Question: Should I go high or low on my commercial proposals?
Answer: It is always easier to start high and then go down. Steve explains how to do it…
Hi Steve,
I really need a sounding board on commercial pricing. I paid a telemarketer to following up on a mail campaign we are running here in St. Louis. I had 7 appointments this week and six of them went very well. But now I have to return with proposals next week. I am putting together professional looking proposals and yet I haven’t a clue how to price them!
I understand giving the 3 option frequency/pricing you taught us in SFS. Actually I am giving 4 options (one time, quarterly, monthly, and an 8x yearly flex plan. I have asked several of these prospects about their “projected budgeting” and I can’t get any clue from anyone in terms of what they now pay.
I have several quotes to complete, from a banquet house (15,000 square feet), to several restaurants between 1000 and 5000 square feet.
Using the 1,000 square feet as an example, I get a rate of 145.00 – 160.00 depending on which Excel tool I use. (You folks gave us these Excel pricing sheets done by Chuck Violand in SFS.) So this 145.00 to 160.00 amount equates to roughly .16 cents a foot. (Assumptions: 1 hour job, 1 hour set up/tear down, 1 hour travel time. Labor rate $15.00 per hour.)
So Steve, if you were doing a proposal, is this 160.00 the one-time charge or your target discounted charge for a regular monthly or quarterly contract maintenance cleaning?
In my mind, I can rationalize anywhere between 250.00 – 150.00. But I am just not sure what the market bears in this area. I’d hate to lose all 7 proposals due to overpricing, but I don’t want to leave money on the table either. Your thoughts?
Stumped in St. Louis
Dear Stumped,
Good to hear from you, Stumped! Your basic concepts are sound and you are working things through logically instead of doing the good, old SWAG method. Congratulations! However, focus on this section you wrote:
In my mind, I can rationalize anywhere between 250.00 – 150.00. But I am just not sure what the market bears in this area. I’d hate to lose all 7 proposals due to overpricing, but I don’t want to leave money on the table either. Your thoughts?
And yes, THIS is the conundrum we all face! But you have two secret weapons on your side:
1. The Law of Large Numbers– With your “full-court commercial press”, Stumped, you should be getting lots of RTB’s. (Request to Bid) So even if you lose half of your proposals due to being “over the market” the other half will more than compensate you with your higher pricing margins! (Remember the goal should be to get regular, PROFITABLE contract accounts.)
2. Start high and then “fall back” if needed- So after presenting your (higher priced) recommendations simply ask, “Which one of these options best meets your needs?” Then shut up. Now if your contact hems and haw or say, “Let me get back to you…” you hit em with my one-two fall back punch…
First say: “I understand”. Then ask: “Does the way I have my recommendations written meet your projected budget?” Once they reply, “It is a little high…” you can start shaving off areas with a lower priority while cutting the price slightly.
This way you get the best of both worlds, Stumped. A higher initial proposed price that many prospects will accept without question but also let you “retreat with dignity” and still profitably salvage the account IF you hit resistance!
NOTE: Are you tracking your production figures with my Production/Pricing Analysis Log? If not, please do so now.
Let me know how this approach works and best wishes!
Steve