The First Rule of Sales Proposal Pricing

I’m not going to talk about the strategy and tactics of your pricing—that’s a whole separate issue (you can read The Strategy and Tactics of Pricing, if you’d like an in-depth look). This is about presenting that pricing in your proposal.

Regardless of the details of your pricing and its presentation, the single most important thing is that you present it after you have presented the value. You want the prospect to compare your price to the value they get by selecting you. If they feel confident of the value, you can avoid a lot of painful price concessions. If they don’t feel confident in the value, or don’t really understand the value, they will compare your price to the competition, almost inevitably including cheaper options, one of which is the status quo. If you don’t offer good value compared to the current situation, your price will look too high.

“But we offer tremendous value, the prospect just doesn’t see it,” you may object. This is a common refrain in sales. A customer in a workshop was complaining about customers not understanding the value in a piece of electronics that was literally gold-plated. This feature was much more expensive to produce, of course, and some customers were happy to pay a profitable premium. Other customers compared it to non-gold-plated options and refused to pay extra. Why didn’t they see the value? Because in their applications, the gold didn’t add any value.

Value is not defined by the seller. It is perceived by the buyer. As a seller, you can help the buyer see value in unexpected places, mention how other customers have benefited from your offering, or provide frameworks to help them calculate value. Ultimately, however, the customer decides what is valuable, and they do it in comparison to something else. What we often term “value”, is really “perceived differential value”, and understanding the distinction is important. It’s not what we think the value is. It’s what the customer perceives compared to alternatives.

Assuming you have made a compelling case for the (perceived differential) value of your offering, it’s time to tell the prospect how much it will cost. Don’t be shy, just tell them. You have probably experienced this moment as a buyer. There are sellers who are confident in their value, who present a price (often a premium price) simply and clearly. And there are other sellers who are not confident, who hem and haw and apologize for the price (which is often lower). As a buyer, you sense the lack of confidence, which translate to a lack of confidence  for you in the offering, making you less likely to buy, not more. If you do still want to buy, you sense an opportunity to negotiate for a further discount.

Don’t play on your heels, play on your toes.

Clearly state what the customer is paying for, and how much it will cost. The actual pricing and its presentation are important (and we will discuss more in future posts), but the most important thing is making sure the prospect understands the value.

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