Jan sells web design services to mid-sized companies. She spends upwards of two hours talking to prospects before she ever reveals her price. Her closing ratio is 20%. That means that she has to waste eight hours with people in order to spend two hours with someone that will buy. As a sales trainer, I have seen firsthand how hundreds of different companies price their products and services. Some companies have effective pricing models, while others are losing many sales, thus hurting both sales motivation and their pocketbooks. Jan doesn’t ask prospects for a budget and she ultimately gives them one price. These two mistakes cost her thousands of dollars.
Get a budget from prospects. One of my biggest passions as a motivational sales trainer is to have my clients get budgets from prospects. When someone like Jan runs around putting together proposals ultimately only closing one in five prospects, she is wasting a huge amount of time. Rather, if after she asks some questions about the prospect’s challenges, she helps the prospect come up with a budget, Jan will have far more clarity about whether it is worth her time to create a proposal. And if she does decide to create a proposal, she is considerably more likely to close that sale, with a good understanding of what the prospect is willing to invest.
Stop giving one option. As a motivational sales speaker, I always have my clients give their prospects three options to buy. The means that one option is a little below their budget, one option is right at the budget and one option is well above their budget. Next time you go to the grocery store, you will see the exact same strategy at play. If you want a can of soup, there is the store brand, the Campbell’s brand and then the organic high-end brand. The data shows that most buy the Campbell’s, but many still buy the organic brand—which is very high margin. When Jan begins offering three options, she creates a basis for comparison for her prospects increasing the likelihood of a close, and she also increases her average sale size because some prospects go with the high-end option.
As a conference motivational speaker, I always stress the importance of a good pricing strategy. By asking for a budget and giving multiple options, you close more deals and close bigger deals.
How do you price your product? Please share below.