Typical B2B:
Contract Pricing

When it comes to developing and implementing B2B commerce environments, Madia can call itself a true specialist. Over the last 17+ years, we’ve seen many B2B commerce cases, each with its own unique use cases and requirements.

My name is Falco van der Maden, and I am the founder and CEO of Madia (LinkedIn). With nearly two decades of hands-on experience in the B2B commerce industry, I have worked with a diverse range of businesses, from small enterprises to multinational corporations. My journey in this field has equipped me with an in-depth understanding of the challenges and opportunities that businesses face when making choices in the complex world of B2B commerce.

Throughout my career, I have been dedicated to helping businesses optimize their B2B platforms to drive growth, improve efficiency, and enhance customer satisfaction. I am passionate about sharing my knowledge and insights to help others succeed in B2B Commerce.

In this series of blogs, we will highlight the most common B2B commerce features—the features that you could call, ‘typical B2B‘.

In previous posts, we explored “Large Catalogs” and “Custom Catalogs”. Today, we delve into another critical topic: “Contract Pricing.”

In the complex world of B2B e-commerce, contract pricing plays a vital role in maintaining competitive advantage, fostering strong customer relationships, and ensuring consistent revenue streams. Contract pricing involves setting predefined prices for products or services based on negotiated agreements with customers.

Understanding Contract Pricing in B2B E-Commerce

Contract pricing is a pricing strategy where businesses agree to specific prices for products or services with their B2B customers over a set period. These prices are usually negotiated based on factors like purchase volumes, frequency, and the duration of the agreement.

Key Components of Contract Pricing:

1. Negotiated Agreements: Prices are determined through negotiations between the seller and the buyer, considering various factors such as order volume, purchase frequency, and long-term commitment.
2. Fixed Pricing Period: Prices are fixed for the duration of the contract, providing predictability and stability for both parties.
3. Volume Discounts: Often, higher purchase volumes result in greater discounts, incentivizing larger orders.
4. Customized Terms: Contract pricing agreements can include customized terms such as payment schedules, delivery options, and exclusive deals.
5. Performance Metrics: Contracts may include performance metrics and service level agreements (SLAs) to ensure compliance and satisfaction.

Implementing contract pricing effectively can lead to stronger customer relationships, improved sales forecasting, and enhanced financial stability.

Benefits of Contract Pricing in B2B E-Commerce

Contract pricing offers numerous benefits for B2B e-commerce businesses and their customers, including:

1. Price Stability: Fixed prices over the contract duration provide customers with price stability, aiding in budget planning and financial forecasting.
2. Customer Loyalty: Long-term pricing agreements foster stronger customer relationships and enhance loyalty.
3. Predictable Revenue: Contract pricing ensures a steady revenue stream for the business, aiding in financial planning and resource allocation.
4. Competitive Advantage: Offering customized pricing agreements can set your business apart from competitors, attracting and retaining more customers.
5. Operational Efficiency: Streamlined pricing processes reduce administrative workload and improve overall operational efficiency.

By implementing contract pricing, businesses can create a win-win scenario for themselves and their customers, leading to long-term success and stability.

Best Practices for Implementing Contract Pricing

To successfully implement contract pricing, consider the following best practices:

Clear Pricing model

In our practice, we have often seen that price agreements with customers have gone too far. Sales staff have had free rein for years to make price agreements with customers to win the deal. This has more than once led to a loss of oversight in the price structure. An example of this is a client we worked for who, with a large catalog and many customers, ultimately came to more than 1 billion different prices. And that didn’t even include the product tier prices. All these prices were based on different formulas in their ERP systems, where no one really knew what these calculations actually looked like. It is an understatement to say that this is not a good starting point for automating the pricing model. Therefore, the first thing to do is to establish a clear and workable pricing model so that clear agreements can be made with the customers.

