What is the potential revenue impact of improving pricing in major B2B industries?

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What is the potential revenue impact of improving pricing in major B2B industries?

Exhaustive research of the public domain indicates that, while B2B pricing optimization is a topic of considerable discussion, there is a consistent lack of data-centric case studies, white papers, books or research reports in public resources which clearly define the revenue impact or potential revenue impact of pricing improvement for specific industries. This may be due to the differentiation of products and services within the broad scope of a single industry; but based on the high level of anonymity in the few available case studies, it is also reasonable to assume that this data is held as proprietary by the respective companies. It appears that either industry-specific pricing optimization is not a subject of significant market research, or that applicable research has not been published in the public domain. However, it does appear that value-based pricing is the current buzzword across multiple industries relative to price optimization; and while this strategy represents a potential for revenue increase for most industries, it poses the opposite potential for the pharmaceutical industry.

METHODOLOGY

I began my research by searching for case studies, whitepapers or market research reports on the revenue impact of improved pricing for B2B industries in general, and for each of the key industries that you listed as examples. Research specific to market research and consulting companies such as Bain, McKinsey, Deloitte, etc generated a significant body of published content on the value of differentiated pricing and pricing increases, but failed to generate any data-specific content about revenue impact by industry. Promotional case studies rarely give specific data points, and only a few of the case studies I reviewed gave revenue impact data. Even when they do (ex: here), the ROS data is specific to a company, not to an industry. Given that the differences between products and companies in the same industry can be quite significant, it doesn't seem a sound methodology to assume 'potential revenue impact' based on isolated examples. As a last resort, I also researched industry-specific resources, but this strategy did not generate the requested data. Based on the lack of specific information available in the public domain, it appears that a segmented analysis of industry-specific revenue impact would require primary market research.

PRICE OPTIMIZATION

All of my research concurs with the Bain & Company assertion that "pricing has a more powerful impact on the bottom line than other means such as gaining market share or reducing costs...Across a wide range of sectors...companies earn an 8% increase in operating profit for every 1% of improvement in realized price; that’s roughly twice the benefit as a 1% improvement in market share, variable costs or fixed-cost utilization." Despite its clear and superior utility as a revenue strategy, price segmentation appears to be a difficult-to-implement aspect, given that "pricing is an often neglected aspect of strategy, given little attention or respect." This inconsistent implementation across industries - and indeed, within any one industry - could be another reason why the information you've requested isn't publicly available: there simply isn't a large enough base of companies improving their prices within a specific industry to warrant focused or publicly published research.

VALUE BASED PRICING

Value based pricing isn't synonymous with price optimization; it's just one method of achieving the end goal. However, it is the current buzzword in pricing conversations, and is considered by a growing number of experts as a 'best practice' in price optimization. For this reason, I have provided below the information discovered in my research relative to value based pricing for the pharmaceutical and technology industries. While I also researched value based pricing for multiple other industries, this research did not discover any relevant information.

PHARMACEUTICALS
The global pharmaceutical industry is under significant pressure to align with value-based pricing and/or reimbursement. Unlike most other industries, this represents the potential for lower revenue to pharmaceutical companies, and industry representatives have been vocal about the perceived limitations this might engender in pharmaceutical innovation. Additionally, due to the high level of regulation in this industry, consensus over what constitutes the 'value' of a drug is a major point of difficulty in implementing value-based pricing for pharmaceutical products.

TECHNOLOGY
B2B value based pricing in technology benefits from taking into account different market consumer segments across the "technology adoption lifecycle," i.e., understanding that different consumer segments have distinctly different willingness-to-pay for technology products and services.

CONCLUSION

To wrap it up: the potential revenue impact of price optimization in specific industry segments cannot be reported or triangulated due to lack of the requested data in the public domain. However, value-based pricing is the current hot topic strategy under discussion across multiple industries, and represents the potential for revenue increases for most industries except the pharmaceutical industry.

Sources
Sources