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Why You Should Never Lose on Price—And How to Make Me Right

We wanted to share with you an article that one of our colleagues, Stuart Baum, Director of Marketing for Blackman Kallick and President of LargerPond Marketing, recently had published in the Perimeter Advisors Online Insight Newsletter.

AYSO Region 423’s Referee Administrator counsels new soccer refs with the following advice: “If you never call a hand ball, you will be right 95% of the time.”

With that in mind, I’ll start by saying that you should NEVER lose a new business pitch on price. If you think you did, you are fooling yourself. If the prospect says you did, then they are lying (though maybe for good reason. Call it a white lie.)

In my role, I have access to reviewing many lost proposals. When we are told that “we lost on price” and contact that lost prospect, we almost always get a different reason. I have yet to hear a CMO contradict this statement.

Then why did the prospect say it was price? This is the business equivalent of “It’s not you; it’s me.” I’m no relationship expert, but I can tell you this: When you hear this phrase, it IS you.

OK, then, how do you not lose on price?

1. Ask about price. Ask what percentage of the decision will be based on price. This should not be your first question, of course. But if they are creating a weighted matrix, ask what percent each attribute will be weighted. If they are not creating a matrix, then ask how they will compare bids and what will be the key determining factor(s).
2. Ask about competition. Are you competing against low-cost providers? Are you competing against hungry competitors who are low-balling currently? Or are the other competitors selling on value, too?
3. Ask about the other buying factors. How important are these? “If we are, perhaps, a little higher on price, but we can show you that we knock the ball out of the park when it comes to XXX, will we win this?” Watch them carefully when you ask this question.
4. Ask them why they are bidding the project. Was (is) there an incumbent? How did they find your name? Often you can find out the price question here. If they are leaving due to lack of service, you should be good. If they are leaving since they feel they are being overcharged for “a commodity,” your red flag should go up.
5. Do your research on the prospect. Do they tend to buy from low-cost providers? Contact their other suppliers and ask what they care about. Ask if they pay their bills on time or argue over every nickel and dime. What you are hunting for here is not price, but value factors. What does this prospect value most?
6. Ask them who is making the final decision. Is this a buyer who cares only about cost? Unlikely. While a CFO (for example) might care more about cost than the end user, if she/he bought only on price, then the company would no longer be in business. Sure, when provided with three options, the CFO might gravitate to price, but if you cannot show that you are not a like option, then you deserve to lose, regardless of price.
7. Deliver the proposal in person. My Number One pet peeve. If you e-mailed the proposal, you did not lose on price. You lost on customer service. You also lost an opportunity to be there when they saw the price. If their eyes became pie plates, then you would have a chance to see why they were expecting a lower price. Perhaps you added a lot of features/services that they didn’t want or need. Who knows? (Answer: Not you.) Here I advise people to set the proposal delivery meeting during the scope meeting. If they refuse to set a date or say, “Just e-mail it over and we’ll call you,” then you know they do not value customer service. . .or they are looking for a stalking horse. If prospects won’t set a date for discussing the proposal, then you should reconsider sending them one. See Yogi Berra quote below.

So you asked and . . .

They wouldn’t tell you. Did they tell you about other attributes they value? Are there other suppliers delivering value vs. cost? Research around it.

Price is their Number One concern. Ask yourself: Is your company’s differentiator one of price? Or do you want to have a short-term, unprofitable relationship for alternative reasons? If so, full speed ahead. You’ve met a good match. If not, then run. Sure, I’ve gamed my NEVER here, but if you can’t compete, don’t. Why create a proposal when you know you will lose? As Yogi Berra said, “Swing at the strikes.”

Whenever possible (and I know in many cases you cannot), take a lesson from car dealerships and tell them the price up front…before the pitch. It’s the first place they’ll look anyway, so why not peel off the bandaid? Then you can spend the rest of the time piling on value until the price is overcome. We’re 2% higher than the other bid? Fine, I’m going to show you 5% more value. Only 2%? Usually we’re higher than that. Then explain why.

I tell prospects that if they get five bids, we’ll probably be the second highest. That is, at the top of the three palatable bids. Or, if I know they are top-feeding, I let them know we’ll be in the middle. “You are considering some solid firms; we’ll be right in the middle of that pack price-wise.” And then I pause to see their reaction. At least now they know not to expect us to be the low-cost option, and we can focus on value.

In short, if you are proposing and do not know how much the prospect cares about price, then you need to do a better job with your pre-proposal efforts. Or you’ll deserve to lose. And, when you do, they will say it was price. And you will believe them.

Want to know more? Contact Stuart at LargerPond Marketing, (312) 980-3235, stuart@largerpond.com or visit his blog to read more.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.