Is there a potential deal looming that could make a big impact on your business? If so, you might be considering dropping your pricing really low in order to ensure you win that deal. Perhaps the potential customer has given you a target price to hit and you’re not sure if you really should hit it or not. Or, you know the competition is stiff so you’re thinking that you need to take a dive on pricing to have any sort of chance at all. Before you slash your prices, read on for some considerations.
What’s the True Margin?
The revenue on this potential deal might sound impressive but what’s the margin really like? It’s obvious to consider the margin on the deal to ensure you’re able to cover your costs. Do consider more than just the delta between cost and sales, though. Think about the fact that it takes time, effort, and man hours to manage an order from start to finish and be sure you aren’t losing out in terms of salary paid to people helping the process along, shipping, and other costs associated with this deal.
How Easy or Difficult is the Client Going to Be?
Is this looking like a potentially high maintenance client? Are you going to have to chase for payment? There are ongoing costs of doing business and you’ll want to be sure that it’s actually worthwhile to take on this deal.
Consider whether or not this pricing is going to set a precedent for habitual price dropping requests, too. Maybe it’ll get your foot in the door but maybe it’ll be an ongoing issue. You will want to carefully consider the potential benefits vs. drawbacks of working with a customer that’s constantly haggling with you or that’s constantly price shopping every single order.
Beyond the actual sale, what else is going to be a requirement of winning a deal? Will you have to deal with any after sales support? Will you be obligated to keep pricing at that range for more than just an initial order? Are you protected in the case of cancellations or returns on bulk deals? Carefully consider these things before bringing in inventory for someone and before setting a really low price on something that may have more cost associated than initially meets the eye.
What opportunities would winning this deal mean to your company? Would it offer you future potential with a specific customer? Would it offer you partnership opportunities or better pricing with a supplier or manufacturer? Does it help you get on the map as a bigger contender in your industry? Or will it be a one-time deal without a whole lot of future potential? Carefully weigh things before dropping your price too low. And carefully weigh the future potential before you walk away because the margin seems too low at first glance. The right pricing on an initial deal could be a game changer for you in some cases.
Consider Changing Tactics
Is a price drop the only way you will win? It doesn’t always take the lowest price to win a deal. There may be a better way to win this bid. At times it all comes down to price but other times it’s about the bigger picture. Your client may also be looking for value add that your competition isn’t taking the time to consider pitching (or that they aren’t prepared to offer). A careful strategy is important and the right approach could mean great things for you. On the other hand, sometimes it’s better to walk away.
A careful pricing strategy is important to your sales and marketing efforts. Manage your deals with the help of a CRM solution like Base.
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