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Vocatus Pricing & Selling Blog

Pricing and selling powered by Behavioral Economics

You’re not the cost leader in your industry – why do you still have customers?

Too few companies in B2B ask themselves that question. If they did, they would discover how a change in perspective can help their sales success.

It has happened numerous times. After a talk on Behavioral Pricing & Selling, or on our GRIPS decision typology, someone approaches us and raises the following concerns:

All of what you’ve said may apply to B2C products like cars or newspaper subscriptions, but I work in B2B, and our industry is so commodified that price is the only thing that we can talk to the customer about. Behavioral economics just doesn’t apply to our industry.”

There is a very easy litmus test for that, which we happily apply on the spot: 

–“Are you the cost leader in your industry?” 
“No”
–“So why do you have any customers then?”

Behavioral Economics not applying to commodified B2B markets would essentially mean: All customers decide rationally, they have the perfect product, market and price knowledge and make their decisions purely based on the final cost.

In such an industry, only the cost leader would be able to survive. Nevertheless, there is competition in B2B commodity markets, as we all know. That’s because companies already exploit some elements of Behavioral Pricing and Selling without even recognizing.

 Just consider a few examples of customer behaviour that determines many buying outcomes in B2B:

  • Fairness: No buyer will squeeze every last cent out of the sales rep on the other side. After all, he has to be able to look him in the eyes at a later point in time.
  • Loss aversion: Switching to cheaper providers creates uncertainties. These are often unknown or they may be hard to assess and quantify. Few purchasers would be willing to blindly run the risks following from switching providers.
  • Lack of knowledge: Purchasing departments aren’t aware of the entire market and may not be aware of cheaper competitors.
  • Disincentives: Buyers are incentivized based on negotiated discounts, not on finding the lowest possible price. Getting a hefty discount on a high list price is better rewarded than finding the supplier with the lowest possible final price. 

These are just a few examples of how Behavioral Economics is key to understanding and influencing B2B buying behavior. So, rather than leaving it down to chance, how Behavioral Pricing and Selling already benefit your business, discover how understanding and influencing your customers’ behaviour can open even more opportunities for greater business success.

 

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