How Do I Price this Proposal?

06/23/2011

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How Do I Price this Proposal?

Sometimes the biggest challenge for a Sales Representative is trying to figure out what to quote a customer that asks for pricing information or a proposal. Often times a Sales Professional creates a customized product demonstration that’s difficult to price without knowing more information as far as requirements from the customers perspective. Another dilemma for a salesperson is pricing the solution based on the company’s pricing guidelines. Many sales professionals have conveyed to me the subjectivity of pricing their product. How do they know that is the most optimal quote to render success of a closed opportunity?

The answer to that problem would require expertise from pricing consultants that can provide an analysis of the company’s pricing structure based on many variables such as the relationship of quality and price, competitor’s price, Total Cost of Ownership, and Gross Profit Margin. An alternative solution to this age old problem is having software that can analyze all of those variables and output a sophisticated algorithm for your pricing strategy. 

Here are a few tips to keep in mind when evaluating a software vendor or consultant:

Understand your Customer: Whether you use an internal resource or hire a marketing firm company must know why their existing customers appreciate their products. Investigating your buyer’s motivation will help drive your messaging on why your product is the most valuable.

Recognize your Costs: Every business whether it’s the mom and pop store or enterprise size corporation must take into account all the costs associated with their product. It could be the cost of the materials to create the product, the cost of labor, overhead expenditures, or even marketing expenses. All of these factors are important when you determine your pricing strategy.

What about my Competitors? If you don’t know what your competitors are charging how will you know if you won the bid? One way to really know your competitors price is to ask your existing customers when they were shopping for vendors what quotes did they receive from other vendors before they chose your company. An alternative would be to have a dedicated person or department to research that information on a continuous basis to stay ahead of the game. Competitor pricing information that is dated months ago will not work. Think about how often your own prices have changed on a monthly or quarterly basis.

Keep up with Market Trends: Every business probably is aware of their own market trends but are they well-informed about their customer’s industry? It takes dedication to really understand an industry outside of your own. The more well informed you are on their developments the more likely you will be seen as a credible expert.

In general sales and marketing is more of an art than an exact science but the way you price your product can encompass mathematical equations based on analysis of your business, customers, product, and competitors. 

Software should only be necessary when people are having difficulty in managing this process on their own. Technology should be a guide to the path of success, not a crutch that can hinder a company’s swiftness. 

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