preventive maintenance. So instead of having to, you know, buy those items one off, they treat it as a service, negotiate that fair, equitable arrangement out of the gate, and now that customer is happy in perpetuity.
You know, I I I read an article that water heaters and air conditioners in our homes and businesses are gonna be going that direction because it creates multiple revenue streams. Right?
And it’s a new way to grow and scale your business. So that’s fantastic. Thank you for that, John. Let’s look at action number four.
And action number four is really around embracing variable pricing and channel expansion.
So as you can kinda see here, when we think about what what is on this screen starting at the top, right, You’ve got your direct sale with your person in your handshake for for some goods. But then we have resellers. Right? Are you selling to multiple types of reseller channels, inside sales that are picking up the phone, agreements that are locking in various pricing on your core, your tail, or your lead SKUs, your a SKUs.
Right? Ecommerce channels. Do you have one or even some businesses now have multiple ecommerce channels?
In addition to that, subscription options to where product just automatically gets delivered for that particular subscription.
And, of course, mobile is exploding on the b to b scale. It used to be you logged in on your laptop top where businesses were placing orders. Now it’s actually people are just wanting to go to an app on their phone or a mobile website in order to replenish their orders.
So you have multiple channels, and those different channels can have different cost to serve. We all know that if it’s a direct channel, you’ve got sales reps and all of the other costs associated with that, travel and expense associated perhaps with an outside Salesforce moving around versus an ecommerce that is more self-service.
So you have to think about variability in your pricing, but also what type of channel parity do you wanna have or where do you want to incentivize to shift your customer demand to that could lower your overall cost to serve that customer but still fulfill their needs. So even if your pricing is holding flat on some of those channels, your cost to serve should be, equated into that calculation for each one of the channels and the complexities of the channels.
So as you move into those digital channels, you know, you can execute pricing strategies across these, and they can be different pricing strategies that will enable you to really maximize the market and the buyer at that given moment of how they want to transact with you.
Yeah, Josh. So there’s process, there’s technology, there’s strategy. Can I ask you just for one minute to talk a little bit about the people aspect of this? What role do people play in making sure this either multi or omnichannel strategy works?
Yeah. You know, that’s that’s a great question. We’ve been having a lot of fantastic conversations across, customers when I’ve been out doing, various strategy sessions.
And, you know, when we think about pricing holistically in the past, it was always kind of a siloed department. Right? It might have rolled up to finance. It might have rolled up to marketing. It’s where a lot of businesses roll pricing today. But now when we kinda think about we’re having to do channels or, you know, channel expansion, maybe we’re moving into just two or three different channels. It’s gonna be involving now our sales organization, our ecommerce organizations, our IT organizations.
So you have this demand now as they think about change management within your organization and you move into a multichannel world is that you want to get alignment within your broader organization and start creating those pricing threads that connect each one of those various departments and how what you do with pricing is gonna impact that particular organization. Right? The WIFM, what’s in it for me It’s the way you wanna think about these different departments that you’re working with. So if you’re moving stuff from a direct to a ecommerce channel, like I said earlier, what’s the impact to your sales organization gonna be?
Do we need to look at and revisit within the finance and sales leadership of around commissions and sales structures to ensure that we don’t start, cutting away into the sales ability for them to have the earnings that they’re looking for? So that’s gonna be some of the key aspects you’re gonna wanna think about now we start moving into the people side within our organization.
Does that help answer did that did that help answer kinda what you were thinking, John?
Yeah. Super helpful. Right? The way that I look at it is we don’t want to, penalize anybody in the organization for what the organization wants as its overarching objective. So when you think about things like more sales going through ecommerce, that’s a good thing for the organization and should be seen as a good thing for everybody involved.
Yeah. Absolutely. That’s right.
So, you know, let’s move into our our final one. I know we’re coming up towards the top of the hour. Is when we really kinda think about what we have is is build that right pricing organization just as kinda John was talking about. We don’t wanna penalize anyone.
Right? You wanna protect the margin in this traditional world. Right? We create controls and manager and execute eighty percent twice in the price execution, and it’s only twenty percent strategy.
Right? But when we think about kind of moving in the digital, now we can become more nimble. Right? No touch pricing, real time pricing tailored for each and every one of your SKUs.
