32 The Financial Times Guide to Business Development
Might there be room for a total change in pricing and charging
models?
How can you get a differential advantage over your competitors
through pricing?
If you are doing something new, how do you know what price to
launch at?
The 20 tools and truths in this section of the book, many of which overlap,
will act as a powerful stimulus in your attempts to answer these questions.
1. Winning business is not the most important
thing – being protable is
Speaking on the subject of pricing some years ago, one of my delegates proudly
boasted to a room full of people how he converted 100 per cent of his ‘how much’
calls into business. I asked him to share his secret.
‘Oh it’s easy,’ he explained. ‘I simply ask the caller if they have telephoned anyone
else yet. If they say yes, I ask them to tell me the lowest price. Then I beat it. If they
haven’t rung anybody else I ask them to telephone my competitors and then come
back and give me the lowest price, so that I can go even lower. This way I almost
always get the job.’
Being rather curious, I asked him why, if he was so effective, he was on my course.
‘Because I’m not making any money,’ he confessed.
The moral of this story is simple. Too many businesses are totally driven by
having a pricing or charging strategy that leads to winning the business. I
have seen scores of businesses of all sizes pressured into undercutting their
competitors just to get the customer or client to say ‘yes’.
Over the years, I have spoken to a huge number of business people who
regard it as a business virtue to be cheaper than anyone else. This thinking
is totally awed and dangerous. Price cutting is not the best weapon of
choice when facing stiff competition. All that will happen is you will
attract disloyal customers and clients who only want cheap, and you risk
tarnishing your name and brand for ever.
Many business owners and directors will even boast about their revenue
gures: ‘Things are going great. We have hit the £1 million mark this year,
for the rst time.’ That’s ne providing they aren’t spending around that
gure to run the business. What counts is prot, so your ability to be able
to get the maximum return is key.
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