Bob Diamond of FTI Group Expands on Pricing for Beginners
In a May 2 post, titled “Pricing for Beginners,” P+P blogger Harriet Gatter answered the following reader question: “I am new to the business. Do you have any advice as to how to price items?”
In his response below, Bob Diamond of FTI Group LLC, Redmond, Wash., offers his own take on the topic.
Much more goes into determining the best selling price to maximize profit and get the order. Here are a few good rules:
1. Always ask the customer how much they paid, or even what your competitors are offering—especially if the customer has previously bought the product or something like it. For the life of me, I do not know why salespeople shy away from asking. People buy from people, and then try to justify their purchase, so if you are the desired vendor, and you should be, then your prospect is normally quite willing to tell you. Be a little careful on this, though, because they do tend to hedge.
2. Always be sure that you are getting the best cost from your vendor. Just because the vendor has an "A" or "P" does not mean they have the lowest cost.
3. Always ask if you can have end column pricing. All they can say is “no.”
4. Always best to add additional features as options to get your base cost as low as possible and give your customer more choices. Some examples include:
- Options for better or lower quality paper
- Additional colors
- Additional features: How about adding varnish—either dull or gloss
- Always have a lower and better option
- Better material
- If you have a freight advantage, then include. If not, then don’t.
You need to be paid for your effort and how much time you bring to get your proposal prepared, as well as the chances of repeating and getting additional business. Many times, you are learning about a new product and this education will help you easily sell many other customers. In these cases, you can go in at a much lower margin because your customer should not pay for your education. I have even gone in at a 0 margin just for the opportunity to learn a complicated product or service that I could then bring to the marketplace
It amazes me that salespeople shy away from products and services they are not familiar with when this can be your greatest opportunity. Learn something new that you can take to the marketplace, and in the process, you even get an order. What a great way to build your repertoire and become the go-to person for many products and services! Knowledge is golden.
Finally, know the market price. If you don’t know the market price, you are at a tremendous disadvantage to either lose the order or leave a boatful of money on the table. Talk to your peers and your customers. This is part of the learning process.
Related story: Pricing for Beginners