This happens when your sales process gets out of sync with the customer’s buying process. Early in B2B transactions, the prospect asks, “How much does your solution cost?” Reps eagerly mistake this as a sign that the customer is getting ready to buy. Jumping ahead of the buyer, the sales rep begins to burn energy to deliver a complete and competitive price. How does this hurt your profits?
- Wasted Resources: The first way is that scarce resources are consumed to develop pricing. In larger B2B enterprises, sales managers and controllers are engaged for discount approvals, presales engineers burn time fine-tuning solution configurations, and pricing experts generate spreadsheets and pricing models. Although they are already on the payroll, these resources cost money. Remember, time invested in an ‘early stage’ deal is time that could be spent winning a ‘late stage’ deal.
- Premature Discounting: The second, more obvious profit drain is the price reduction even before the buyer protested that it was too high.
The error here is easy to identify. Although the prospect is requesting basic cost information, the selling team reacts by delivering detailed, finalized pricing. Instead of responding to the prospect’s ‘early stage’ ballpark pricing request, the team delivers ‘late stage’ finalized pricing. Being out of sync here wastes resources and reduces profits.
The Question: “What Stage is the Buyer in?”
It is critical to understand that the buyer is in an ‘early stage’ of their process with a need to start making financial decisions about how big the solution might be, and also to begin the internal budget process. This is also when buyers start to see where vendors line up from least expensive to most expensive. But it is NOT the time when the buyer needs final pricing to negotiate a deal. Buyers will accept it, but they do not need it.
It is a waste of your time and resources to provide your prospect with more information than they need. Sellers who have made significant investments in sophisticated pricing and configuration engines have a tendency to want to put them into action. As the saying goes, “To the craftsman who only has a hammer, the world looks like a nail.” But there is another tool that is elegantly simple.
The Answer: The “Solution Options Proposal”
The Solution Option Proposal has 3 essential elements:
- The proposal gives the potential buyer 2 or 3 general choices that range from “Economy” to “Prime” to “Deluxe.” Use your imagination to name the options as you see here. You can think of this as an automobile showroom, where you see a variety of models to choose from. The simplest one just gets the job done, the middle one completely solves the business problem(s), and the high end solution anticipates future needs or provides nice-to-have extras.
- The price for each option is a RANGE. The Prospect should not need exact pricing until later. Do not waste effort providing it. Give a low number and a high number – state why it varies – “depending upon final configuration” may be sufficient, or you may want to be more specific.
- List accessories or options separately. Give the Prospect enough information to add some capabilities and get a rough estimate of the cost. Don’t be specific – use ranges of prices here too.
The Solution Options Proposal provides all the ‘early stage’ information that the buyer needs to begin evaluating options and moving further along the decision journey. In fact, the buyer has additional information about options and accessories to begin to understand which knobs to turn to drive the cost up or reduce it. This is much more empowering than a single final price.
This level of information matches the buyer’s needs at this early stage. Neil Rackham suggests a variation on this technique that is called “bracket pricing.” When the buyer moves to the later stages of the process and requests finalized pricing, your sales reps are then ready to engage your pricing and negotiating resources. Buyers sometimes ask for final pricing early because they think it improves their negotiating position, but the Solution Options Proposal actually helps them to understand where the true cost levers lie.
How to Implement:
To provide your sales reps with ranges of choices, prices and options you need to develop some generic offerings that they can be quickly customized to respond to early stage pricing requests. A Solution Options Proposal should take little time to prepare and modify. Download a sample Proposal Option Template by clicking here.
This strategy may not work for every deal. I’d like to hear your opinions and experiences. Use the comment box below to let me know your thoughts.
This strategy is one way to match your sales process to your customers’ buying process; reducing friction and converting opportunities into orders.