Single pricing rarely works in commerce. Large-volume buyers pay differently, regular buyers pay differently, and upfront payers pay differently.
This variation is legitimate; the problem lies in how it is managed. When prices are kept in people's memories, inconsistency becomes inevitable.
In this article, we explained how to set up customer-based pricing, segmentation, and authorization control.
Table of Contents
Segmentation first
Defining a separate price for every customer is not sustainable. If you have a hundred customers, you cannot manage a hundred price lists.
The right approach is segmentation: customers are grouped according to similar conditions, and pricing is defined on a group basis.
Typical segments are: retail customer, small dealer, large dealer, key account, export customer.
The number of segments should be kept low. Three to five groups are sufficient for most businesses;B2B account groups we discussed this structure in the article.
What should be the basis of price differentiation?
Price differences should not be arbitrary; they must be based on a measurable rationale. Otherwise, it becomes indefensible when customers compare.
Volume.Annual purchase size is the most common criterion. It is measurable and easily understood by the customer.
Payment term.A customer who pays in advance deserves a better price; maturity is a cost.
Logistics.A customer who picks up goods with their own vehicle assumes the delivery cost.
Order pattern.A customer who places a few large orders generates less operational cost than one who places frequent small orders.
Customer-specific agreements
The segment structure covers most situations, but exceptions occur. A special agreement made with a major customer must be entered into the system.
These agreements must have a start and end date. Indefinite special prices are forgotten over time and continue to be applied for years.
Additionally, the rationale for the agreement must be recorded. Years later, the question "why is this customer getting this price?" will be asked.
Special agreements override the segment rule; we explained the order of priority in the discount matrix article.
Channel conflict
The most sensitive point of customer-based pricing is channel conflict. If you sell the product you sold to the dealer cheaper on your own site, the dealer will be upset.
This is the most common tension experienced by traditional distributors expanding into e-commerce. The pricing policy must be established in conjunction with the channel strategy.
Some businesses solve this problem by using a different product range per channel. Others do not let the online price drop below the dealer retail price.
Whichever way you choose, the decision must be conscious; we discussed it in the multi-channel sales management article.
Balance of transparency and confidentiality
Customers talk to each other. If the justification for the price difference is not defensible, a loss of trust occurs when it is found out.
Therefore, it is preferred that segment criteria are clear. Saying "dealers exceeding this annual volume fall into this group" is better than looking arbitrary.
On the system side, access to pricing information should be restricted. A sales representative generally does not need to see all customers' prices.
The scope and authorization model provide this distinction; authorization page.
Reviewing prices
Customer segments change over time. A small dealer may grow; a large customer may shrink.
It is necessary to conduct a segment review once a year. Customers are regrouped based on past purchasing data.
A customer-based sales report is used for this work; sales reports article.
Price and group definitions are kept in the general definitions module; sales, B2B, and e-commerce read the same definition.
Applicability in the field
Even the best-designed pricing structure is useless if it cannot be applied in the field. The sales representative needs to reach the correct price in front of the customer within seconds.
Therefore, it is mandatory for the price to be retrieved by the system. Having the representative look at the list and make calculations is both slow and prone to errors.
This is even more critical in mobile usage. When a customer card is opened, the applicable price, discount, and balance should be visible together; field sales mobile usage article explains this flow.
The same principle applies to the dealer portal. When the dealer logs in, they must see the price defined for their group; showing the general list price and then applying a discount generates distrust.
Regardless of the channel, the price must come from a single definition. Keeping different definitions in different channels will sooner or later create inconsistency; multi-channel sales management article.
Measuring the results of the pricing policy
Once the pricing policy is established, the results must be monitored. Otherwise, it is never known whether the policy works or not.
The first indicator is segment-based margin. If a segment's margin is significantly lower than the others, the pricing structure of that segment should be reviewed.
The second indicator is segment transitions. The number of customers moving up to a higher segment shows that price incentives are working.
The third is customer churn. Customers who stop purchasing after a price increase should be monitored; this information helps to act more cautiously in the next update.
These indicators are derived from customer-based sales reports; sales reports we discussed which report explains what in the article.
Simplifying the pricing structure
Customer-based pricing tends to become complex over time. Every exception invites the next exception.
The first step of simplification is to list the existing exceptions. In most businesses, this list is longer than expected.
Customers under similar conditions are grouped and a group price is defined. This significantly reduces the number of exceptions.
The remaining true exceptions should be recorded along with their justifications.
Exceptions without justification should be reviewed and removed at the end of the period.
When this cleanup is not done, the pricing structure becomes unmanageable within a few years.
Points to consider
Limiting pricing decisions with authorization is necessary to protect the structure.
An unlimited discount authority for a sales representative will disrupt even the best-established pricing structure in a short time.
Tiered authorization works well; up to a certain rate is handled by the representative, and above that requires manager approval.
Reporting the discounts given also creates a deterrent effect.
Keeping price history is decisive in any subsequent objections.
It should be traceable which price was applied by which user on which date.
Frequently asked questions
Which segment does a new customer enter?
A default starting segment should be defined; it is reviewed at the end of the first period.
Do price changes affect open orders?
A policy must be established. Usually, the price at the time of the order is protected.
Can the dealer see their own price on the portal?
Yes, they see the price defined for their group; dealer catalog section.
Is the segment change applied retroactively?
No. The new price applies to documents issued after the date of change.
Customer-based pricing adds flexibility to sales when structured correctly, but produces indefensible discrepancies when poorly structured. The difference lies in the measurability of the justification.
You can follow a three-step path to start. First, rank your current customers by their previous year's purchase volume; this list will already reveal natural segments.
Then, determine a price difference for each segment and write down its justification. A price difference that cannot be justified is likely an indefensible one.
Finally, list the exceptions. Define a reason and an end date for every customer who does not fit the segment rule; indefinite exceptions eventually become the rule itself and disrupt the structure.
By consulting with the EQLEM team, you can plan your customer segmentation and pricing structure.