155: How To Totally Smash Your Price Is Too High (Part One)

<p>Pricing is usually set by the boss and salespeople are just there to get out and sell at that designation.  The provenance of that price point can be quite varied.  In some cases, there is a careful calculation involved. It determines the necessary return to cover direct and indirect costs, plus make a specified margin of profit.  In other cases, a moist index finger is lofted skyward and a price magically appears.  The services industry, in particular, has a lot of skyward finger waggling going on.  The trouble though is salespeople are not convinced by any price setting methodology.</p> <p> </p> <p>They only believe in the reality of the market . The way they know the reality is the degree of pushback they get from clients, when they are trying to sell.  It is also a function of the nerve of the organization to defend the price point, when there is the threat of no deal.  If the boss tells the salespeople to “go out there and sell” at that price point and then the boss folds immediately, every time there is buyer resistance, then the salespeople’s belief in the validity of that price point is precisely zero.  The bosses have to hold their nerve and hold the line.</p> <p> </p> <p>When you have no belief in the value backing up that price point, your ability to sell at that rate is simply squashed.  You default to discounting to get a small piece of something, rather than a very large piece of nothing.  Now the boss is cranky because you are undervaluing the brand and the company’s market positioning.  So around and around we go on the merry-go-round of price setting.</p> <p> </p> <p>The crunch point is the sales price negotiation with the buyer.  If you have gotten into the death spiral of last minute discounting, in order to move the product or service, you have now trained the buyer to extract the biggest possible discount every time.  When ever I have been sucked into price discounting with Japanese buyers it is like quicksand.  You can’t get out and are stuck now at that price point or lower. </p> <p> </p