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Lower Price Equals Increased Risk

The sales team knew that their pricing was very close to their competitor’s price. They knew that their solution was perfect for their dream client, but so was their competitor’s solution. The decision wasn’t going to be an easy one for the stakeholders charged with deciding.

So this sales team decided to do what was necessary to swing the deal in their direction. After all, it was an enormous, game-changing opportunity, and more still, it was strategic. The team went back to their prospect and gave them an unimaginably large discount.

The prospect was stunned. At first, they seemed pleased that this sales team came up with such a massive price reduction. It meant that the company was going to save serious money on the solution they were buying. All things being equal, the lower price should have been the deciding factor. But it wasn’t.

It’s Not What You Think

The sales team got a call from the prospect. They had decided to go with the competitor. She apologized to the team and told them they did great work, but the decision was final.

The price wasn’t the primary decision criteria the prospective client was using to make their decision. The stakeholders making the decision needed the outcome that the solution was going to provide them. The massive reduction in price meant that there would be a greater likelihood that the program wouldn’t be right, that it wouldn’t work as well as it needed to, and that it would take more time and effort to stand up.

All told, the lower price meant the sales team’s solution was too risky.

Shortcuts Aren’t Lower Price

Because “price” is always going to be one of the factors considered in a buying decision, and because you are always going to be asked whether you can lower your price, it can feel like the price is the most important thing. And in some cases and for some buyers it is.

Lowering your price isn’t a reliable shortcut for winning long cycle, relatively high-risk sales. A substantial reduction that isn’t traded against some different value gives the impression that you are buying the business and increases the perception of risk.

Fewer people buy on price alone than you think. And far more buy on value, provided they are working with salespeople who will collaborate with them.

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Filed under: Pricing, Value

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