How do you feel when a car dealer asks you to purchase protection packages, warranties, extra rust proofing and undercoating protection?
What would you do if you had to purchase the extra protection in order to buy the car?
If you’re like me, you’d find the same car without having spent hundreds or thousands more on stuff that should’ve been included with the car in the first place.
Unfortunately, software purchases can feel the same way.
A prospect and customer spend months creating mutual value. Positive experiences could make a company do business with us; negative experiences could turn the company away indefinitely. Salespeople who build the strongest relationships with customers will have the highest probability of success.
We’ve determined the scope of the clients needs and offered valuable solutions to meet those needs. We’ve agreed on the detail of the implementation. It looks like we’re going to earn the sale. There’s just one thing left to discuss…pricing.
It’s amazing how software companies complicate pricing. There can be annual fees, perpetual fees, fees for number of users (substitute any industry specific name), training fees, support fees, custom development fees, professional services fees, integration fees, platform fees, authoring seat fees, hosting fees, FEES, FEES, FEES.
I’ve seen and created proposals that include a sentence or two, a few bullet points listing clients’ “needs,” paragraphs detailing companies’ products/services, followed by pages of possible combinations of pricing including discounts. These proposals can take hours for salespeople to create and hours for customers to comprehend. The unnecessary complication opens the door for customer objections and often times gives a customer and open door to negotiate down the proposal.
A few years ago, I’d successfully differentiated my company’s product from other vendors’ products in the space. The company easily visualized my software application meeting their needs. We’d agreed on the implementation and the approximate investment required. My next step was to create a proposal. I broke the proposal into a few categories including pricing based on the number or records tracked, training, professional services for implementation, and annual maintenance. As an incentive, I added discounts for purchasing an extra “bundle” of records, training multiple users and pre-paid maintenance for two years, three years, four years and five years. (I had created the discounted proposal in consideration of maximizing my compensation plan) I submitted the proposal and started thinking about that red Porsche.
To my surprise, the VP of Finance of a large software company contacted me with a proposal of his own. His proposal included the maximum “bundle” of records, training for everyone, and pre-paid maintenance for five years, priced at a fraction of the proposed price!
With a proposal listing out every option with pricing, the VP of Finance knew exactly where he could negotiate and at what price. Not only was the sale now mine to lose because the trust in our relationship was compromised, I found myself at best with a substantially discounted opportunity.
I did get the sale, but that red Porsche never made it off the showroom floor.
This story and other experiences delivering complicated proposals have made it clear to me that keeping pricing simple is the best strategy. Simple pricing will:
• Maintain a mutually strong and enduring relationship
• Save the customer’s time and your time
• Avoid confusion
• Avoid customers omitting products and services to save money that may diminish the solutions value and cause the customer to become unhappy.
Ideally, the broadest scope of the customer’s needs should be identified by the salesperson and valuable solutions to meet those needs that connect to a client’s vision, objectives and challenges. A single price should be determined that meets the broadest scope of solutions possible. If the customer does not have the budget, valuable elements of the solution set can be omitted to create a solution of mutual value; however, this strategy is risky because our customer may not be as successful without all the elements of the solution and could become unhappy and ultimately create a negative experience which could turn them away from us permanently.
Consider creating a proposal with one price that includes software fees, training and support. Customers will appreciate that we’ve included all of the necessary components of the well crafted solution. They will be happier customers if they receive the training and support they need to be successful using the software. Our relationship with will be consistent and positive allowing us to achieve sustainable success. We will also avoid the possibility that the customer will find a solution somewhere else.
