What do you do when a potential customer tells you “the price is too high, I cannot pay this”?
Most sales people will give a discount in the hope of signing the client as quickly as possible.
A discount usually means a “reduction in price with no strings attached”.
They sometimes work and the client takes the deal, thus contributing to a short-term increase of sales volume. Most probably, the short-term profits are reduced.
On the long-term it will lead to all sorts of negative effects for software services companies:
1. It creates an expectation that the client will always receive the same percentage discount (or higher) for any other project or contract
2. It devalue the perception of quality of what you are offering
3. It attracts the types of customers that use price as their main buying decision criteria
Whenever a potential new customer says they want to pay less, you have the possibility to offer them a “reduction in price with a trade-off”.
That could be different payment terms, maintenance options or overhead services included in the price.
The advantage of this is that you still have a chance of capturing the price conscious customer segments, without selling at a lower price to those that have a higher willingness to pay and without decreasing the perceived value of your offering.
WHAT THIS MEANS FOR YOU
Always offer price reductions, not discounts.
PS. Summer low power mode
I will be in “low power mode” for some weeks in July and August.
I am trying to recharge my mental batteries for what’s coming in the autumn, once we launch the beta version of our pricing optimisation application.
Low power mode means I will be spending less time on writing.
You can expect shorter newsletters until August 15th, when I will be back to my normal working schedule.