If you’re a sentient human being on planet earth, you know the story of Goldilocks and the three bears. We’re going to spin that fable to detail some feature of sales proposal solutions and how they help you set pricing for your “porridge” that’s a win for you and your customers.
This porridge is too hot
— this price is too high
@@The worst thing a business can do is set prices based on the revenue it would like to drive.@@ This means that you’re only looking internally, probably a bit too greedily, and will go forth with a price that is too high and burns your customers. Like how that first bowl of porridge drove ol’ Goldilocks on to the next one.
This porridge is too cold
— this price is too low
The next-to-the-worst thing a business can do is come out with a price that’s too low. The good news? You’re likely to get some customers as everyone likes a bargain. (Because unlike Goldilocks who found “too cold” distasteful, your customers will lap up a lower price all day, every day.) The bad news? A price that’s too low undervalues your products and services, is likely unsustainable, and is definitely not as good for your bottom line. Ironically, “too cold” results in your business getting burned.
This porridge is just right
— a price that’s a win-win
So where you find a price that’s just right? Some say it’s not easy: Charles Toftoy, a professor of management science at GWU, says that "[pricing] is probably the toughest thing there is to do… It's part art and part science."
We’re gonna have to sort of disagree with you there, Charles. We’re in the proposal solutions space, so we think it’s entirely science and not all that difficult if you have the proper tools.
True, if you’re introducing an entirely new product or service into an entirely new market, then, yes, there may be a bit more research required for setting the right price for the first few customers. But research isn’t an art form — it’s a science.
And if you’re using a configure, price, quote software solution and empowered by sales analytics tools (either in your CRM or your CPQ system — even better, with CPQ and CRM integration), you can quickly uncover which proposals are winning, and set your overall pricing from the pricing details therein. Because your customers, by choosing to do business with you based on the pricing and products they see in in your proposal, are giving you all the info you need.
It’s a sad but true fact that most customers likely view whatever you offer as a commodity, so price will ALWAYS be a factor. But if you have a price that’s fair — one that reflects what the customer may have seen elsewhere in their own research, and one that lets you both stay in business and grow your business — chances are you’ll find your way out of the woods just like our Goldilocks did. (In some versions of the story, anyway. In others, she finds the bed that’s just right… and falls asleep… and the bears come home and eat her. We’ll figure out how to spin that version in a later post.)
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