Closing strategies

5 Psychological Pricing Mistakes When Quoting a Prospect.

Whether you’re a young startup or mature business, pricing is still one of the most difficult components of the proposal writing process. You don’t want to set your price too low and miss out on profits, but you also want to avoid overpricing your services and missing out on the contract altogether. And while hitting the sweet spot is challenging, it’s not impossible.

 

The Psychology of Pricing

For most business owners and CEOs, pricing is something that gets a lot of attention. You’re always thinking about cost, revenue, and margins. However, it’s imperative that you look beyond these surface-level measurements. Pricing is as much about buyer psychology as it is about spreadsheets and budgets.

“Pricing is a concept that transcends profit margins,” marketers Neil Patel and Ritka Puri explain in their guide to understanding consumer psychology. “It’s also a marketing tactic that can help your business boost sales volume. When you think about pricing, you need to focus on more than what will cover your company’s operating expenses and pay the bills. You need to choose numbers that will compel your audiences to buy.”

While Patel and Puri are specifically speaking to B2C businesses that directly target the end consumer – and how marketing and pricing work together to attract customers – the truths in the previous statement can be applied to proposal writing in B2B situations. You have to consistently produce quotes that compel audiences to say yes.

There are many different facets of pricing psychology, but if we’re going to hone in on just one, it would have to be the importance of value over cost. “Instead of showing prospects what they should expect to spend, show them what they are going [to] earn,” Patel and Puri suggest.

While the cost does matter, you have to dig deeper than dollar signs and decimal points. Why do businesses spend money on your services? Well, because they expect to receive some sort of value in return. If you can convince a prospect that the value you’re providing them is a worthy return on investment, then you can charge a higher price and produce better response rates.

5 Mistakes You Must Avoid

In order to consistently develop quotes that are enticing to targets and profitable for your business, you must avoid making debilitating mistakes that will set you back. In particular, you’ll want to avoid the following:

 

1. Trying to be the Lowest Price

There’s a common misconception in the business world that the lowest price equals the highest volume. While this relationship does exist in certain industries, it’s more of a cliché than a rule. This principle only holds true in industries where products and services are undifferentiated. Assuming that your business offers things that the competition doesn’t, and vice versa, then an attempt to be the lowest price on the block does you no good.

In order to provide the lowest price and benefit from it, you need access to massive amounts of resources. This is why Walmart is successful at being a low-price leader, while the convenience store on the corner of your street would go out of business if it tried to offer the lowest prices on everything.

Most businesses would prefer to have a handful of high-paying contracts than a multitude of low-paying contracts. And if you want to make this happen, you have to focus on value over price.

 

2. Mixing Pricing Messaging

Many businesses struggle with consistent client onboarding because they don’t have consistent pricing messaging. In other words, they’ll try to provide the lowest quote on one project, the highest quote on the next, and a middle-of-the-road figure on the one after that.

You need to identify an appropriate price point and own that number. You’ll quickly learn how people respond to your price point and can then adjust your value proposition accordingly. Clients want to see consistency – so avoid the temptation to try everything.

 

3. Underestimating Project Cost

It’s easy to get so caught up in market prices that you don’t take the time to carefully consider the real project costs. In other words, what’s it going to cost you to complete the project? This should be one of the first things you figure out. This gives you a bottom line figure and prevents you from undercutting yourself.

Also, don’t be conservative with these estimates. How many times does a project end up costing you the exact amount you budgeted? Very rarely. In most cases, something unpredictable pops up and increases the cost. Err on the side of caution and your pricing strategy will be much sounder.

 

4. Focusing on Comparative Pricing

Be very careful with comparative pricing. As soon as you position your pricing up against a competitor, the client you’re pitching takes on a totally different mindset. Typically, it’s a much more conservative mindset.

According to research published by the Stanford Graduate School of Business, asking consumers to relate your pricing to another company’s pricing can easily backfire by making them perceive a heightened risk. In other words, they suddenly become fearful that they either aren’t getting (a) the best quality or (b) the lowest price.

 

5. Not Using a CPQ Tool

Tools exist for a reason. They produce added value, speed up a process, or establish more consistency. When it comes to quoting and proposal writing, CPQ tools do all of these things. If you aren’t currently leveraging the value of a CPQ tool, you’re missing out on an opportunity to automate many of the time-consuming steps you’re currently dealing with.

 

Start Using iQuoteXpress Today

If you aren’t currently using a configure price quote (CPQ) tool, then you’re clearly not maximizing your proposal writing. In fact, it’s entirely possible that you’re compromising your proposals by using the wrong price points.

