OnDemand WTP Pricing Research

Sales Effectiveness – Your Negotiated B2B Pricing is Not Elastic! | PROS

It’s a concept that’s easily understood – lower prices should cause new customers to buy and existing customers to buy more, while higher prices should cause fewer new customers to buy and existing customers to buy less. Economists even have a fancy name for this customer/price interplay – price elasticity. Price elasticity is the demand for a good or service relative to a change in the price of that good or service.

It’s easy to get caught in the gravitational pull of the simplistic conceptual beauty of price elasticity. It’s an inverse relationship that makes sense, especially to buyers in market economies. Yet, this venerable concept may cloud decision making regarding the price to offer in a new request for proposal (RFP.)

There are many cases where negotiated pricing is not elastic, especially when we’re talking about B2B pricing. Stop treating it as elastic, and you can help your sales team be more effective with the RFP.

Before jumping into an example, let’s put some parameters and definitions in place. First, negotiated pricing is pricing set specifically with each customer, typically as part of a contract. If the same price for the same product must be given to each buyer, it’s not negotiated pricing.

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Sales Effectiveness – Your Negotiated B2B Pricing is Not Elastic!.