Question: Mark, I’ve been intrigued with your mention of B2B pricing. A curiosity I’ve had is about ethical competitive analysis of industry pricing. In retail, consumer or product sales, the information is available and transparent, but in services, it’s hidden. Asking other vendors is fraught with deceit and calling posing as a customer is not cool. J.
Answer: Great question J. The first and easy answer is ethics are in the mind of the beholder. I don’t necessarily get to say what is ethical and what isn’t. But, for the sake of argument, let’s assume anything deceitful is unethical. Then, how can you find competitive B2B pricing information?
How to Find Hidden B2B Pricing
This can be a challenging for most companies. Since you mention services, I’m assuming that every project is different, has a different scope and a different price. Ideally you would find out the competitors price before the project is awarded, which makes it even harder. Here are a few ideas, one before the award and a couple for after the award.
Finding Pricing Before the Award
In large projects, there are multiple buyers. Your salesperson has a good relationship with one or more of those buyers. If that buyer wants you to win, they may be willing to give you the information you need. However, do not trust any numbers that come from procurement. If they give you a number during the negotiations, they are probably making it up.
Finding Pricing After the Award
- Just ask. Someone may be willing to share that information with you. It often isn’t comfortable to ask, but what’s the worst that could happen? They say no. Just ask.
- Take advantage of all government opportunities. You should be able to get copies of the competitors proposals after the award when you are selling to the government. The implication is that your competitor will behave similarly when bidding on commercial jobs.
- When you are bidding on custom projects, you are probably using cost plus pricing (ugh). You are estimating the size of the job, estimating your costs, and adding a margin. The good news is, your competitors are probably doing the same.
Assuming your costs are similar to your competitors costs, then deals you lose may be because you were looking for a markup that is too high. Deals you win are because your markup was less than your competitors. I hate this thinking but it’s relatively accurate.
Improving Your Chance of a Winning Bid
Here is what I prefer in these situations.
Respond with 3 bid packages: good, better and best.
- The better package is the one that meets the RFP and has a decent margin built in.
- The good package is less than they want at an aggressive price so you are seen as price competitive.
- The best package is much more expensive, but has aspirational capabilities, showing them what they may be able to get from you. Often, buyers like this flexibility enough that they go with you.
Good luck. Sorry there isn’t an easy answer, but keep trying. Readers, any other ideas?
Tags: ask a pricing expert