Paying the Price for Lowering Your Price

There is nothing wrong with selling whatever it is you sell at a lower price than your competitors if that is the value you create for your clients. We sometimes believe that because our model has a higher price and creates a different kind of value that it is somehow inferior.

The value of your model is contextual, making the low price option the greater value for those who don't need the high trust, high value, and high caring (this is why you don't worry about the quality of the paper you use with your printer). It's also why you don't take your significant other to Burger King on your anniversary—as doing so would find some local divorce lawyer drafting divorce papers—but you would drive through when short on time and hangry.

Let's agree that in one context, a client should pay what they need to pay to achieve the outcomes they're seeking. One client who doesn't need more than the lowest price option should not pay more to acquire what they need. Another client may need the same product or service but needs a very different outcome, so they might pay more, even though they are buying the same sort of product.

Where we get in trouble is when we believe that two companies who sell the same thing are in competition, when they are not. Salespeople make mistakes when they believe they are competing for the same clients. Which brings us to the question "who pays the price for paying the wrong price?"

When Your Client Pays the Price for the Low Price

A client that needs a certain set of outcomes requires them to spend more money to ensure they are able to succeed in producing those outcomes they need. Without the additional investment, your sales organization would lack the cash to invest the necessary resources to help the client succeed. If this is your model, you have seen clients choose to buy from a lower price company only to be disappointed.

Another salesperson at "Biz Y" might sell the client on the idea that they sold exactly the same thing as the higher-priced company at "Biz Z." This is causing the client to pay a higher price than the company with the higher-priced "Biz Z." Let's agree that the client paid for the product or service, but they paid the price for failing their clients or customers. There is no reason to blame the salesperson who sold them on the low price, as the cheap client is also to blame. They are both complicit in the crime they committed.

Everyone believes they want a deal, but when they fail to produce the outcomes they need, they eventually realize the real deal is paying enough to succeed and produce the results they need.

When You Lower Your Price It Costs Your Client

Another way a lowering your price causes your client to "pay the price" is when you know that you are going to have to remove some of the resources you provide to your client to help them improve their results! Once your operations team or your financial team realizes this client isn't contributing the profit necessary, some sales organizations start to deprioritize the client, making it difficult for them to succeed. Once this happens, the client starts to ask for more help and support, and when they don't get the resources they need, they leave.

The sales manager that needed the revenue as much (or more) as the salesperson who negotiated the concession from them means they are both complicit in this fiasco. When the model doesn't fit the client's budget, you cost your client both time and money.

How You Pay the Price for Lowering Your Price

You want to be a purist when it comes to your model and the way you deliver value to your clients once they buy from you. Your company has a higher price because they have chosen to compete by providing greater outcomes, something that almost certainly requires additional investments in resources that produce the better results your client needs.

When you can't capture the price that allows your company to deliver the value your clients need, you harm your company, making it difficult for them to take care of your client. More still, you harm your company's reputation, as the client you disappointed will tell others how your company failed them, maybe even writing a review on a website that offers the public a place to review the companies they buy from.

You May Make a Concession on Price

There is a difference between charging your client a price that is going to cause everyone to "pay the price" for the deal they made together and making a price concession—even though I'd prefer not to do so. But when a deal is large, valuable, has strategic value to your firm, and is one that is going to be with you for ten years, you might have to give a little to get a lot.

There are times when a low price is harmful and other times when lowering your price might be the best course of action.