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Handling Price Match Requests: How to Respond Competitively

November 1st, 2023 | 7 min. read

By Garth Hoff

Competitive price match requests present sellers with two choices: A, agree to a price match to keep their customer happy, or B, stand firm on their prices (or, in parallel, present alternatives with the same margin impact). How sales teams navigate this process is as representative of their commitment to their customer relationships as it is of their commitment to the overall pricing strategy. Is consistently satisfying both an impossible dream? We’re here to argue that with the right strategies, it doesn’t have to be.

Here at Pricefx, as a leading cloud-native pricing software company, we pride ourselves on offering a number of solutions that support sales teams to focus on profitable selling, and that includes data-driven decision support when evaluating price match requests.

This article will briefly touch on what a price match request involves before diving into strategies sellers can use to respond competitively to price match requests, including pricing software tools that can help along the way.

What Is a Price Match Request and Why Does Your Response Matter?

A price match request is when a customer asks a company for a lower price on a product to match a better deal offered by a competitor. While price matching often occurs in retail, particularly in consumer electronics, it’s not uncommon for B2B customers to seek a competitor price match in highly competitive markets or environments of high volatility.

Luckily for us as consumers, many major retailers have a price-matching policy of some kind. Who doesn’t like saving money? But in a B2B environment, when we’re the ones at the other end of the transaction, price matching isn’t always as exhilarating to experience.

In these cases, it’s important to be discerning and consider multiple factors when evaluating how to respond, which brings us to the next section.


Strategies for Effectively Responding to Price Match Requests

How sales teams handle price match requests is a good indication of how effectively their company can execute its pricing strategy. When evaluating requests, sellers should consider – and have the means to answer – key questions like, “is the requested price in line with my company’s margin or revenue goals?” and “does this product actually need a higher price?”.

To strike the right balance between their company’s and their customers’ best interests, sales teams can use these strategies when responding to price match requests:

1.  Consider the Customer Profile

When faced with a price match request from a customer, one of the first steps should be to assess their demographics, particularly the nature of their relationship with your business. Are they a long-standing partner, a high-volume client, or a new joiner? Legacy clients who have given a lot to your business over the years may be entitled to a little more than the newer, more transactional clients.

Customer buying habits are an equally important consideration. Small-volume, cherry-picking customers may be more concerned about short-term savings than a long-term relationship with your business or the value you can provide them.

2.  Understand and Communicate Value in Negotiations

Responding to price match requests is an opportunity to either highlight the value a product provides or offer alternatives.

However, you’ll need the data to understand what the main value drivers are for your customers. A few ways to do this include use an Economic Value Estimation (EVE) model to derive the value of a product compared to the next best alternative (NBA) or setting up internal or externally driven consulting projects.

Approaching negotiations from a value perspective will produce answers to questions like, are there comparable products or solutions that satisfy my target profits or margins? Can I remove any features or services that don’t bring value to the customer to meet this price request?

Through different analyses of what your customers truly value, you might be surprised to find that some are happy to remove certain add-ons or services for lower prices, or, alternatively, would be willing to pay more for others.

In short, value estimation and similar strategies can be a game changer with customers. By shifting the focus way from price towards the unique benefits or values your product brings, you make it more challenging for the customer’s procurement department to compare your product with others solely based on price.

3. Take Advantage of Optimized Sales Guidance and Analytics

Optimized sales guidance and analytics allow sales teams to understand the financial impact of a price match request with precision. Using these tools, teams can quickly verify whether the requested price is above or below floor price, where it falls within the acceptable margin range, or how it’s positioned against transaction history trends (for example, whether the price an outlier in the market).

Ultimately, using data-driven tools to guide your response to price match requests ensures that your decision-making is contextualized and in line with the larger pricing strategy.

4. Align Prices With Cost to Serve

Your response should also consider how well the cost of serving the customer aligns with the requested price.

While often overlooked or underestimated, cost to serve, which covers elements like warehousing, packaging, or freight costs, is an invaluable resource in negotiations. For example, a salesperson might agree to a lower price in exchange for recouping some of the warehouse space it had been providing to house customer inventory.

How Pricing Software Optimizes the Price Match Evaluation Process

In an increasingly competitive marketplace, where buyers and sellers alike are on the hunt for the best price, pricing software can serve as an ally for sales teams as they navigate the intricacies of price matching negotiations.

The following are just a few of the data-driven tools and capabilities businesses can use to reach a pricing decision that truly aligns their pricing and profitability goals:

  • CPQ (Configure, Price, Quote) Software: CPQ software automates the entire quoting process, with capabilities like customizable templates for streamlined responses and seamless integration with pricing solutions, such as analytics and price setting, to ensure the agreed price aligns with your pricing strategy.
  • Price Optimization and Analytics: Optimized sales guidance requires the combined power of price optimization for accessing AI-driven competitive pricing suggestions, and pricing analytics for contextualizing decision-making in negotiations.
  • Data Integration: Pricing software’s seamless data integration capabilities with third-party systems allows companies to easily access the information they need on their customers when evaluating price match requests and use it to reflect what they value in pricing decisions.
  • Cost Recovery Heatmap: Pricefx’s analytic tool visualizes cost-to-serve elements across products and identify areas for optimization, ensuring offered prices sufficiently account for the cost of delivering value to the customer.

With so many features to choose between, from quoting to analytics, sellers have all the data-powered tools at their fingertips to arrive at a counteroffer (or, alternatively, know when to accept the price match) which is mutually gratifying for themselves and their customers.

Next Up: Communicate Price Increases With Confidence

At this point, you should have added a couple new strategies and tools to your arsenal to effectively respond to future price match requests and in turn, make pricing decisions that protect margins and retain customers at the same time.

As we know, when agreeing to lower prices, or simply maintaining stable pricing over time, negotiations between sellers and buyers are relatively painless. However, communicating higher prices than customers are comfortable with is a different story.

For a guide on how to communicate price increases effectively, we’ve got you covered. Check out our recent article below, which breaks down tips for sales teams on how to defend increases.

Happy selling!

Garth Hoff

Director, Industry Strategy , Pricefx

Garth Hoff is a 15-year veteran of the pricing industry. He has real-world practitioner experience as a Director of Pricing Strategy, and also pricing software and services leadership experience leading solutions, strategy, sales, product management, and marketing teams. His experience encompasses products, services, B2B, B2C, and e-commerce functions at Ascend Performance Materials, IHS Markit, PROS Revenue Management, Orbitz.com, United Airlines, and General Motors – Delphi Automotive Systems. In his current role at Pricefx, Garth focuses on providing companies with a future vision of what is possible with pricing software while also helping them to make the best possible decision when investing in software.