There is a new trend that is driving sales in vertical markets, including telecommunications. Telecom providers are joining B2B marketplaces to expand their business. B2B suppliers have been watching B2C e-commerce sites like Amazon, Facebook, and Overstock and know they are a great way to reach customers, including business customers seeking online destinations where they can source whatever they need.
B2B marketplaces give sellers access to a broader pool of customers ready to buy without marketing. They also give buyers access to more goods and services at competitive rates. A vertical marketplace not only makes it easier for buyers to find what they need, but they can check availability and negotiate pricing. According to Gartner, digital commerce sales now make up 45% of organizations’ revenue, up from 36% in 2019.
Many telecommunications companies have resisted the marketplace model because they are concerned about margin compression and undercutting their channel partners. Telecom buyers also are used to maintaining relationships with suppliers and dealing direct. However, B2B marketplaces are becoming more sophisticated. They now can readily handle dynamic pricing, complex RFQs, and custom orders. Today’s business buyers expect the same buying experience from B2B marketplaces as they do from their B2C e-commerce sites, including shopping for special features at the best price.
The new B2B marketplaces
The growing number of B2B marketplaces offer goods and services purchased via self-service. There are different typically four types of B2B marketplaces:
- Product marketplaces that offer supplies, equipment, parts, and other goods.
- Time-and-materials marketplaces offering services such as freight and shipping, temporary labor, and facilities management.
- Scope-of-work marketplaces that offer telecommunications, marketing, outsourced sales, and professional services.
- Corporate spinoff marketplaces extend the online catalog of manufacturers or providers to create a larger supply network.
The goal of any B2B marketplace is to simplify procurement. Buyers can choose from a broad range of suppliers, features, prices, delivery times, and other differentiators. The best marketplaces have a broad product offering, information about delivery and fulfillment, shipping options, returns, and refunds, and transparent and dynamic pricing. The best marketplaces are easy to navigate and promote frictionless transactions.
Many vendors are wary of participating in an open B2B marketplace, fearing that transparent pricing undercut margins. However, applying dynamic pricing in a marketplace setting has many competitive advantages.
Variations on dynamic pricing
One of the great attractions of the marketplace sales model is pricing transparency. Vendors can maintain higher profits if they can negotiate pricing and delivery schedules with customers. Naturally, buyers want the same things from a B2B marketplace they get from e-commerce sites – competitive pricing, quality service, and expedited delivery.
To remain competitive and maximize margins, sellers can adopt dynamic pricing, Dynamic pricing is driven by algorithms that automatically adjust rates based on competitive pricing, supply and demand, and other variables. B2B commerce commonly uses five different dynamic pricing models:
- Cost-plus pricing – Cost-plus is the simplest form of pricing; taking the cost to source the goods or services plus a mark-up.
- Competitor-based pricing – You adjust pricing based on the competition’s lowest price.
- Value-based pricing – Prices are set by perceived value or willingness to pay. In the past, telephone companies adopted value-based pricing based on variables such as calling distance and time of day or day of the week.
- Conversion rate pricing – In e-commerce, prices can change based on the number of website conversions. For example, when web conversions are low, prices decline.
- Time-based pricing – Prices can change throughout the year or by the day or week. For example, some vendors seek to move more goods at the end of the month, or they may want to offer an incentive with a discount as a special offer.
Why adopt dynamic pricing
Dynamic pricing offers many advantages, such as giving you a better understanding of the market and when to adjust pricing. It also can help maximize profits on every transaction by determining what customers are willing to pay. Dynamic pricing can be extremely valuable when testing new products and services.
In any B2B marketplace, competition drives pricing. Keeping track of the competition ensures your goods and services aren’t over or underpriced. You also can adjust pricing for faster product acceptance or market penetration.
You can expect to see more self-service B2B marketplaces emerge, especially in telecommunications. Last year, the TM Forum’s Catalyst Project profiled several ideas including a digital marketplace for 5G services. As new technologies continue to emerge and telecommunications become more competitive, expect providers to look beyond their own branded offerings and expand their reach with B2B marketplaces. And you can be sure to see dynamic pricing keeping providers more competitive and profitable.
