Should you drop your prices if customers don’t say anything?
Silence isn’t a sound that most leaders want to hear in the aftermath of their pitch for new business. Still, if customers don’t immediately sign on the dotted line, silence is the second best reaction. Let me explain.
I recently I had lunch with the managing director of a company who wanted to discuss his pricing over lunch. We chatted about things like the value he delivered, recent sales performance and the cost and frequency associated with updating his service.
Then we got to the heart of the matter. Peter had recently achieved some big wins: some of the biggest companies in his target market had taken a three-year subscription to his top-of-the-range product.
But why weren’t the other companies in his target market following suite? They had seemed impressed with his pitch and the product on offer, but they had gone quiet. That left Peter worrying that his price was too high, and maybe he should drop it.
I suggested to Peter that the sound of silence was not a reason to drop his price. In fact, the opposite is usually the case: customers won’t remain silent if the price is too high.
I suggested a different response to Peter: he should reduce the number of products in his product ladder from six to five, making it easier for customer to choose which product to buy. It was an idea that appealed immediately, and we finished our Malaysian spread with Peter in a more jovial mood.
Pricing is more than just the dollars and cents; pricing can mean the difference between success and failure. It is at the heart of every company’s business model, but is often forgotten and poorly managed.