I got a phone call from my friend last week, and he was in a pricing panic. He had hoped to get six new clients for his summer program, and he had only gotten two. He was convinced he needed to lower his prices.
Here’s the deal. As entrepreneurs who set our own prices, when we hear “no” a bunch of times in a row we start to feel bad. Our self-worth gets all twisted up in our close rates, so we lower our prices, resulting in us not earning enough for the value we bring.
I understand the urge to lower rates (or start out too low and stay there) — it feels safe, it feels easier. But, for most of my clients, it doesn’t help them reach their revenue and impact goals.
Before lowering his price, I urged my friend to ask himself a couple questions. As soon as we got off the phone, I recorded a video for you so you could hear exactly what I told him:
Before lowering his prices, I asked my friend to reflect on two things:
1. The pool.
How many people had he talked with to reach his goal of six sales? Turns out he only spoke with eight potential clients. Doing the math, he would have had to achieve a 75% close rate to meet his goal. Now, I’m a good salesperson, but even I know better than to bank on closing three-quarters of the people I talk to.
In the end, he had a 25% close rate, which isn’t bad; especially during a global pandemic. Had he increased the number of ideal clients he had spoken with, he could have met his goal.
2. Are you selling the value?
Frankly, while a 25% close rate is good, there’s room for improvement. But before he lowers the price, I want to be sure he’s properly positioning the value of his offering.
Is he allowing time in his sales conversations to listen for the real pain points of his potential customer? Is he uncovering the urgency and motivation? And, most importantly, is he making clear connections between the customer’s needs and the value he brings?
As you can see, it’s likely that my friend doesn’t have a pricing problem. It’s far more likely that he has issues around marketing, prospecting and pitching.
So imagine if he lowered his rates without fixing these issues — next time around he’d likely get the same results but actually earn less!
Do you have more questions about pricing? If so, click here to join my upcoming free Sales Roundtable — a space for entrepreneurs and small business owners to get together, talk shop and come away with our best next sales steps!