Last week I met with a small business owner, investor, and friend of mine to discuss specific investments he is involved in. He mentioned one of his investments, a software company, was wrestling with opportunities they are pursuing. This company my friend is invested in sells business software to F500 companies. They are a young company with a few clients to their name, but are having trouble maintaining price integrity. They have been heavily discounting their sale as a tactic to win new business.
A bit of background…they sell at the executive level, have a product offering suited only for large supply management clients, target mostly finance and manufacturing organizations, and have a sale price in excess of $500K.
My friend said they are having trouble with the price of their product. He reported they were discounting their solution heavily and rethinking their price and revenue model. In discussing their sales opportunities, it appeared they are presenting their product as most technology companies do — especially start-up companies — pushing their technology, features, and functionality. Their customers are responding with positive reception of their offering however, they are asking for large discounts to complete the sale.
From conversations with my friend and the executive team at the company, it became obvious they were positioning themselves as a cool commodity. Unwittingly, they are raising price in the hierarchy of their prospect’s decision making process.
A suggestion is they stop focusing on their offer and instead present their solution completely from the perspective of their prospective customer’s benefit from using their software. They should completely forget their technology, features, and functionality and instead entirely focus on their customer’s use and benefits of use from deploying their software. They need to establish benefits well before they arrive at the details of their offering. Eventually their software will be tested and their technology will be scrutinized however, they need this evaluation to be more of a validation of their ability to delivery (reason to believe), as opposed to being the reason to purchase.
Their features and functionality are important, but only to the extent they enable and prove a benefit worth buying.
The thought I left my friend and the management team is price is rarely the issue; recognized value and benefit to the customer is what they are most likely selling against.
You can maintain your asking price in a deal to the extent your customer values their benefit in excess of your price. By focusing on your customer’s benefits you are better able to maintain your price and reduce the review of the details of your offer to a validation of your ability to deliver the benefits they are buying.