The Future of Pricing:
New Value Driver Models

In a B2B context, definitions of value traditionally focus on the financial benefits (reduced costs, reduced risks, increased revenue opportunities) an offering provides. But increasingly consumers and businesses (especially those near customers/at the bottom of the supply chain) are recognizing sources of value in the areas of sustainability, quality of life, and making a positive social impact. While financial assessment of value remains critical, quantifying non-monetary value drivers will increasingly unlock new opportunities for value capture and differentiation.  

The triple-bottom-line model (Profit-People-Planet) is currently one of many well-known frameworks that can be employed for identifying and quantifying important non-monetary value drivers. While the ‘Profit’ component refers to the familiar financial impact of an offering, the ‘People’ and ‘Planet’ components can help us systematically identify non-monetary factors. The ‘People’ component refers to the social impact of an offering. How does your offering contribute to the common good? An example would be enabling an increased time with patients in a medical setting. The ‘Planet’ component refers to the environmental impact of an offering. How does your offering contribute to environmental sustainability? A common example would be carbon emissions reductions. 

While incorporating non-monetary value drivers requires far more creativity and effort, there are many reasons to make this a part of your value quantification process: 

• Millennials and later generations simply expect it.  
  
  Study after study shows younger generations—who are increasingly represented in the buying center—seek partners who make a positive social and environmental impact. According to one study, 95% of millennials surveyed reported that a company’s ethics are ‘very important’ to them. 92% of S&P 500 companies and 70% of Russell 1000 companiesare publishing their sustainability goals according to the Governance and Accountability Institute. Further, studies show there is a direct link between a firm’s reputation in corporate social responsibility and overall corporate reputation. Having a strong quantified message about how you will contribute to people and the planet will appeal to their sense of meaning.  
  

• Creates new dimensions of value by which your offerings can be differentiated.   
  
  Given two offerings in a highly competitive market where prices are similar, quantifying and communicating your offering’s social and environmental impact creates a new vector of performance comparison. 
  

• Demonstrates you can help your B2B customers meet increasing regulatory requirements, the compliance needs of their customers, and their corporate mission goals.  
  
  In November of 2022, the United States launched a Net-Zero Government Initiative at the United Nations Climate change Conference of the Parties and pledged net-zero emissions by 2050. This follows the European Green Deal (2019) which similarly sets the goal of Europe’s economy and society to become climate-neutral by 2050.  As global, national, and local environmental impact regulations become increasingly rigorous, firms will need to communicate how their offerings will make their customers compliant.  Many firms must adhere to the GHG Protocol for reporting greenhouse gas emissions, which includes tracking within the entire supply chain (Scope 3).  
  

• Value from non-monetary value drivers frequently can be harvested through traditional monetary value drivers.  
  
  While some non-monetary value drivers are compelling alone, there are frequently opportunities to harvest the value through varied capture mechanisms. Reduced carbon emissions might be converted to carbon credits sold in carbon markets. If your firm is serving a government agency, you can align measures of social impact according to grant funding requirements (thereby monetizing the social impact as new revenue). Numerous studies show consumers are willing to pay a substantial premium for sustainable offerings. If your offerings help your clients sell at a premium, you should be able to capture a percentage of their premium. 

What could triple-bottom-line thinking do for your pricing and offering development process? 

Just consider, in many of the recent engagements we've seen in the last six months, almost all of them included quantification of non-monetary benefits with substantial results. Here are only a few case studies of what is possible: 

• One firm quantified carbon reductions through the increased use of virtual engagements. By developing a carbon reduction estimation for their services, they could prove movement towards compliance with Europe’s carbon neutrality mandates by 2050. 
  
• One firm quantified the impact of a lighter offering in the transportation industry with both financial impacts (less fuel consumption) and lower levels of carbon emissions (from less fuel) which created opportunities for their customers to enter the carbon credit market. 
  
• Another company's offering created social benefits in terms of lower incarceration rates and greater access to lower-cost social welfare programs, both metrics drive the funding goals of their target customers.  By documenting these benefits, the customers could more easily seek grant funding and therefore grow in the scale of business opportunities. 
  
• A medical device company was able to quantify time savings which translated to more time spent with patients. This was of great value to the customer for improving the standard of care and they believed their customers would be willing to pay a premium because of it.   
  

We perceive that pricing will increasingly incorporate the value of non-monetary value drivers and sustainability in the future and that new frameworks will need to be developed to help firms navigate a range of contextual variables: 

• How do regional attitudes vary and impact value capture for sustainability benefits? 
• How does a firm’s position within the supply chain impact value capture for sustainability benefits? 
• How might governments create subsidies and grants to encourage firms to pursue non-monetary KPIs and alleviate the pressure to pass on costs through the supply chain in the form of higher prices? 
• Do buyer attitudes and business conditions align to provide a first-mover advantage, or is it best to benefit from the learnings of others?