In a lean economy, many sales and business development people feel obligated to discount their prices; at least, the discussion of price and where it fits in the sales strategy becomes more important than ever.
Many of my customers struggle with the issues of pricing to be competitive and also maintaining a viable profit margin.
So I’ve spent some time exploring best practices and considering what we should recommend in this market.
I’ll say at the outset that The Whale Hunters way is never to discount a price. If we believe our price is fair, and if we have a market for products and services at our prices, then discounting will only take us into a downward spiral. If a customer wants a service, and the service is more than the customer is willing to pay, we are often willing to renegotiate the scope of work, but not the price of our work.
If this is an issue you’d really like to study, I have three resources to recommend:
First, check out Dan Sullivan’s program for entrepreneurs–The Strategic Coach Inc. at www.strategiccoach.com. Dan’s built a highly profitable and durable business teaching entrepreneurs how to get the greatest value for their services and products.
For professional service firms, try How to Maximize Professional Service Fees by Alan Weiss. This little book offers 57 ways to manage your fee structure to your advantage. I’ll repeat just three of his nuggets, incorporated into the chapter “Value Must Be Based Upon Worth”:
- Value is in the eyes of the client
- Fees should be based upon fulfilling value, not performing tasks.
- Time unit billing will always be less than your true value.
A more comprehensive discussion of pricing models is available in Pricing With Confidence by Reed Holden and Mike Burton. These authors offer ten rules for pricing, the most important of which is Rule #10 — Price With Confidence.
So if the economy has got you worried about the need to cut prices in order to get business, it’s time to arm yourself with some very good advice and reconsider the cost-cutting strategy.