Pricing

Sell the value before you position the price.

The price positioning is one of the four key steps in any sales process. Discovery, the demo, and concluding the order are the other three.

In SaaS sales, we talk about pricing as shorthand for the full commercial arrangements. Length of contract, payment terms, et cetera et cetera form the other elements of the commercial deal.

Discounting is something that we often talk about in the context of pricing and discounting has two basic rules:

  • Firstly, you only negotiate and thereby discount ONCE. in terms of the pricing and other commercial details.
  • Secondly, you negotiate concessions in return. The most common of which is an agreed close date. Done this way it can be a win-win for both you and your client.

Amplifying Factors:

RED – Shared in detail and seems expensive

Check back to where you positioned indicative pricing and if this is changed to more negative it may indicate that competitive pressures are at play here. The competition includes doing nothing in this context.

AMBER – Shared in detail and neutral reply

Check to see how they responded to your indicative pricing and also consider other elements of how they are working with you to draw an inference from this reaction. Some  individuals and companies have a poker face approach to receiving pricing

Green – Shared in detail and still within budget.

Ideally, this is where you need to be at, and maintain this through the rest of the process.

Mitigations – What to Do?

Make sure you negotiate the price with the right person. Make sure the decision-maker or the signer is involved in the pricing discussion.

Don’t have the pricing discussion until you’ve sold the value. Make sure the prospect understands the value before you position pricing with them. It’s ok to give a ballpark or better still a range ( but be careful if you give a range as they will gravitate to the lower number “ I think the price will be $5 -$6K”. Ah, $5K sounds good” he replies.

Typically, We will have a conversation around price when we have addressed all other issues, and only when prices are the only thing between you and an order will you have your final pricing discussion to prepare your proposal.

Discounting includes other concessions such as break clauses, short contracts, special payment terms et cetera et cetera are only negotiated once. It’s okay to indicate a concession with “ I don’t think that’s going to be a problem” to reassure the prospect earlier in the sales process but make sure that it is clear to them that you’re gathering these up for one single negotiation conversation.

Discounting should only come into play if and when you’re ready to close and you want to incentivize the prospect to close in the timeframe that works for you. Done the wrong way this can appear as pressurizing your client to close to a false deadline, e.g. your end of month.  If done correctly, the prospect will work with you to close in a timeframe that makes sense to you, provided they are convinced of the value and they see benefits in them in closing your timeframe. This is a complex piece of art and drama creation that takes practice to get right.

When pricing is shared in writing it must always be time-bound (this offer is valid for 30 days or this offer is valid till such and such a date).

Always add the line, “subject to approval”. In theory, you should have an approval process for discounting so this gives you an out with the customer. If other factors come into play affecting the price, for example, you are assuming a three-year contract and they only want one year contract at the last minute this gives you the right to revisit the price.

Make sure your mutual close plan includes a step for final negotiation.

You are having a final negotiation conversation it is no harm to bring in a co-founder colleague to create drama.

Pricing NDA can be very useful to create the inference that the pricing the special. Everyone loves a deal and so pricing NDA, whereby the clients cannot divulge the pricing to others can put you in a very good place to conclude business.

 

Scroll to Top