Should I lower my price?

A student in one of our programs asked me if he should lower a price that he had given to a customer to get the business? I suggested that sometimes selling on price can be the right strategy but most of the time it will create more problems than it will solve.

In some businesses that have become highly "commoditized", creating a difference that will allow you to demonstrate value and get a higher price for what you sell can be difficult. However, often times the way you sell has driven you into a postion that makes it easy for your customer to approach you from the "price" perspective. Giving all of your information up front and then letting your customer "shop" is a selling strategy designed to frustrate you and lower your margins.

I asked my client why he felt that lowering the price would be a good idea? He said "they have an offer from another vendor that is lower, and since it is only a small project we really won't be hurt much if we can beat the price and that would allow us to do more business".

I suggested that since it is a small piece of business, that not offering to lower the price and maintaining "price integrity" might actually be a better idea in the long run. The problem with lowering the price is that once you make a compromise the customer will always wonder if there is "more room" for negotiating. They always have to ask themselves "did I get the best price". Also, now every time you make them an offer they will feel compelled to negotiate and you end up "training" them to ask for a lower price.

Since it is a small piece of business give it up, hold your price and maintain your "price integrity". That, in the long run, will have far more value than the relatively small project we were talking about. Ironically you may also find out that there really "is no lower price" and it was only a strategy in the first place to get you to lower yours.

Make a decision that your strategy is not to be the "lowest" price before you start and stick to it. Then you will have an opportunity to talk about why your price is higher and why your customers are willing to pay for it!

Comments

[John Hirth]

David,

Thanks for your interest in my sales commentary, your thoughts and time to respond are appreciated.

I have some thoughts I would like to provide but have a question first. Since you suggested at the beginning of your post that "you're not sure if you agree", my question is "do you disagree 100% with what I wrote?"

Let me know your answer and I will provide you with some valuable insight that might help you as well as other people following my commentary. I'll also provide the outcome my client got after following my suggestions... and it's not what you are probably thinking!