Are the prices you charge winning or losing you business?
A strange and surprising thing happened to our firm earlier this year, we started losing every bid for which we tossed our hat into the ring.
First it was a year long public relations project from the European Commission (we were in the final 2) . Then it was the bid for the PR campaign of a public utility, and later, a one month intensive media training session for a team of crisis communicators. There it was, three out of three, all back-to-back, all major losses.
There were a few possibilities pointing their scrooge like fingers as to the reasons why? Had our competitors gotten better? Were our RFPs missing the target? Had we grown complacent?
I never for a moment thought about price until a prospective client called us after our presentation to say we had the most incisive of all the proposals his executives had seen, he then asked me to lower our price points to match what our closest competitor had put on the table.
This was the eye opener.
The realities of a new global economy meant a few adjustments in price, the question was how to go about doing it. Naturally my first instinct was to lower prices just to be able to compete but since I have never devised my firm’s pricing as a ‘fly by the seat of my pants’ activity, I decided to give some real thought to the issue.
Like other committed small businesses, my team works long and hard at bringing our sleuth of services to market and pricing is based on the often dedicated and invisible work needed to execute a project, our expertise, the service agenda, the opportunity cost and yes even the financial risk. When we look at pricing just as a mix of marking -up costs, maintaining margins, matching competitors, or doing things the way they’ve always been done, then we miss the point that pricing is really a strategy: one of survival and growth, yes even in the toughest of business climates.
So to the solutions for the tough times for small businesses, I came up with new ground rules:
- Know your value and what you can offer; set value based prices
- Acknowledge that each client is different with divergent needs and a one size pricing is not the best strategy
- Offer targeted service versions to meet specific customer needs, I call it a Bronze, Silver and Gold package. A good, better, and best version that is designed to capture different customer valuations. In the end the customer decides
- Over deliver; this never hurts and ensures you’re the top of mind choice for your client
Focusing on better pricing (not necessarily lower draconian cuts) is not easy. It requires confidence, an enormous amount of follow through on your service promise and the requisite expertise, you’ve got to be better than your nearest rival; you must be super service oriented.
Each day I say a thank prayer to that prospect (now client) who gave me that wake up call. Since then, we’ve won 5 out of 7 bids, seems like we’re back on track.