7 Deadly Sins of Pricing: Presentation Sins
The 7 deadly sins of pricing that hurt your company’s growth and erode margins can be viewed through three lenses: Differentiation Sins; Valuation Sins; and Presentation Sins. Last time, we discussed the Valuation Sins. In the third of three parts, we discuss the Presentation Sins. Presentation Sins are committed in how you present your pricing offers to customers.
We’ve already covered NOT presenting only one pricing option as part of the Differentiation Sins. Now, here are the sixth and seventh deadly sins of pricing (he presentation sins) and an alternative presentation to consider.
“Budget” as the Middle Option
As part of qualifying prospects, we learn to ask a prospect what their budget is. In working with several companies, we have found that many companies offer a pricing option in line with the prospect’s budgets. This option is typically provided as the middle option. There’s one higher-priced option and one lower-priced option.
In most of those cases, the customers select the middle option. However, occasionally, prospects select the lowest priced option, meaning they get an option even lower than their admitted budget. Of course, we are assuming the admitted budget amount was accurate and not merely a negotiation ploy. Even less likely is the scenario where a prospect selects the highest-priced option.
The other option used by companies we have worked with is presenting three options, starting with the price point closest to the budget. The first option shown is the lowest price option. Each subsequent option serves as an upsell. In this scenario, the first two options get the most selections (the low and the mid-priced options). Rarely, does the highest option get picked.
Our advice to clients based on our results is to offer the highest of the three options first. The first price seen is a natural anchor—everything else is judged against the first item viewed. Also, prospects are more reluctant to downgrade to a lower option than they are to be upsold. It works and companies with this approach have higher contract values. We would encourage you to try this approach and email us at email@example.com with your results.
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