Building Merchants: How to Price When You Don’t Have Competitor Data | eCommerce Matters Ep. 019

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In this episode, Philip is joined by Alan Timothy from CEO at Bubo.ai, a leading A.I tech firm for dynamic pricing recommendations, to talk all things pricing related to builders merchants, understanding a customer’s willingness to pay and plus much much more.

Guest: Alan Timothy (CEO at Bubo.ai)

Host: Philip Huthwaite (CEO & Founder of BlackCurve)

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Full Episode

The Problem With Customer Discount Bands

Is Being The Cheapest The Most Important Factor In Winning Business?

The Power Of Customer Willingness To Pay

Podcast Summary

Introduction

Alan Timothy, the representative from Bubo.ai, and Philip Huthwaite from BlackCurve engage in a conversation about pricing strategies and data-driven decision-making in the building merchant industry.

Transparent Pricing and Training

Bubo.ai highlights the importance of transparency in pricing. They provide clients with transactional data, including sales figures and corresponding prices. Bubo.ai believes in total transparency and offers to walk clients through the pricing models, sharing their numbers and allowing clients to see the data. They also provide training to clients' staff on the pricing models to ensure they can maintain them independently.

Average Margin and Pricing

The discussion focuses on average margin and the goal of increasing prices. Bubo.ai calculates the maximum price a customer is willing to pay for a product and aims to increase prices to achieve an optimal balance between volume and margin. The concept of setting the price too low, resulting in selling a product to every customer who inquires about it, is discussed, emphasizing the importance of finding the right price that maintains volume while maximizing margin.

Handling New Products

Bubo.ai addresses the challenges of pricing new products. They analyze similar products in their data to estimate the pricing for new items. While acknowledging the uncertainty surrounding new products, they primarily focus on pricing core product sets that have historical sales data.

Impact of COVID-19

The conversation delves into the impact of the COVID-19 pandemic on the building merchant industry. The pandemic has caused product shortages due to plant closures and disrupted supply chains. Bubo.ai discusses the challenges of setting prices during this time, considering the balance between price increases and maintaining long-term customer relationships. The topic of supply and demand dynamics is also discussed, as the ability to increase prices may be influenced by the availability of raw materials and market demand.

Supply Metrics and Pricing

BlackCurve's approach involves using supply metrics to make pricing decisions during the pandemic. By tracking supply data, businesses can avoid selling products too cheaply when facing limited stock. This approach helps ensure that pricing decisions align with the supply situation and prevent excessive discounts that can negatively impact profitability.

Challenges of Competitor Data

The conversation touches upon the challenges of obtaining accurate competitor pricing data. Bubo.ai mentions their app that enables sales teams to capture competitor quotes or invoices. However, obtaining comprehensive competitor data for all products and customers is difficult. Bubo.ai emphasizes the importance of considering competitor prices but acknowledges the limitations and complexity of incorporating competitor data into pricing models.

Pricing Strategies for Online Stores

The discussion shifts to pricing strategies for online stores, considering the growing significance of e-commerce in the building merchant industry. Transparency and communication between pricing and marketing teams are crucial for ensuring consistent pricing across different channels. Sales history and customer-specific pricing play significant roles in determining optimal pricing strategies for online stores. The importance of leveraging customer data and historical purchase behavior to tailor prices and promotions for individual customers is emphasized.

Change Management and Staff Training

The conversation highlights the importance of change management and staff training when implementing new pricing strategies. Bubo.ai stresses the need to educate and train staff members to shift their mindset from relying solely on discounts to considering the overall value and benefits of pricing strategies. This includes empowering sales advisors to understand the pricing models, their role in providing value to customers, and the significance of maintaining margins while offering competitive prices.

Digital Efficiency and Automation

Both Bubo.ai and BlackCurve emphasize the need for digital efficiency and automation in pricing decisions. Businesses that invest in smarter decision-making processes and leverage automation experience tangible financial benefits. The conversation discusses the potential returns and cost savings that can be achieved by optimizing pricing strategies and reallocating resources to other areas of the business.

Conclusion

The discussion concludes by summarizing the key points covered in the conversation, including transparent pricing, average margin optimization, challenges with competitor data, the impact of COVID-19 on pricing, online store pricing strategies, change management, and the importance of digital efficiency in pricing decisions. The overall message underscores the importance of data-driven pricing strategies to maximize profitability and provide value to customers in the building merchant industry.

 

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