Pricing and sales of commodities
Energy providers face significant challenges in selling their commodity offerings. From a physical perspective, electricity and gas do not differ in quality, nor are they readily substitutable. As a result, consumers typically assess providers on the basis of two factors: price and brand.
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Decision criterion: Price
Decision criterion: PriceConsumers who decide purely on price will, in a comparison, always choose the cheapest provider. These customers are only valuable to energy providers that are on a path toward process cost leadership.
Decision criterion: Brand
For all other consumers, the brand can create a strong lock-in effect. The most important factor is building trust with the customer – to such an extent that switching is no longer perceived as desirable.
Lower switching propensity typically goes hand in hand with lower price sensitivity. Energy providers should actively realize the resulting higher willingness to pay. At the same time, they must establish early warning indicators that signal when switching propensity starts to increase again.
Solutions for the energy sector: customer segmentation
To assess switching propensity in a meaningful way, the customer base should be segmented along two key dimensions: churn score and customer value. These two dimensions help determine whether price increases are appropriate for individual customers and what switching risk is associated with such a move.
The underlying logic should be integrated dynamically into the CRM system in order to identify changes at the individual customer level early on and prevent losses.
Pricing and sales of non-commodity offerings
In the non-commodity segment, purchase decisions are not based solely on hard facts. Intangible motives, such as contributing to environmental protection or strengthening the local region, often play an equally important role. This applies in both B2C and B2B markets.
These intangible sources of value need to be identified and incorporated into pricing. Energy providers should therefore shift away from cost-plus pricing and toward value-based pricing.
Value-based pricing in the energy sector
Many people associate value-based pricing with sophisticated and expensive methods such as conjoint analysis. While these approaches often deliver excellent results and are certainly part of our work, there are also more pragmatic alternatives. Relatively simple and cost-effective telephone surveys based on the van Westendorp method, for example, can already provide a reliable indication of willingness to pay.
Value Selling
Especially in the non-commodity segment, sales discussions often require companies to explain added value clearly and justify prices convincingly.
This means that both internal and external sales teams must be equipped to sell on value. Value selling therefore needs to become an established capability in the energy sector.
To achieve this goal, we go beyond sales training alone. Using fact-based analysis, we show sales teams which customers are more or less price-sensitive, and at what points in time. We support this with sales tools that help teams prepare optimally for negotiations. In addition, we work with product marketing and sales to develop persuasive selling stories that strengthen the preparation of customer conversations.
Project experience
Prof. Roll & Pastuch has extensive experience in pricing and sales in the energy sector, including.
- development of pricing models and value-based pricing approaches
- innovation pricing and go-to-market strategy development
- preparation of business plans
- market segmentation, VoC studies, and customer retention programs
- sales training and negotiation training
- sales strategy and sales process optimization
- redesign of marketing and sales strategy
Learn more about your potentials of pricing and sales
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