5 common mistakes you’re probably making with your pricing
Your pricing and how you present your offer can make or break a deal. Your price is not just a number; many psychological factors play into its perception and what it communicates about your brand. Here's how to avoid common price mistakes.
Your pricing and how you present your offer can make or break a deal. It’s important to understand that your price is not just a number; many psychological factors play into its perception and what it communicates about your brand. And if a buyer perceives your offer negatively, it becomes your silent deal killer— the buyer quietly moves on, shifting their conversations to other solution providers.
So what are the most common mistakes made with your price model and pricing page design?
We asked Patrick Campbell, pricing expert and CEO of ProfitWell, and Mark Tanner, Co-founder and COO of Qwilr, to debate and discuss best practices for presenting prices. The conversation was engaging and informative— listen in to our two sessions:
5 Common pricing mistakes
Ask the pricing expert
Price mistake #1: Competing on price
If you’re in a highly competitive market, it’s challenging not to compete on price. Additionally, if reps aren’t confident in your pricing model or the buyer is pushing for a lower rate, it’s tempting to move to price discounting prematurely.
In our webinar audience poll, 84% of sellers said they feel pressured to compete on price.
More than half of our audience said they regularly give price discounts. Of those giving discounts, 53% offer 1-15% off, while 42% give up to 30% off.
Price discounting is common and often expected by buyers. Patrick Campbell cited a research study done on the selling practices of 8,000 SaaS sales reps, and 75% of respondents said discounting was essential to their job. But the concept of price discounting is not the problem— it’s the amount you’re offering. Research shows pricing discounts over 20% double your churn rate, as the customer is buying to get a low price today vs. seeing the long-term value of your solution.
“If your reps feel they have to offer pricing discounts higher than 20%, it’s a good indicator that your price may be off, and it’s time to review your rates. Cut your discounting by half or a third and see what happens,” advised Patrick. Similarly, Mark Tanner shared his experience that reps can become overly dependent on discounting. “Limiting pricing discounts forces the sales rep to focus on the product value vs. cost. If you must discount, avoid discounting your core product and give a price break on the additional services, such as onboarding fees.” (Subtle buyer tip: if you’re considering Qwilr, be sure to ask your rep for a good deal on an onboarding package. 😉)
The takeaway: analyze your team’s average pricing discounts, and if they’re above 20%, it’s time to look at how your solution is priced and how your reps are selling it.
Price mistake #2: One size fits all
Not all leads are created equally, and understanding your buyer’s persona is essential to optimizing your pricing presentation. For example, some may be price-sensitive, while others may be less concerned with the bottom line if it includes the features they want.
To improve your pricing effectiveness, consider mapping out your different buyer personas: what you know about them demographically, plus what’s important to them and the value they seek from your solution. Your objective is to align your price to the value they want— the bottom line price is less important if your offer addresses their objectives and what they perceive as valuable.
One price rarely fits all, and Patrick advises never to have just one price. Instead, create one tier for each primary persona you’re selling to based on what they’re most likely to buy and present other higher/lower tiers to address variations in their needs.
“Pricing presentations are balanced and offer options,” advised Patrick. “As an example, some buyers may want an upgraded analytics package while others want priority support or extra hours. Let them choose the additional services they want and provide options.”
Buyers confirmed Patrick’s advice in Qwilr’s 2021 Buyer Experience Study, with 66% of buyers preferring pricing and options they can choose independently. “As humans, we want a feeling of control,” said Mark, “and providing a structured process around your pricing allows the buyer to feel good about the package and add-ons they choose.”
One word of caution: never offer a price point or package that doesn’t address the needs of your buyer. And don’t overthink your pricing either— have value in mind and give buyers choices— you might be surprised when they select the highest-priced option.
Read more on using tiered or “good better best” pricing to your advantage.
Price mistake #3: Overcomplicating your pricing presentation
Simpler is better when presenting your price; don’t make the buyer interpret your offer. Keep in mind you’re selling to imperfect humans who are irrational beings.
Setting your pricing based on rational points is common, but pricing decisions are emotional. For example, big-box retailer JC Penney conducted a pricing study years ago. They offered two items at 50% off in this test, or 2 for 1— buy one get one free. Which offer performed better? The 2 for 1 won by a large margin. The reason is humans understand whole numbers much easier than percentages. Though the two offers resulted in the same bottom line price, the two items at 50% off required more thinking, and most people don’t like math.
Other basic guidelines for your pricing presentation:
- Show what your buyer is getting clearly and easily understood.
- Don’t make your offer hard to read— simplify whenever possible.
- Don’t ask your buyer to do extra work, such as asking them to refer to other tables for product details.
Buyers often jump straight to your pricing page. Ideal pricing presentations give buyers the information they need to understand what they’re buying, how much it costs, and the value of your offer is reinforced.
For more on buyer psychology and effective pricing presentations, get our free Pricing Playbook.
Price mistake #4: Not taking advantage of upselling opportunities
Upselling or “upserving” is a win-win for both the buyer and the seller. Retailers especially are known for leveraging upselling simply by asking the buyer if they would like to purchase related products. The result?
Upselling increases retail sales by 9%– “that’s just ‘found’ money,” said Mark. “Many B2B sellers are afraid to ask the buyer to purchase more, perhaps to keep the deal simple and close it,” said Patrick. “Add-ons are one of the most underutilized aspects of all pricing. You’ve already got someone committed; now get them to commit a little more.”
Note too, that upsells can come at the point of sale or after the initial sale.
Patrick shared that of the fastest-growing SaaS companies, 20% or more of their revenue comes from their existing customer base. “Look at the people who already like you and see if they would like more services from you,” Patrick advised.
Upselling is good for both the customer and adds more value to their contract with you, plus it’s “bonus revenue” for the sales organization.
Price mistake #5: Set it and forget it
Your product changes and evolves, and your price should, too. How often should you review your pricing?
Price is one of the main growth levers of an organization, yet many companies aren’t taking advantage of its opportunities. “The focus tends to be on acquiring new customers, but if you can acquire new customers at a higher price point, that’s a win,” said Patrick.
And if you were one of the many companies who were hesitant to raise prices during the pandemic, now might be the optimal time to review your price. Remember, customers care less about your cost and more about your value.
Pricing wrap up
Though it may not be what sellers want, buyers often jump to the bottom line— what’s the cost? If you’re not thinking about your price and pricing presentation, you’re falling short of optimizing your sales machine.
The takeaways from our session: scrutinize your pricing discount practices, optimize your packages by buyer persona, simplify your pricing presentation, look for opportunities to upsell, and remember, your price is never static. So don’t be afraid to change your price, always keeping value in mind.
Want to go deeper on how to present your price effectively? We recommend these additional resources:
- Pricing Playbook
- Strategies for Creating an Irresistible Offer Using Tiered Pricing
- SaaS & Subscription Pricing e-Book
Qwilr also offers a pricing presentation suite to help you pitch your price right. See how you can add clarity and visual appeal to your offer— request a demo now.
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