Charging The Best Price

How much should you charge for your product or service? There is no fixed answer or formula to that question.  In deciding, the first key is to make sure you are charging enough to make a good profit.  Don’t forget that the profit you make on a deal has to make a contribution to all your costs and overheads, as well as paying for the direct costs of the product. The second key is to make sure your pricing is competitive; but don’t forget that reputation and trust have a value.  If you give first class, reliable service you might be able to charge a premium and risk not being the cheapest bid. But, customers and prospects will be looking at more than one bid, and you have to think about handling price objections.

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Tip from Shaf – Handling price objections
In face-to-face and telephone selling we tend to react wrongly when someone comes up with the dreaded phrase, “Sorry, mate, I’ve found a cheaper quote.”  Most people have two instinctive reactions; they either lower the price, reducing the profit on the deal, or they go over again the benefits of dealing with them as a supplier – this can be boring and probably won’t work.

But there is a reason the prospect is still talking to you; so try this. Find out what the buyer thinks are the benefits of your approach by asking the question “Would you buy from us if we were the same price?” 
If they say, “Yes,” ask them why and they will tell you what they think is good about dealing with you. Then ask them if those benefits are not a worth a 15% premium on the price.  You may still have to come down a bit but not necessarily as much as to match the other price.

If they say “No” you have still made progress, because you can then find out what your problems in getting this deal are apart from the price objection.

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Everyone negotiates for everything, particularly in these hard times. This means that you will probably have to lower your price a bit during the negotiation; so, to begin with, ask for more than you would settle for.  Remember you can always come down from your first price but the customer will never allow you to go up.  In my experience of negotiating, setting the price for your first bid with as large a margin as you dare, generally gets a better result than going in only just above the price you are hoping for.

Always go into a negotiation with plenty of minor issues – terms of trade, delivery, payment times and so on.  You might be able to make a concession on those that does not impact your profit nearly as much as reducing the price.  For example, if you are dealing with a middle manager in a big company he may not be measured against an objective in the area of managing cash.  This can give you the opportunity to improve the deal for you by offering a discount for prompt payment. 

That way you both win; they have done a better deal in cost terms and you have protected your cash flow.