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When in doubt, they’re buying the most expensive

Entrepreneurs, upon going into business frequently make the mistake of lowering the cost of their product or service due to the perception that this is the only way to gain new business. They think that paying the “no profit dues” is the sole means to get in the door.

As a small business, pricing your product or service correctly is nothing short of critical.

When it comes to deciphering what you should charge for a given product or service, I’ve compiled three of the most crucial pricing tips to help your start-up sustain growth, successfully maintain the company’s existing client base, as well feel that you are being compensated adequately for your expertise:

If You Want A Nice Diamond, Go To Tiffany’s

When clients call into a potential vendor, they typically have no idea about the product or service that they are inquiring about. If they did, more likely than not they wouldn’t be outsourcing the job.

Therefore, many clients judge the quality of a product or a service based on its price. After all, the higher the price tag, the better it is likely to be.

Although logic would say that the aforementioned statement proves to be entirely false, it is what your potential clients are thinking when you answer that RFP with an astonishingly low price.

Another reason why you should shy away from being the price competitor at first is that the firms that are ultimately going to use you and that are going to become your clients are not going to want to deal with future price raises and are much less likely to be successfully sold on a parallel product or service that you’re offering.

Cheap Clients Don’t Like Price Increases

Don’t go into the game thinking that the price increase that is going to strategically be implemented in a few months won’t lose you clients.

Any client, especially the bargain hunter is going to be livid when you convey the news that they had the introductory offer that has now expired. Either be prepared to be known as the cheapest and form your business plan accordingly or begin in the price tier that you believe you have the best chance of competing in.

If you don’t want to be the cheapest, there are a few highly persuasive ways in which you can implement that will result both in you getting the fee that you deserve and will also result in the client feeling that he or she got a fair price.

Cushioning The Blow – Higher Price 1st

I like to refer to this tactic as cushioning the blow because upon giving a quote, you always want to give two different options or packages. The first or more expensive package can even be a dummy product.

Whether the package is real doesn’t matter because the buyer is going to often opt for the second mentioned or cheaper package your firm offers to its clients.

Essentially, what you are doing is easing the blow regarding your costs and mitigating the chances of the potential client leaving to further price shop by stating and describing the more costly package first.

This way, the regular package that you are seeking you sell them on seems very reasonable and logical to purchase.

Good Cop, Bad Cop

When being pressured to lower your prices, use the traditional “Good Cop, Bad Cop” negotiation tactic. It’s cliche for a reason: it works.

Just as you can soften the blow by quoting the higher price first, you can also soften your own image in your client’s eyes by relying on a third party to play the “bad cop” role in pricing.

If your “CFO” has set a certain price minimum, or if you have otherwise number-based “rules” to follow, it is harder for a client to argue the price.

Since numbers are what they are, and do not depend on your positive feelings for one client or another, setting up a third party bad cop (you could be the CFO of your start-up, but they don’t know that) takes the potential for taking it personally out of the equation.


This Entrepreneurship article was written by Ken Sundheim on 4/6/2011

Ken runs a sales and marketing staffing agency by the name of KAS Placement Sales Recruiter NYC Headhunters Marketing Staffing. He is 29 right now and started the business when he was 25 with no experience from a studio apartment on the Upper West Side after getting fired from a corporate job about 3 months after graduating from Fordham University. KAS staffs job seekers throughout the U.S. including Sales Recruiter Washington DC Headhunters Marketing