By anticipating the trends, CPQ software vendors and their technology help get you ahead of the curve. Examine four trends in SMB tech and practices.
7 Creative Ideas for Discounts in Your Sales Proposal
Remain Competitive Without Lowering Prices with these Value-Added Services
Sales proposals are somewhat limiting, especially to companies in highly competitive fields or those providing straightforward services, because oftentimes, buyers make their decisions based on one factor: price. If your price is lower than your competitors, you’ll win the bid, but if you’re higher, you won’t have a chance. This is frustrating at times, as you may offer a higher quality of service or better customer relationships, but an objective number may kick you out of the running.
Fortunately, you can use selective and creative discounts to make your prices more appealing—but at the same time you need to be careful. You can’t blindly slash your prices too far, or you won’t make any money on the deal, and if you don’t present your discounts properly, you could compromise their effectiveness.
Where Discounts Come Into Play
Discounts may seem like a straightforward addition of value to your proposal, but there are actually three ways they can increase your chances of closing a deal:
Objective value. The first is obvious, and especially important if you know you’re facing stiff competition. In some circles, the lowest-priced proposal is going to win the bid, so having an objectively lower price will increase your chances—regardless of what type of discount or how steep a discount you’re offering.
Perceived compromise. There’s also the perception that you’re offering a discount because of how much you value the potential relationship. If a buyer is choosing between two similarly priced competitors, and one is offering a more significant discount, the buyer may go with this option.
Negotiation and choice. Offering different types of discounts in your proposal also gives your prospective buyer a certain degree of freedom and choice. This can be valuable if your buyer has needs or wants that are undisclosed in the original RFP, or if your buyer likes to have wiggle room with various options.
Finding the Right Price
The first obstacle you’re going to face in deciding on a discount is how to set the right price. If you’re especially interested in a deal, you may want to cut your profit margins, but if you cut them too thin, you’ll end up doing yourself a disservice.
First, consider how badly you need this deal. Are you behind on your sales targets for the month, or are you sitting comfortably on a number of new clients? Generally, the more comfortable you are, the less of a discount you’ll need to offer, which is somewhat counter-intuitive, but it will secure you more deals when you need them the most.
Second, think about all the peripheral values that a deal may offer you. Assume for a moment that you only break even on a job. What other benefits are you going to see? Will this client offer you other, more profitable work in the future? Will this make for a good portfolio piece? Will the client be able to refer you to other, bigger clients? What can you gain from the relationship?
Finally, take a look at your competitors’ pricing models and see how much of a discount they’ve offered in the past (if you can). This should give you a solid indication of where to start. From there, you may consider cutting costs on some of your services or products if you can, to offer a lower price without cutting into your profit margins.
Offering Different Payment Options
Next, you’ll want to consider offering different payment options, which will allow you to offer different types of pricing for what are, essentially, the same products and services. For example:
Packaging services. You can take a number of different services and package them together differently, at different levels. For example, you might offer a “simple” plan and an “extended” plan against a “premium” plan.
Itemizing services (a-la-carte). You can also itemize all your products and services in a kind of a-la-carte menu, which your prospective buyers can use to build their own custom plan for their own desired price. This gives you more flexibility.
Monthly retainers. Monthly retainers forgo the costs of individual products and services in exchange for a blanket monthly rate that covers a specific range of services.
Discount Styles and Options
There are also a few styles and options of discounts you may find valuable for different situations:
Bulk purchases. Here, you’ll offer increasing discounts based on how many products or services the buyer orders.
Extended contracts. Similar to bulk purchases, this is more focused on time than quantity—the longer the terms of service extend, the lower your prices can go.
Stipulations or circumstantial discounts. You may also offer situational discounts, such as a discount in exchange for a new client referral or progressive discounts based on variables in the contract.
Key Tenets for Success
With those options explained, there are a handful of key principles you’ll need to be successful in your discount presentation:
Do your research. Before you can offer any discount, you need to know what you’re getting yourself into. Know your costs, know your buyer, and know your competition.
Keep it simple. You have a lot of options here, but try not to pack all of them into a single proposal. Your best option is usually to keep it simple.
Make it obvious. Show off your discounts however you can, making them prominent and obvious to even an oblivious buyer.
Focus on value. Play up the value of your discounts, showcasing their objective advantages.
With these tenets and considerations in mind, you can find and create the perfect discounts for each of your proposals. The last step is to make sure they’re displaying properly, and in a controllable, repeatable format; the best way to accomplish this is to use CPQ software, which puts your sales force on the same platform and enables you to meticulously control things like pricing and discounts.
If you’re interested in putting CPQ software to good use in your business, start with a demo of iQuoteXpress today!
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.