“I’m sorry. It’s not in our budget right now.”
How many times have you heard that in response to a business proposal you sent to a client? If your answer is “too many,” the problem may not be the post-recession climate or overpricing the bid.
Often, it’s a polite way of saying you didn’t convince a prospect that what you’re offering is valuable and compelling enough to hire you, says Mike Schultz, a faculty member in the marketing department at Babson College and president of RAIN Group, a sales training and consulting company in Framingham, Mass. “What they’re saying is: 'I didn’t want it,’” he says.
If you want customers to buy what you’re selling at the price you want to command, you’ve got to run your business in a way that makes it impossible for your target clients to say no. Here are some tips from experts and entrepreneurs on winning new business—without undercutting yourself.
Know your value—and convey it. It’s not uncommon to agonize about how much to bid on a new project, especially if the market in your industry is soft. “People sit at their desks and think: 'Am I overshooting?—I don’t want to lose this.' Or 'am I leaving money on the table?’ They just don’t know,” Schultz says.
Understanding your value proposition will help you gain clarity, says Schultz, who is also author of the book Rainmaking Conversations. Do you offer something that’s better than everyone else—and can you define it and illustrate it to clients? If so, you may be able to charge more than competitors.
But, contrary to what you might have heard, crafting an “elevator pitch” isn’t the answer, he says. You’ve got to pay careful attention to what customers want to achieve and show them how you’ll get them there, according to Schultz. That may involve offering solutions they have not considered. “All of a sudden, you become important to them, as long as they’re listening,” he says.
Be predictable. Vacationing at Disney resorts isn't cheap, yet legions of people are willing to pay a premium to stay there. Why? They know that the experience will meet a certain standard—unlike the typical weekend carnival. “People go to Disneyland for the consistency of experience,” says Andy LaPointe, operating partner at Traverse Bay Farms in Bellaire, Mich., which sells fruit salsas and other fruit products at premium prices.
Delivering excellent service to your customers every time you have contact with them—whether it’s on your website, at your call center or in person—will make it worthwhile for them to pay you premium prices, says LaPointe, who also runs a consultancy that advises small businesses on Internet and social media marketing. That’s especially true if you do business with big corporate clients who deal with a lot of bidders. Purchasing agents who want to hire you for higher prices than the company usually pays may have to prove your value to higher-ups. “They need to have that genuine value they can justify,” LaPointe says.
Consistently delivering outstanding service will also lead to word-of-mouth publicity—the best kind. The “transferred trust” you get when one professional refers you to another makes it a lot easier to sell your services at the price you want, says Schultz.
Know what the market will bear. What if you don’t offer a service that’s so high-end or unique that you can charge whatever you want? Then you’ve probably got to offer competitive pricing that reflects both demand in the market and what the customer is willing to pay. “Understanding price ranges and demands is central to good pricing,” says Douglas K. Foster, principal at NovaLex Consulting, a marketing consultancy in the Austin, Texas, area.
Foster is a fan of using Dutch economist Peter van Westendorp’s “price sensitivity meter” to figure out ideal pricing. It involves asking yourself several key questions:
- At what price is the product or service too expensive for a customer to justify the cost?
- At what price is it expensive but worth the investment?
- At what price is it a bargain?
- And at what price does the product become so inexpensive that a customer will question the quality?
Doing market research to answer these questions will help you get closer to the ideal pricing for your target customer. “You can optimize your price point to maximize your margin or volume,” Foster says. “It gives you a range of acceptable prices.”
Take a chance. “There’s a certain amount of risk to being an entrepreneur,” Schultz says. If business is humming, don’t be afraid to raise the price of your services occasionally to see if customers will pay more. “You’ll only find out how high you can price things once you start losing deals on price,” he adds.
If you’re not getting any push back on pricing, he says, “you’re probably not pricing high enough,” Schultz says. The only way to find out if you’re selling yourself short is to bid higher on a few jobs. “You can get busy for a lower price,” says Schultz. “A lot of times you can get just as busy at higher prices just as fast.”
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