PWC’s insights indicate that optimising trade pricing and discount strategies can lead to a 10-15% improvement in profit margins through streamlined processes and better pricing models (June 2024).
In B2B sales, getting your pricing strategy right can be the difference between retaining your best customers and losing them to the competition.
Trade pricing and trade discounts are powerful tools that can reward loyalty, incentivise larger purchases and ultimately retain customers increasing their lifetime value.
Getting it right helps boosts sales, increase profits and can also help manage your inventory more effectively.
Understanding Trade Pricing and Trade Discounts
Trade Pricing
Trade pricing involves setting specific price bands for your products, tailored to different customers or customer groups. For example, a standard customer might buy a product for £20. However, customers in Trade Price A group could pay £18.72, while those in Trade Price B group might pay £17.89. This tiered pricing system rewards your most valuable customers with better prices, encouraging them to keep coming back.
Trade Pricing allows you to offer competitive rates to your biggest customers while maintaining higher prices for your smaller buyers or retail customers.
Bain & Company analysis shows that for every 1% improvement in realised price, B2B companies can see an 8% increase in operating profit. This is roughly twice the benefit compared to a 1% improvement in market share, variable costs, or fixed-cost utilisation. This underscores the significant impact of effective trade pricing strategies on profitability (Bain).
Trade Discounts
Trade discounts are reductions on the list price applied to specific items, brands or categories, and can also be linked to customers or customer groups. An example is “price breaks for volume” – where a single item might cost £50, but buying 50 reduces the price to £47.50 each and buying 100 lowers it further to £45 each. These discounts incentivise your customers to purchase in larger quantities, boosting your sales volume.
Research shows that effective trade promotion management can significantly impact profitability. A PWC Strategy & report found that companies can see a 5% to 20% improvement in annual profits within one to two years of optimising their trade spend and discount strategies (Strategy & PWC 2023).
Where is Trade Pricing Applied?
Trade pricing can be seamlessly integrated across multiple sales channels to ensure consistency and ease of use:
Websites
Stok.ly maps your trade pricing directly to your eCommerce channels, ensuring that your B2B customers see their specific pricing when they log in and shop online.
Phone and Email Sales
When creating a new sale and adding a customer, Stok.ly automatically assigns the relevant trade pricing and discounts to all items added to the cart. This makes it easy for your sales team to offer the right prices without manual adjustments.
Field Sales
Similar to phone and email sales, trade pricing and discounts are automatically applied when field sales teams add items to the cart. This ensures your sales representatives can confidently provide accurate pricing on the spot.
Automating Trade Discounts Based on Customer Behaviour
One of the most powerful features of Stok.ly’s B2B Order Management system is its ability to automate trade discounts based on customer behaviour. This means that discounts can be applied to your customers based on factors such as purchase frequency, average purchase value and total lifetime spend. For example, a customer who buys frequently or spends a significant amount over time could automatically receive better pricing, further encouraging their loyalty and higher spending.
Boost Customer Loyalty and Lifetime Value
Stok.ly’s B2B Order Management System supports flexible trade pricing and trade discounts, linked directly to your customers and customer groups. This flexibility allows you to tailor your pricing strategy to meet the needs of different segments of your customer base, rewarding your best customers, incentivising larger purchases and increasing overall customer satisfaction and retention.
Managing Excess Inventory
Trade discounts are effective in managing excess inventory. By offering substantial discounts on bulk orders, you can quickly clear out surplus stock, reducing storage costs and minimising losses from unsold products. This strategy helps you run a lean inventory and improves cash flow, which is critical for maintaining profitability and freeing up cash.
Pricing Mismatch
Whilst pricing mismatches can occur with any strategy, Stok.ly’s accurate, real-time visibility of stock across all channels, ensures pricing data for all your trade customers is always synced and up to date.
Impact of Pricing Mismatch: Pricing mismatch is the biggest deal breaker for 50% of buyers during the evaluation stage of their purchasing journey. Clear and transparent pricing is crucial to prevent potential customers from dropping out of the purchase process (Gartner, 2023).
By implementing a well-structured trade pricing and discount strategy with Stok.ly, you can build stronger, more profitable relationships with your customers. Start using the power of trade pricing and trade discounts today and watch your B2B business scale.
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Author: Iain Coplans CEO Stok.ly