At iQuoteXpress, we produce tools that allow businesses like yours to streamline the quotation process and consistently develop accurate, professional, and comprehensive proposals in the least amount of time possible. It’s this convenience that makes our CPQ tool one of the premier solutions in the industry. Contact us today and we’ll be happy to provide you with a free no-obligation online demo.

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Presidential Campaign Strategies applied to Business.

This year’s Presidential campaign season has already been full of surprises and twists, and it’s bound to get even more intense as the months roll on. It’s very early, yet candidates are trying their hardest to prove that they’re the best, most experienced, most appropriate leaders for the nation – and, regardless of your political affiliations or personal investments in the outcome of the election, you have to be impressed with the tactics they use to promote themselves.

While the analogy isn’t obvious at first glance, this process of political positioning has a lot to teach us about the best way to structure and write a proposal in a professional environment. Think about your goals as a proposal writer: you’re competing against a group of peers, you have to convince the reviewer that you’re the most authoritative and valuable candidate, and you only get a finite amount of space to pack in all of your persuasive arguments.

 

Let’s dig into the specifics of how political tactics can help you shape better proposals:

 

Have a Slogan

Politics and marketing have a lot in common. Perhaps most importantly, you need to be able to communicate large amounts of meaning in a targeted, effective way. This is best demonstrated by the political slogan, a short snippet of text designed to “stick” in a voter’s mind and accurately, concisely sum up the entirety of a candidate’s political platform. For politicians, this might be a value statement or a snappy rebuttal to an opponent’s vision for the future of the country.

For you, this is an opening statement or summary page, where you’ll boil down your main points to only those that are most relevant. If you’re successful here, your arguments are going to “stick” in your readers’ minds, and long after they’ve given the proposals a once-over, yours is the one that’s going to come to mind first. It also serves as an effective summary page: since it’s rare that companies will review entire proposals multiple times over, your summary statements are the best tool that you have to earn bonus points during further reviews.

 

Create a Plan

There’s something to be said for the value of rational appeal, and there’s no greater rational appeal than a point-by-point plan. For politicians, this means turning a general statement like “improve education” into a series of realistic, actionable items (which is often easier said than done). This must be grounded and convincing, or else nobody will find the plan persuasive.

Proposal writing is no different, except that you have different general statements to flesh out, and you’ll be in complete control of how you eventually execute the steps to get there. For example, you might have a statement like, “We’ll help you to increase your marketing ROI,” but that doesn’t say much unless you have a well-researched, well-documented plan on how you’re going to pull that off. It’s important to back up your plans with research and insights; otherwise, your plan steps will seem as hollow or unimpressive as your general statements. Be specific here!

 

Ask for Help

It’s almost impossible to create and manage a political campaign on your own. Most modern political candidates have entire teams of people behind the scenes, posting on their behalf on social media, answering press inquiries, scheduling events, and getting them ready for significant turns. The politician may be a visionary for the campaign, but the grunt work is done by, well, grunts.

As a proposal writer, you may have access to your own team, but sometimes even that isn’t enough to get your proposal written in time (or in a proper format). That’s why tools like iQuoteXpress exist – too help you get your proposals written faster and easier without sacrificing the quality of your finished piece. Think of your proposal writing software as a campaign manager, helping you keep everything in order.

 

Prove That You’re More Than Just Empty Promises

One of the biggest problems politicians face in the modern era is earning voter trust. All of their plans may sound good, and their rhetoric may be persuasive, but what does that actually mean? It doesn’t matter that you have a four-year plan to improve healthcare coverage if, when you get into office, you immediately abandon that plan. Accordingly, politicians are forced to prove that they’re more than just empty promises.

You’ve guessed it already: you do too. Most proposal submitters will talk a big game, so to differentiate yourself, you have to prove that you can back up those words. Some of the most effective ways to do this are through case studies and former client testimonials; show that you’ve done it before! Otherwise, you can show off measurable metrics and your company history (including team member expertise) to close the deal.

 

Be Unique

To many voters, all candidates look alike. The frontrunners are the ones who’ve managed to stand out from the crowd. In this year’s election, Donald Trump and Bernie Sanders – candidates on both sides of the aisle – have emerged as major contenders because of their unconventional approaches (and, in the former’s case, debatable aptitude). This isn’t to say that standing out instantly makes you a better candidate, but it does get you more attention – and attention is always the first step. Put this to good use in your proposal writing endeavors by including a unique format or position. Break away from the norm!

If you can use these tactics effectively for your proposal, you’ll have a far better chance at standing out among the crowd. Remember, one of the most important elements to successful integration is subtlety: if a voter suspects a politician of being subversive or manipulative, the politician will lose his/her vote. Similarly, if you try too hard to manipulate your readers, your proposal will come off as sales-y and impersonal. Instead, strive to incorporate these means of persuasion without losing the human approachability of your voice. 

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