Your Pricing is Hurting Your Proposal, but Not How You Think

Aug 30

You’re putting the finishing touches on your proposal. Everything looks good, but you have nagging doubts about your price. It seems so… expensive. Are lower-priced competitors going to snatch the business. You take 10% off the price, then send it over to your prospect. A week later, you haven’t heard any response, so consider lowering the price further. After all, you really wanted this business.

As if your week wasn’t stressful enough, your mom calls. She’s just come back from the doctor and has some bad news: she needs a hip replacement. You look up doctors near her, and start calling their offices, trying to find the cheapest doctor. Wait, what? Of course you don’t do that. The cost of the procedure is important, especially the binary criteria of whether that office takes your mom’s insurance, but you don’t start by trying to find the lowest price. In fact, if a doctor advertised “cheapest hip replacements in town”, you’d probably go elsewhere.

Don’t make your business the “cheapest hip replacements in town” business. Price must align with value, but a lot of that perceived value is derived from price, in the absence of other information. When your customers want to “do surgery” on important parts of their business, they want a price that makes economic sense, but they want to make sure the surgery is successful. Part of believing that you can deliver comes from other parts of the proposal, how well you understand their needs, how much your proposed solution makes sense, and part of it comes from believing that your price indicates solid, professional work. One provider of enterprise services tried to charge $25,000 but found sales disappointing. After raising their price 10X, business took off. I’m not saying you should try to gouge your customers, just that you should not sell yourself short. If you win the business, it will mean a huge hit to your bottom line and your lifestyle (see this post that includes a spreadsheet so you can see the impact of pricing changes). Even worse, pricing too low can knock you completely out of contention.

Don’t sell yourself short.

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