Pricing Strategy for Rainmakers
What’s your pricing strategy for B2B sales? How do you decide the price customers should pay, and then persuade them to go along? How often is your idea of the right price accepted by prospects? How much revenue and margin do you lose when they just won’t agree?
If your answers to these questions are mostly “well, it doesn’t work like that” you are in very good company. These days customers are rarely happy to pay the asking price.
Our problem as entrepreneurs, or sales guys, is price is lifeblood to us, whereas to customers it’s more of a game. They find it super easy to tell us we’re too high, and wait for a response. Most often we need the deal, now, so we can move on to the next guy, whereas prospects can wait awhile and see what goes down.
There are a couple of pricing strategies you might consider, both of which can be fun, although one is more risky than the other.
One guy I worked with years ago had a very simple philosophy. When the prospect asked “how much is it?” he would confidently pick a number, say $100,000. His next play would be determined by the response he got.
If the prospect looked turned off he would add “ for the whole package, but you won’t need all of that”.
If the prospect looked happy he would add “for phase 1”.
He enjoyed playing his game that way, and who’s to argue. He probably got to a better price, faster than I ever did. He also got thrown out more often.
Building the Deal
This was, and still is, my preferred strategy. It’s a question of breaking down the proposal into components, each of which has its own identifiable cost. Then selling the value of each.
It’s the reverse of the buyer’s salami tactic. S/he’ll unpick the offer piece by piece, asking for a discount as the scope shrinks. Then s/he’ll go back to the original package and want the whole thing for the price of the bare component.
I’ll try to turn the tables, and build the price up. That way I won’t run the risk of turning off the customer. I’ll also build my way up to the maximum acceptable amount. Probably the customer will get bored. This game isn’t fun. There’s always a reason to buy the extra, which will cost more next time if they don’t buy it now. In this case the prospect just wants to get the deal closed before being persuaded to pay even more.
Coaching the Customer
Some sales psychology comes into play when we get sophisticated with the process. We probably won’t get to this discussion until the deal is on the table, ready to be closed. The customer wants to buy and we want to sell. We’re simply negotiating a price the customer is prepared to pay.
In that case we can get clever. When the customer asks how much? We can respond with “typically this package comes out at $200,000 but you probably won’t need all of that. Lets work out the components you really need to make the project successful and see if we can meet your price objectives.”
“If we can’t there’s a chance I can sweet talk my boss. If I can tell her you’ll close this week, take delivery this month, provide references to other prospects, promote our product to others in your group?”
‘She might authorise me to discount some of the price.”
“I suggest we work out what you really need, decide how much you can really pay, and then ask her approval for the deal.”
That approach usually works out OK.
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