How We Can Help
We were retained by a professional services organization to develop the pricing capabilities of their sales directors. This team had tremendous expertise and long tenure, but were finding increasing pressure from customers to lower their rates. Using benchmarking data, we found that in fact their rates were the lowest among peer companies. By turning their attention from price to value, and providing tools for sales, we helped turn the situation around. These steps permitted them to embark on a 3 year initiative to raise their rates. As a result, they continued to grow their business on target, and increased profitability by 17%.
The bottom line is that customers lie. Or let’s put it in a kinder way: It is not in customers’ best interests to be entirely honest with sales people. In fact, when it comes to procurement (AKA professional actors employed by companies to highlight price sensitivity) they are paid to get the lowest price possible. Ineffective price governance, inability to distinguish price buyers from value buyers, improper sales incentives and lack of reliable information all contribute to the perception of high price sensitivity. Of course there are competitive factors, but through working with dozens of companies over 20 years and completing price sensitivity analysis for many companies, we have found that more often than not companies themselves and their pricing governance are responsible for creating the price sensitivity they observe.