enterprises

Increase Revenues by Applying Basic Pricing Principles

One of the most challenging areas for startups, especially business-to-business companies, is how to price their products or services. Everyone wants to win some early revenues to show investors, but no one wants to leave (too much) money on the table. There is no magic formula for pricing. I have though discovered some principles that can guide the process.

  1. No pricing strategy completely survives the first contact with enterprise customers. There will always be surprises. Price has to make sense to both sides. It is usually best practice to take the winding path to arriving at a price, rather than putting a price on the table right up front. It can help to do trial closes with different pricing elements, such as asking “if we did this deal do you have a view on what quantity you would purchase in the first year?” or “does your organization prefer to do long-term contracts with ceilings for annual price increases, or do you prefer to renegotiate annual contracts?”

  2. Pricing involves much more than the dollar amount the customer pays. Unlike for consumer goods enterprise sales usually have many more variables to work with, including: volumes, minimum quantities, annual price escalations, level of service provided, customization, integration, payment terms, quality or performance guarantees, and many more.

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