WHEN THE COST OF LOWERING YOUR PRICE IS TOO HIGH

In your market, does your company command the best prices for the range of services you provide, or is it possible someone else is getting a better price?

The most obvious hindrance to getting the price you want for the services you provide is that of a competitor offering to do the same project for less. However, there is another less obvious reason why you may struggle at times to get the price you want for your services…it might possibly be tied to the inability of an account manager to effectively articulate value.

Granted, there are some buyers who have reduced your services categorically to that of a commodity, and they are going to try to beat you down on price. They’ve learned they can do so with your competition, and they will try it with you. There are times when it is a prudent business decision to alter your pricing model…just not all the time. You provide a premium service, and you want to be able to charge a premium price.

Most markets are highly competitive, and it is not uncommon for recent arrivals to drop their prices in an effort to get traction. Also, when companies struggle financially, they will have a tendency to lower their prices believing they can make up the difference in volume, while sacrificing their margins.

Based on these market conditions, you could find yourself feeling pressure to lower your prices, also. The pressure can come from different sources, such as:

• Account Managers – Have you had an account manager tell you that the only way to get “this one” is to drop your price? Have you felt the pressure to do so because you didn’t want to give the competitor an in, or you didn’t want to see the morale of the account manager drop as a result of losing the project?
  
• Matching competitor’s prices – Have you felt pressure to lower your price for color, medium litigation, glasswork, blowbacks, EDD, etc…all because a competitor had made a conscious decision to undercut price in your market as a part of a calculated strategy?
  
• Fear of losing employees due to lack of business - Have you found yourself compromising your pricing model out of fear that you might not have enough work in the shop, causing the cost of labor to increase because paid employees would be unproductive; or, perhaps fear that you might lose operators because they aren’t getting enough hours?
  
• Believing it’s the only way to stay in the game – Have you found yourself believing that everyone is dropping their price, and it is the only way to stay in the game; that the desire to get a reasonable price is unrealistic because too many competitors in your market are aggressively pursuing increased market share through reduced pricing?
  

Not long ago, two providers were splitting a very large project, each getting their proportionate share of the work. One provider was charging .10 cents per impression, while the other company was charging .16 cents per impression; same kind of work, but very different philosophies about price.

As an owner or manager of a litigation support business, you know the significance of getting the right price for your services. It can literally mean the difference between being profitable, or unprofitable. You realize that getting .01 cent more per impression could conceivably double your pre tax profit on a specific project; that getting .01 cent less could mean that you will do the project for no profit at all, or even at a loss. In fact, in most litigation support businesses, a 10% increase in price can lead to a 50% increase in profit. Correspondingly, a 10% decrease in price will likely eliminate as much as 50% of the profitability on a particular project.

Interestingly, based on how most companies structure account managers’ compensation plans, i.e., commission based on revenue, the account manager makes money, even if their company makes little, or none at all on the project.

This you can know for sure…

• We are in an economy where the cost of goods and labor is getting higher, and it will continue to climb.
• The market will become more competitive, not less.
• Looking ahead, it will always be a challenge to get the price you want, need, and deserve for the
  work you do.
• An account manager who is going up against price competition must be confident, skilled, and able to articulate value.

Our sales training specifically addresses these certainties. Send us someone you need to make the case for selling a “premium service at a premium price”, and we’ll teach them how to get the best possible price, fine tune their sales skills, and equip them with the confidence and the ability to articulate value.

The current training schedule for this fall is: August 23-27, September 20-24, October 18-22, & November 15-19. Let us know soon if you plan to have one or more account managers attend one of these classes. If you have questions or would like to talk to references, just let us know by phone or email. You may also review the training outline and testimonials by clicking on either of these links.