Low Pricing Can Kill Your Business!
It was one of those days you don’t ever forget. Like JFK’s assassination, the Space Shuttle Challenger explosion, and O.J.’s acquittal. I remember exactly where I was the day I lost a sale because my fee was too low!
It was February 12, 1990 which happened to be my Dad’s birthday. I was at Corning Medical inMedfield,Massachusettsmeeting with three people in their international marketing department. They were all “leaning in” as I showed them samples of my work publicizing products inWestern Europeand were asking relevant questions about our approach and the specific services we provide. Clearly interested and impressed, they then asked, “How much does this cost?” This, of course, was the ideal scenario: the quality of our work persuaded them to ask me for the sale. I didn’t have to ask them.
When I told them my fee, they were silenced. My answer turned the tide. Because of their experience with international marketing, they couldn’t believe I could achieve the results I showed them for my very reasonable fee. Frankly, I didn’t fully realize it at the time, but the issue became my credibility: they couldn’t imagine how I could achieve results for them for the fee quoted, regardless of the evidence presented. They were suspicious of my Porsche performance at Ford prices!
It took a few months to matriculate, but by May of 1990 I decided to “reposition” my business and increase all of our fees dramatically. TheCorningpeople were right: our fee for publicizing products inWestern Europewas too low! They taught me a lesson that would make me a lot of money for years to come. In June of that year, I changed our company name from Sales Development Associates to Venmark International, developed a rich new logo, and proceeded to generate more business then we could handle during the next several weeks that summer. The new “brand” more accurately reflected our “position” as a high-value service provider.
So as not to offend my longstanding clients, I gave them each a substantial discount from the new fees. Another lesson surfaced: everybody wants to be treated special and get a good deal. And if they perceive their deal to be better than the deal others get; that’s even better! Thanks to Corning Medical, I successfully repositioned my company with a 30% across the board increase in fees and was able to increase fees to existing clients by 10% and none of them balked. This was further confirmation the repositioning was the right thing to do.
The bottom line was: the quality of our work and the results we achieved for clients easily justified the additional fees. Our sales message and new fees were totally congruous and Venmark International has become recognized by clients as well as many media outlets as one of the best product publicity firms in the country; not the cheapest. So, review your lost sales; especially the ones that didn’t feel right to you. Make sure that your pricing isn’t too low compared to the benefits provided by your product or service. And, remember, low pricing can kill your business!
Steven M. Stroum is the founder and president of Venmark International, an industrial and technical product publicity firm located in Wellesley, Massachusetts. venmarkint.wpengine.com