Monday Price Point:​

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Let me tell you a story:

We just completed a mystery shopping exercise for a $40M ARR US B2B SaaS company.
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They were convinced their competitors were undercutting them on price.
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Most of their sales people said so.
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So we mystery shopped their 6 closest competitors using a simulated negotiation process to extract pricing at both SMB and Enterprise levels (more on that in another post).
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The result:
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The cheapest alternative would price my clients $40M customer portfolio at $58M.
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The most expensive would price it at $154M.
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So my client was priced a minimum 30% under the market - and a full 75% lower than the premium provider in the space.
When we went bag and double clicked in the Won/lost data in CRM we found something interesting:
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While price was indeed the biggest reason for 'Lost' sales… it was also the biggest reason for 'Won'!
In fact over 40% of all Won sales stated my clients rock-bottom prices as just too low to ignore.
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So why did the sales reps insist prices were too high?
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Because almost all customers talk about and negotiate price. A part of the buying process is to pretend the price is too high.
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So sales people hear too-high, too-high, too-high all day long.
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But only very rarely do they hear it is too low.
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I call this Asymmetric Pricing Information.
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But it gets worse.
Because even if sales people hear prices are low it doesn't feel as valid:
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When we win we want to take credit (I sold this! … not the low prices).
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When we loose we want to reject responsibility (stupid high prices!).
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Also: negative emotion tends to lodge in memory a lot better than positive emotions, which leads us to remember bad things more clearly, with more detail and with more conviction (see 'Baumeister - bad is stronger than good' or Kensinger & ​Schacter).
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So your sales reps have to handle both the asymmetry of information AND the asymmetry of the cognitive processing of that information.
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The problem of course is that this is costing my client somewhere between $18M and $110M a year.
And maybe you too?
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​How To Do it:​

If your sales people tell you that the customers are pressuring you on price (or even worse: if you are the senior sales leader and you feel this yourself), this is your remedy:
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Mystery shop competitors. Deeply.
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Look at your churn rate: if it is below 5% you have pricing power
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Now look at churn on a segment-by-segment basis (e.g. SMB vs. Enterprise): below 5%?
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Call the Lost cases and do an autopsy - especially the ones Sales put down as 'Price'. Was it really price? Did we fail to articulate value? Did the other vendor just follow up better and build more trust?
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Prohibit sales reps from putting down 'Price' as a lost reason. Make them own the loss.
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Cut discounts. A lot. If average is now 30%, then reduce to 15%. Make commissions highly dependent on the discount rate. See if reps find a way to talk value.
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As promised : a point about pricing every Monday.

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