The Golden Rule of Pricing

When was the last time you offered one price for one proposed solution, for example ï¿¡10,000 for a project?

If this is your approach, you're not alone. Many businesses, especially those in consulting or advisory services, follow this format.

The trouble is, even if you have been given an indication of budget, you still can't be sure of?the price level your prospect finds acceptable. Your one price?might be too high, or it might even be too low!

It's understandable why the one price approach occurs, and its very common particularly if you have an engineering, IT or analytical background (and I’ve seen it with consultants and marketers as well).?

A typical process might be as follows:

1. Assess the client’s need or requirements.
2. Design a solution that meets their needs.
3. Estimate the time and effort involved in delivering that solution.
4. Price up your proposal using the rates for you and your team.
5. Submit your proposal.

However, by taking this approach you are putting all your eggs in one basket by only presenting your prospect with one price option.

And from the buyer’s perspective, it’s a binary decision. They either like your price, or they don’t.

Improve Your Odds – Offer More Choice

The simple solution is to always offer your prospect a choice of price points.

Present a minimum of 2 price options or ideally 3 options each time you present your prices to a buyer.

The first price must address the core needs and requirements that your prospect has asked for. And then the additional options add further value to enhance your proposed solution.

Proposal with 2 Price Options:

• Standard Offer:??????ï¿¡10,000
• Premium Offer:??????ï¿¡14,000?(ideally 30-40% more than the Standard price).

Proposal with 3 Price Options:

• Standard Offer:??????ï¿¡10,000
• Premium Offer:??????ï¿¡14,000
• Executive Offer:??????ï¿¡22,000?(ideally at least 50% more than the Premium price).

When you present your offer in this way using 2 or 3 priced options (with increasing value to the buyer), a number of benefits arise:

• The highest price point acts as a price anchor?and signals high quality to your buyer.
• The other two options seem good value to the buyer, in comparison to the highest price.
• It changes their decision-making process from “Am I going to buy from you, yes or no?” to “If I do buy from you, which option might I choose?”.

When using this approach, it is critical that you let the buyer decide which option they want. You must not lead or guide them to a particular option as they need to feel in control of the buying decision.

So the Golden Rule of Pricing is CHOICE.

By taking this approach, you will find that it actually becomes easier to sell premium prices, rather than harder as you might expect.

It will increase your confidence in your pricing, as it changes the focus from your “all or nothing” single price to allowing your prospect to select an option that best meets their needs.

It also allows you to hedge your bets and present a range of prices if you are unsure about the client’s level of willingness to pay.

Results

You would be amazed at the number of people I have shown this approach to, and they report back afterwards,?“Mark, my client chose the highest price option!”

It also works in many Product or SaaS type businesses as well – the principles are exactly the same.

So, remember the golden rule of pricing, and aim to offer all your clients a choice of price points from here on in!

How are you going to apply choice to your pricing?

If you would like help to improve your pricing strategy and offer choice then please book a call