You want a repeatable, largely self running dynamic pricing model. The idea here is to move more to a strategic new pricing strategies, new go to market strategy.
Those in the marketplace where all the movements as cost changes come in or tariffs were to move, you get vendor changes, rebates. All of this ties together, and you want it in a more automated seamless fashion for your day to day.
That will allow the pricing teams to be able to move into more of a proactive idea creation of where they can identify and AB test new pricing strategies, new go to market strategies, start to deep dive across product categories, verticals, customers to identify where there could be some leakage.
That’s where you can really find two to three hundred basis points of incremental margin that can drop straight to the bottom line. That dollar up on top that you get goes right to the overall profitability of your business. So think about building that pricing organization. Work collaboratively across the departments to get the resources you need to be able to execute this type of both traditional and digital commerce.
So I think kind of in closing, John, I’ll kinda, wanna end with kind of it’s a brave new world. Right? Your customers, as you kinda think about it, right, you wanna build that long term relationship.
Pricing is becoming, as we know, the central source to an organization’s ability to thrive, grow, be competitive in this ever scaling economy of of channels and channel expansion, SKU proliferation that is occurring. We’re not managing twenty thousand SKUs anymore. We’re managing a million SKUs through multiple channels.
Technology and practices are evolving at a rapid rate. So investing in them now, that is a scalable baseline so you don’t have to continue investing in new, what I’ll call, Band Aids of a solution every two, three years. Get a platform that is gonna be able to allow you to serve all your customers across all of the channels.
And as we know, AI is the future. It’s in everything we do. I just got an update on my phone last night that has a new AI module in it. It’s immersing all around us, in our cars, in our day to day lives.
AI technology and pricing is enabling pricers to move from that tactical reactive state to a very proactive revenue generating business model. And so I would, you know, kind of challenge that everyone as you think about where you’re going is, if if you don’t have AI today, AI is not going to replace you itself, but a person using AI is going to to be replacing you. So think about how you can help push and evolve your business.
I wanna thank you for the time today, and I wanna move it over to our closing slide. And, John, any kinda closing thoughts on your side before we open it up for a few questions?
Yeah. I think the the point you made around artificial intelligence is gonna be important. Right? It’s pervasive. It’s everywhere in our daily lives. Similar to what you mentioned earlier in terms of the b to c versus b to b dynamic. Right?
AI is is touching us everywhere, whether it’s how we navigate from point a to point b, you know, how your phone recognizes who’s in a photo.
That has now made the transition over into the b to b world, And it’s now the growing skill set that’s going to help people advance in their careers. So those that are using AI and using AI effectively in their day to day jobs will not only see success for their business, but they’ll also see success for themselves personally and professionally.
So it’s a great time, and it’s not, just for, again, going back to that notion of customer lifetime value. AI is not just for that order. AI helps you define those relationships as well. What’s the right subscription? What’s the right price agreement? What’s the right rebate?
And it helps define that everlasting customer relationship.
Yeah. And, I know we’re gonna have Alexis turn it over for some kind of closing remarks. I wanna thank again PPS, Kevin Mitchell, and the entire team. Looking forward to seeing everybody at the Dallas show coming up.
Alright. Thank you so much. Can you all hear me?
Yes.
Okay. I know you can’t see me, but, wanted to make sure you had my voice. Thank you both so much for your presentation today. We really appreciate your time and your insights on this topic.
Josh, you mentioned Dallas. Thank you so much for that segue. I wanted to, actually bring everyone’s attention. I’m dropping a link in the chat to a blog actually written by, one of Josh and John’s pros colleagues, Tom Goran, the impact of AI on b to b pricing, a double edged sword.
So if today’s discussion peaked any interest for you, I’d highly recommend you check that out. Tom will also be joining us at our spring conference in Dallas, Texas, May sixth through ninth. He’ll be in one of our breakout sessions. So if you have not already registered to join us there, please, do so now.
Our early bird pricing does end on March thirty first. I will give you the direct link to our event page as well.
If anyone has any questions, please drop them in the chat, at this time. Otherwise, Josh, John, thank you again for your time. Appreciate you hanging out with us a little bit longer, and I wish everyone a great afternoon.