Custom Pricing

What is Custom Pricing?

Custom pricing is a pricing strategy where the price of a product or service is tailored specifically for an individual customer or a particular group of customers. It’s commonly used in B2B sales, where each deal is unique, and pricing depends on needs and purchasing habits.

Key aspects of custom pricing include:

• Personalization
• Negotiation
• Dynamic adjustments
• Close customer relationships
• Data-driven decisions (e.g., past purchasing behavior)

With fixed or standard pricing models, every customer pays the same price. Custom pricing can be influenced by various factors like the customer’s purchase history, purchase volume, current market conditions, and specific requirements or configurations of the product or service.

Synonyms

• Editable pricing
• B2B custom pricing
• Custom pricing in CPQ

Custom Pricing in B2B Sales

While fixed-rate pricing offers some flexibility for discretionary discounts, price breaks, and promotions, custom pricing takes it to the next level. Unlike generic discounts, which apply a uniform price reduction to a broad customer base, custom pricing involves a sophisticated analysis.

The analysis factors in some or all of the following:

• Customer type
• Purchase history
• Buying power
• Market trends
• Deal size
• Specific product configurations
• Bundles and add-ons

B2B sales typically involve complex products or services with a longer sales cycle, and each deal requires individual attention. This analysis enables businesses to set prices that reflect the true value of the product or service to each customer, rather than applying a one-size-fits-all pricing rule.

For example, in B2B manufacturing, a company may have a standard price list for its products, but a custom pricing model would allow them to negotiate per-unit prices with large-volume customers.

Similarly, in B2B SaaS, an enterprise customer who needs a more comprehensive and tailored solution would pay a price that falls outside the standard pricing strategy.

What is Custom Pricing in CPQ?

In configure, price, quote (CPQ) software, custom pricing is a critical feature for B2B sales teams. While CPQ operates on pricing rules and pre-defined logic, custom pricing allows sales teams to create unique prices for each customer they are negotiating with.

The custom pricing module is especially valuable when a deal involves multiple products or services that need to be bundled together in a customized package. It also helps with enterprise sales reps who deal with the business’s largest customers and most complex contract negotiations.

Custom pricing in CPQ gives sales reps the ability to:

• Make manual price adjustments
• Configure bundles and custom products with dynamic pricing
• Integrate with data from CRM and ERP for targeted discounts
• Conduct “what-if” analysis to compare different pricing scenarios
• Negotiate real-time with customers, factoring in their unique needs and purchasing habits

Let’s say a customer is interested in purchasing a software package with various add-ons and configurations. With custom pricing in CPQ, the sales rep can input the customer’s desired specifications and offer a personalized price based on those needs.

To ensure the custom price a rep offers is within the company’s profit margin, an admin can design an approval workflow. This automatically routes the quote for approval to a higher-ranking sales department member with the authority to sign off on such deals.

Benefits of Custom Pricing

Custom pricing is one of the best ways to offer a personalized customer experience, especially at the enterprise level.

There are several benefits to implementing a custom pricing model for some or all of your customers:

• Increased adaptability to competition, market conditions, and customer preferences
• Stronger customer relationships through special pricing agreements
• Incentives for customer loyalty and repeat business
• Larger deal sizes and more revenue upfront
• Faster-moving inventory (for businesses selling physical products)
• Higher win rates for complex deals
• Better profit margins by matching price to value

With the flexibility to offer custom prices, it’s easy for a business to beat out a competing offer, sweeten the deal for an already-interested customer, or create a more attractive package for a specific market segment. And sales reps can use custom pricing to create a unique value proposition for each customer.

Ensuring Responsible Use of Custom Pricing

While CPQ makes pricing more adaptable, and custom pricing can have significant benefits, it isn’t the best option in every situation. It’s also not suitable for every customer or product.

The main challenge with implementing custom pricing is that it isn’t scalable. If your business offers a simple product or sells to a high volume of similar customers, a standardized approach would be much less time-consuming to manage (not to mention, fairer for your customers).

Using custom pricing responsibly means:

• Setting clear boundaries and guidelines for sales reps when negotiating custom prices
• Using approval workflows for high-value deals with personalized pricing
• Focusing custom pricing strategies on customers with high potential customer lifetime value
• Defining minimum profit margins to guarantee profitability
• Looking at pricing trends and average deal sizes to identify potential abuse

You also want to be careful not to frustrate your current customers. If one customer finds out they’re paying far more than another and doesn’t understand why, it can damage your brand reputation and create mistrust between you and the customer.

The solution: Keep pricing transparent as much as possible, so there are no surprises for your customers.

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