Will You Sacrifice Your Price to Close a Deal?
You need to close deals in order for your business to survive. Thank you for stating the obvious…
But invariably when closing deals you’ll have to make concessions. You’ll have to…negotiate.
Price is almost always the #1 issue with customers. Everyone wants a price break. In some industries it’s pratically guaranteed that you’ll negotiate on price. No one buys a car at sticker price. Other industries jack prices up knowing they’re going to be offering big sales or that negotiation is a fact of life.
In service businesses, many vendors will buffer their price quotes/estimates: (a) to cover their asses, and (b) to allow for some wiggle room.
So, how low will you go? How low will you go? How low will you go? Sing it with me!
Selling below cost is a bad move. (This sounds obvious, but it might not always be.) Wasn’t there a Dilbert cartoon where the guy says something like, “They cost us $5.99 to make, but we’ll sell ‘em for $3.99…and just sell a ton of them to make up the difference!”
You may run into a prospect that has a ton of appeal. A big name client that would jazz up your client list. The promise of PR that’ll draw some buzz. Or (and this is a classic), the promise of deeper purchasing from that client, “if they could just get it super cheap at the outset…”
Are any of those things worth losing money?
In my experience the answer is “no”.
Lowering your price does the following:
- It devalues what you offer.
- It sets expectations with clients that you’ll lower your cost in the future.
- It ruins your profit margins.
- It makes it easier for you to lower the price the next time.
I’m not saying, “don’t negotiate.” We all have to, it’s part of being in business.
But the question still stands, “How low will you go?”
(This is the first in a multi-post series on what you’re willing to sacrifice to close a deal. Next: Sacrificing your time.)
i know it devalues what i offer, but i often end up doing this anyway. don’t know why, i’m just too flexible like that. should stop.
You make some really great points Ben. One thing I’ve found is that clients who focus the most on price tend to be the ones to look out for. If they continue to beat you up regarding price, there are usually other issues. It may be hard, but sometimes it’s better to just let them go to a cheaper company.
I’ve also had a few experiences where the same client who wanted a cheaper price ended up coming back, after they saw what kind of quality you get for cheap.
Julien - raising prices is hard. It can be scary, but if you provide enough value, customers should be willing to follow along. They should understand. Maybe some will grumble, but is it worse if they lose you as a vendor or pay a bit more?
Tony - I think you’re right on the money saying that you may have to let cheap clients go.
But, it doesn’t surprise me that clients came back to you after seeing what they could get for a less expensive cost. The question then becomes, can you maintain a growing business servicing those repeat clients at a less expensive cost than finding new clients at a higher cost or raising your rates?
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