In this series of webinars, Chris Reddick (President and CEO at Clarity Ventures) and Ron Halversen (Vice-President of Sales and Marketing at Clarity) explain multi-tiered pricing, also known as customer-specific pricing.

Part 1 of a 6-part series

RON: Morning, Chris. How's it going today? 
 
CHRIS: Good morning, Ron. Going well, looking forward to diving in. This is going to be our last in the series for buying groups and group purchasing organizations. And today, we're going to be talking about the all-important topic of pricing. We're going to be looking at some of the different logic for showing pricing.

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CHRIS: Of course, for anyone that has a buying group, or thinking about setting up a buyers group or a group purchasing organization, you know how complex some of the pricing rules can be—and some of the pricing logic—so that you can appropriately show the cost, the price, and tie that to inventory fulfillment...all of these aspects. And then to do it at scale and make it very automated, accurate, and high credibility. This is why you have to have experts to work with across the board, and a really powerful system to be able to do it.  

RON: You don’t want to be selling in quantities of 1000, have [someone] mess up on the website, and sell things at a loss. It’s exciting, we’re going to take a little bit of time today—although we’re calling this “B2B eCommerce multi-tiered pricing,” we’re going to go in and define what multi-tiered pricing is, then we’re going to go in and differentiate the types of tiered pricing. One of them’s called pricing rules, we’ll talk about how your solution should be able to handle multiple models. We’ll talk about what those models are.  

And at the tail-end, we’ll do things a little bit differently than just talk about, I’m going to go in and do a demo of one of our live buying group platforms. I’ll walk through it and talk about the pricing, and I’ll walk you through the numbers, and you can see it change in real time without me even thinking about how the numbers are changing. You’ll see all of these tiered pricing auto-apply, and we can talk about how that affects reordering. 

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RON: Let’s go ahead and dive in. Why don’t you give us a definition of MTP, multi-tiered pricing, CSP or customer-specific pricing, some clients call it pricing rules. Go ahead and tell me what your definition of multi-tiered pricing is, especially when it comes to eCommerce groups

CHRIS: At the end of the day, you want to be in a position where we're transferring accurate pricing data based on things like loyalty, quantity, possibly for a specific shipment, or fulfillment. Are we meeting a certain minimum threshold that the manufacturer or distributor needs, and, is this particular customer one of the first customers, or are they a certain type of customer? Are they purchasing or enrolled in a membership program of some type that gives them a specific type of discount? And then the combination of all of those factors needs to result in the actual pricing data that's shown to the user.  

We should also be able to present a retail or a public version of the group purchasing site to folks. So this may mean that no pricing shows up unless you're logged in. It may show retail pricing. Then, once you're logged in, you see specific pricing data based on your account. There could be a scenario where it makes sense to change the pricing based on the physical location that we're shipping to because it's physically more proximate, it's getting fulfillment from a different fulfillment location. So we may want to show pricing data based on that breakdown.  

These are all scenarios that can apply. Ultimately, we want to go through each of these and just break them out into detail and explain how you might be able to leverage some of these techniques to encourage your members within the buying group, and really to make it a profitable enterprise for everyone. 
 
Really, to the extent that you can take advantage of these pricing rules and the presentation thereof, you're going to be managing the expectations and helping your customers truly understand how the business works, how the buying group website works, and how to take advantage of that for themselves. So what do you think, Ron? Anything else you want to add to that? 
 
RON: Yeah, I love everything you've talked about. Sometimes, for some, they're like, “Wow, that's really complex. Break it down, really simple.” Okay, [here’s the example]. Costco. If I walk into Costco and try to buy, maybe they'll sell to me without a membership, but I would pay retail price. If I have a membership, I pay a different price. There's the tiered pricing, a member price. It's a different price. 

And then they now sell an executive membership. Now, some might, at that executive membership think, do I get a better price? You don't. There's only one price. There's retail, there's member price. That's it. If you buy the executive membership, they give you 1% back and they pay that check every summer. You get a check with 1% cashback, in that case, a loyalty program. 
 
So that right there is very simple tiered pricing. There's only one-tier, member or not. And then if you go to the second tier, instead of being a different tiered price, they make it a loyalty program where you get 1% cashback, and that's why they call it an executive membership. If you're doing a lot of bulk buying for businesses and can get 1% back, then that's obviously a bonus. So they've broken out that tier for corporate accounts. And so there is a two-tiered, very simple group buying platform. But yeah, they can get really complex, and there can be all kinds of different tiers.

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RON: Another one that we see quite often is a master distributor. They'll be our client putting together a system. They'll have resellers, wholesalers, other distributors, and that's it. Those are the three tiers. And when each of those log in, they get different quantity price breaks, and they get different pricing uplifts on the cost models on the products. So there's three simple tiers. So there's a couple of simple examples.  

But as we go through this, we'll start really diving into some of those scenarios that you gave, especially how they go hand in hand with purchasing and ordering, because that can also change the way we might want to serve up price, right? Especially when it comes to quantity price breaks and maybe seasonality.  

Right now gas is really expensive. Why? Everybody's blaming it on the oil companies, which is true. I mean, they're making profits, but every single year before this year, gas prices have gone up for the summer. They know people are going on summer vacations. Gas prices always go up every summer, at least a dollar a gallon. And it's happened for the last 20 years that I've been driving. So that is a seasonality-type thing.  

There's a lot of different things that can affect price. We want to make sure that your platform is prepared to handle those changes in price, both in potentially—I don't want to say gouging your customers—but exploiting and capitalizing on benefits from an B2B eCommerce platform you may get by being able to buy at a lower cost volume and/or potentially insuring margins. As costs rise, the prices on your website go up accordingly. So your margin is protected. Right? Those are some of the different things we'll talk about today.  

Continue to Part 2 to learn about software logic for buying groups.