Small business owners, trying to grow their sales and expand their customer base and, thus, their companies, experience a similar jangling of nerves whenever they give a price to a big customer. This is the moment of truth, after all, when all the skill and guesswork of pricing converge.
If the prospect rejects the offer out of hand, you’ve failed to sell the benefits of what your company provides. If the prospect takes the offer immediately, you’ve given away too much value for too low a price, and the prospect knows it.
If the prospect deliberates and then says yes, the joy you feel is well deserved. The prospect is fully aware of your value, and your price accurately reflects that value.
Unfortunately, too many companies either lose business or sacrifice profits when it comes to pricing. Here are some factors when pricing:
Sell customers on value that resolves their pain or helps them reach their opportunity. Make your prospects and customers comfortable with what they’re buying. Explain the features, benefits and capabilities of your products and services, but sell customers on valuable advantages and outcomes.
Differentiate transactions from relationship sales. You know your business is primarily transactional when you must continually resell your offer, even to customers that have purchased from you in the past. You must be fully compensated for every sale.
Your business is relationship-oriented when loyalty is valuable to you and your customers. This gives you more flexibility in your pricing since your compensation is stretched over the life of the relationship.
Differentiate events from anniversaries. An event sale occurs serendipitously, so your price must cover all your costs and provide enough profit, per transaction, to sustain your business.
In an anniversary sale, your primary concern should be to anticipate and meet your customers’ recurring expectations. Your price should reflect the value of the time your customers save by reordering instead of searching for another supplier.
Price for conversions, reorders and installation sales. If your company is relationship-driven — and all but the most transactional of businesses should form some kind of relationship with customers — you can create a pricing schedule to deepen loyalty one step at a time.
In their zeal to serve, smaller businesses often undervalue and underprice their products and services. The result? They work too hard for too little, for which customers don’t value. Don’t price yourself out of the market — but don’t give away your product either.
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