B2B ROLLING PEER PRICING

Upgrading an Underperforming Legacy Pricing Model

Opportunity

A $2B B2B services company faced a critical pricing governance challenge. They had spent five years and a significant amount of money with another pricing software company, only to receive a "black box" model which gave questionable price recommendations with no explanation. Senior management and sales teams were unable to understand how the model arrived at its price targets, and as a result, the sales team rejected 60% of the model’s suggested prices. They instead relied on gut feel and individual ad hoc methods which led to inconsistent pricing.
Leadership recognized the need for a transparent, intuitive pricing framework that would align commercial teams and unlock pricing optimization opportunities.

Approach

We built a custom pricing algorithm aligned to their business needs and value proposition. The new model was a "glass box" which gave logical and defensible price recommendations, complete with a transparent explanation of why the recommendation was made.
We called the model "rolling peer pricing", because it created price curves based on finding peers for a given customer. Peer groups were determined by careful analysis of customer value. Business rules and guardrails were added to ensure that the model always respected the goals of the business. Comprehensive testing and consultation with sales leaders validated model logic and corrected underlying data quality issues.
The new pricing model was implemented in the first of three business units, applying quarterly price increases to underpriced customers representing $100+ million in revenue. The transparent model dramatically improved sales force adoption and pricing execution.

Outcome

The business impact was transformational. The new "glass box" model achieved over 10x ROI in the first business division alone, with commercial teams embracing the recommendations rather than rejecting them. Unlike the previous system (where sales rejected 60% of algorithmic recommendations) the new pricing algorithm achieved 95% adoption, reflecting high confidence in its logic. This dramatic improvement in model acceptance translated directly to pricing execution, significantly increased pricing power, and created several million dollars in incremental revenue.
We have since applied the rolling peer pricing methodology with several other clients, and it never fails to deliver bottom-line results.