It could confuse your customers and cost you money!
Some companies deliberately develop complex pricing structures for a variety of reasons;
1. They do not understand their customers needs well enough to develop a tailored solution – therefore they develop a ‘flexible’ pricing arrangement to meet all eventualities.
2. They do not want customers to easily make direct comparisons between themselves and other suppliers – which can be understandable in highly competitive markets.
3. They seek to mislead customers by hiding elements of the price in terms and conditions – which we believe is totally unethical.
With the option 3 you may get someone to buy on a single occasion BUT are unlikely to purchase again – fine if you intend to scam the market and then open up again under a new name. Given, however, that we focus on building long term profitable businesses with real owner value, this article will focus on a simple implication of 1 and 2, albeit noting that there are others which will be covered in one of our white papers.
Whilst a complicated pricing matrix may seem very clever from your (the supplier) perspective, it can be highly confusing from a customer perspective. At worst they simply give up trying to understand your prices and select an alternate supplier at best they may make an incorrect decision and can lead them to make incorrect decisions – either way you don’t get the business.
We heard from one of our clients who nearly lost a contract because he bundled a number of services into his proposal which made him appear more expensive than a competitor. Just as this prospect was about to switch to the alternate supplier our client was able to see the competitor’s proposal and discovered that if the full complement of services were included the competitor’s offering it became, in reality, significantly more expensive.
With this insight our client was able to re-present his proposal in a more transparent way, allowing the prospect to fully understand what they were getting. Subsequently, the customer selected our client – an expensive near miss!
The moral(s) of this story: A. Ensure that you have a good understanding of the customers actual business issue and clearly detail why your proposal addresses it. B Don’t be complacent and blindly bundle service elements into your proposal. You might NOT wish to detail prices of individual components BUT do ensure that they are clearly listed and C. Query your prospect to ensure that competitive proposals are comparable such that they pricing can be viewed “….on an apples and apples..” basis.
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