B2B pricing software analyses a company's past sales to tell a salesperson what price a particular customer is likely to accept for a particular product, at the moment the salesperson writes the quote. It is also called price optimisation or deal price guidance. Manufacturers and distributors that sell thousands of products to thousands of business customers use it most.
In B2B sales, there is rarely one price. A list price exists, but most customers pay something else, agreed with a salesperson. Over the years, two similar customers can end up paying very different prices for the same product. One of them bargained harder, or one salesperson agreed to a discount more quickly. A company that sells 20,000 products cannot set each of these prices by hand. So it gives away discounts that the customer would not have needed.
The software reads millions of past sales lines from the ERP and the CRM. It groups similar sales into segments: by product, customer size, region, order quantity and how often the customer buys. Within each segment, it finds the range of prices that customers actually paid, and which quotes were won and lost at each price. From this, it proposes three prices for each segment. The floor is the price below which the salesperson should not go. The target is the usual winning price. The stretch price is for customers who are likely to accept more. These three prices appear on the CPQ screen while the salesperson writes the quote.
Say a Ludhiana company makes tractor parts and sells them to 900 dealers across north India. A dealer in Haryana asks for 500 clutch plates. The list price is ₹420 a plate. The software looks at the last two years of sales of this part to dealers who bought 300 to 1,000 pieces at a time. Those dealers paid between ₹365 and ₹402, and most quotes above ₹395 were lost. So it shows a floor of ₹368, a target of ₹386 and a stretch price of ₹395. This dealer has ordered every month for three years and has never moved to a rival, so the software marks the stretch price as likely. The salesperson quotes ₹392. Before the software, he would have offered ₹370, the price he gave most dealers. The difference of ₹22 a plate comes to ₹11,000 on this one order. Across thousands of orders in a year, such differences add up to crores of rupees.
Retailers set the prices on their shelves with a different kind of tool, price and promotion optimisation. It works from shoppers' purchases, not from prices negotiated with each customer.