E-commerce system limitations

In e-commerce a merchant would like to advertise the products for the agreed price (contract price). Since, in most cases these prices are defined in an ERP system there is a need to sync or retrieve the price information from the ERP and present them in the e-commerce channel.

Make sure that the e-commerce platform is able to support your pricing model. Does the e-commerce solution support,

• Product pricing per customer, per customer group, etc
• Contract pricing per tier
• Multi-level pricing, eg. product default price is €100,- Customer Group C price is €90,- and Customer A price is €80,- Customer A pays €80 and customer B in group C pays €90,-

Price syncing or retrieving

Investigate the best strategy, syncing the price information to the e-commerce platform or collecting the price information on the fly from the ERP system. What works best depends mostly on the capabilities of the systems. Ask yourself the following questions:

• Can I sync the prices in a realistic time? See also large catalogs about this.
• How fast should updated prices be available in the e-commerce solution?
• Can the ERP system handle all the calls to respond with the correct price? eg. What if the customer opens a catalog page with 100 products and expects to see his contract price? Will the ERP system be fast enough?

There is not one answer to all these questions. A good discovery and scoping session will help to define the best approach and to eliminate surprises during the implementation process.

Integrating Contract Pricing with Other Business Systems

Integrating the contract pricing system with other business systems, such as ERP, CRM, and pricing optimization tools, is crucial for efficiency and accuracy. These integrations ensure seamless data flow and real-time updates across systems.

Key Integrations:

• ERP Systems: Integrate with ERP systems to access real-time data on inventory, production costs, and order status, ensuring accurate and up-to-date pricing.
• CRM Systems: Use CRM integrations to track customer interactions and preferences, enabling personalized pricing strategies.
• Pricing Optimization Tools: Use pricing optimization software to analyze market trends, customer behavior, and competitor pricing, helping to set optimal contract prices.
• Accounting Software: Integrate with accounting software to streamline invoicing and financial reporting processes.

Benefits of Integrations:

• Enhanced Accuracy: Real-time data ensures that contract prices are based on the latest information, reducing errors and discrepancies.
• Streamlined Processes: Integrations eliminate the need for manual data entry, speeding up the pricing process and reducing administrative workload.
• Improved Visibility: Centralized data provides a holistic view of contract performance, facilitating better decision-making and customer management.
• Scalability: As the business grows, integrated systems can scale to handle increased volumes of contract pricing agreements without compromising efficiency

Conclusion

Understanding and implementing contract pricing in B2B e-commerce is a sophisticated strategy that brings structure and predictability to pricing agreements between businesses and their clients. It enables companies to customize pricing structures based on volume, frequency, and commitment, offering stability to both the provider and the customer. With the benefits of fostering long-term customer relationships and ensuring a steady revenue stream, contract pricing can significantly enhance operational efficiency and competitive positioning in the market.

However, effective implementation requires a careful approach, particularly in managing pricing complexities and integrating e-commerce systems with ERP solutions to handle real-time data and pricing updates accurately. Businesses must prioritize developing a clear and manageable pricing model to prevent confusion and maintain oversight, ensuring that each contract is beneficial and sustainable. Integrating this pricing strategy with robust ERP and CRM systems further helps in maintaining pricing accuracy and improving customer satisfaction, ultimately leading to increased loyalty and growth. The journey to implementing a successful contract pricing strategy involves meticulous planning, clear communication, and continuous adaptation to meet evolving market and customer needs.

Madia

Madia is a commerce solution provider for more than 17 years. Our experience in B2B commerceimplementations is extensive. We’ve seen many different use cases and with that, a broad verity of requirements. Our team of experts always, in collaboration with our customer will find the best solution to each of customers needs.

Madia works with the best B2B commerce tools available on the market. Tools that from within the core have been developed to fulfill all the typical B2B needs in commerce.

As a Gold partner of Orocommerce we have, in addition to our experience, one of the best B2B commercesolutions for successfully developing and implementing your B2B commerce platform.

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