Indicative Pricing RISK
Any situation in which pricing is presented is both an opportunity to build trust and also an opportunity to introduce risk.
Frequently, the first question, the prospect will ask you is “how much is it?” Sharing pricing before you have a sense of their needs and complexities is fraught with danger. Pitching too high, you can be disqualified before you have an opportunity to show the value you bring. Pitching too low paints you into a corner and prevent you from realizing the true price of your solution.
Indicative pricing should be positioned exactly as that. You need to make it clear to the prospect that this is just indicative off the top of your head and that you will later get into more detailed pricing and proposals. It’s in pencil, rather than in ink.
Amplifying Factors Industry Location
RED – Shared and seemed expensive If they indicate it’s too expensive to you, you might need to either qualify out or rework the value proposition to show them the true value of your product. It could also be that the person you are speaking to is merely tasked with finding pricing, so be careful that it’s not the individual’s perception as opposed to the company perception.
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AMBER – Shared and neutral This is common, particularly early when providing indicative pricing. Prospects often don’t like to show their hand, particularly on pricing, so don’t be too surprised if you get a neutral response. |
GREEN – Shared and seems in budget. This is where you expect and hope to be. Which means the price is not paramount consideration but value probably is.. Be aware that sometimes it can appear in budget at the start but as they get into detail as a talk to competitors that position can shift.
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Mitigation – what to do ?
If at all possible, do not share indicative pricing in writing. Any pricing shared in writing even on an email can come back and haunt you later. So is good practice not to commit in writing a given price until you have the facts available to have confidence in the pricing your offer.
Hold back all discounting at the indicative pricing stage. Discounting is not just discounting the price, but of payment terms, length of contract price for add-on solutions et cetera et cetera all these are in the mix when we talk about discounting so don’t get drawn into discounting at an early stage as everything you put on the table at that point will be pocketed by the prospect, and you can never go back and regain.
Pricing should never be simply shared on email. As mentioned above, indicative pricing can come back to haunt you, but more fundamentally, you can’t just place a price in front of somebody. You need to have a conversation, you need that real-time reaction so face-to-face or over Zoom (cameras on) is the ideal way to present even indicative pricing. You need that reaction. Without it, you’re in danger of being gamed by the prospect without really getting a sense of whether you’re succeeding or failing. There’s an old saying you can’t sell the email and this is where you really need to live by that.
Make sure you make any assumptions clear when you’re discussing it. For example, support or implementation is extra. Make sure that the prospect is clearly told us. Because you want to presenting pricing in a positive frame phrase it like this “ look, I’m going to give you indicative pricing for our software, as opposed to “I’m going to give you price which excludes support and implementation”. This is far more positive than the second way.
Do however write down the indicative pricing clearly keep it as well. You don’t share that with the prospect you need to have an accurate record of exactly what you said.
Always make sure you have a next step in place after you present pricing. Pricing is one of the two main places in the sales cycle prospects disappear, so having a follow-up conversation in the diary before you present pricing while you’re presenting it is critically important.
Indicative pricing is often presented as a range. This can get you out of a lot of trouble. You might say something like, “a company of your size would typically spend in the region of $10-$15,000 per year on a solution”. That gets them a price ballpark but doesn’t commit you to a specific number.