Recently I worked with a client who was concerned they were selling their services too cheaply. They knew they offered some great differentiation and they felt they did a good job of letting clients know. Staying busy wasn’t an issue, however, margins were. They operated on low single digit margins, which left little room for inefficiencies. They weren’t consciously selling on ‘price’ alone, but due to their model, it did appear that way. Two things were happening that caused them to go reach out to our firm, ActusMR. First off, they were devaluing their business. They were seen as ‘cheap’, which often translates as less reputable or valuable. Secondly, they were unable to invest in development, innovation or growth, since the margins were low. This meant high risk for future sustainability.

One of the first questions I asked them was related to pricing, “How did you arrive at your pricing?” It turns out that they had been pulled into pricing battles, as many of us in marketing research are. In actuality, they were dropping their prices with very little pressure, since they perceived the market dictated it. How many of you have seen competition dropping prices to win business? Is that putting pressure on your business? If you can’t differentiate your business offering, then price wars may be a game you have to play to win business from new prospects. However, if you are well positioned, and you can justify to a client why there’s great value, you may indeed sell at a premium.

Testing their pricing was a main area of focus for us. We also looked for additional services that they could sell as an add-on offering. As you’re reading this, you maybe scratching your head, since you don’t believe this can apply to our businesses. Have you tried? Have you spent the time to look at new ways to add revenue to jobs? Are your people asking for additional work, beyond what’s in the RFP? For example, if you offer data processing or coding, are you offering that on every job or only when the proposal requests it? What about data file formats? Or, how about going beyond an executive summary and creating a condensed, manager’s report that summarizes the full report, but gives management a tool they can quickly share and understand? Are you ‘productizing’ services that can sell at a premium? I know some companies are giving these things away as added-value, which can be a good way to stand out. However, be careful you aren’t also selling on low margins and not covering the cost of adding these services.

When testing prices, our client discovered they were, indeed, selling far too low for their offering. In many cases, they were able to raise their pricing as much as 25% and still win most of their proposals. Also, the additional revenue that came from add-on offerings made an impact to the bottom line. If your clients see a higher value in working with you, price becomes less of an issue. Yes, there is always someone who will beat you on price. However, if you can sell at a premium, letting some of those opportunities go may be the best way to achieve the kind of success you want and need. Sustainability isn’t always about the volume of project-work. Instead it’s often about the caliber of the projects. Are you busy, but undervalued? Does that really offer stability and opportunity for growth? Or, does it put you at more risk, since the lower margins also means higher risk to your future? Choose your approach carefully and don’t be afraid to test pricing. You may find it surprising what you can justify if you can stand out.

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