At the wise suggestion of a friend at Google, one of the blogs I always make time to read is AVC, the self-descriptively-titled blog by Fred Wilson, a VC (hence the blog name) and principal of Union Square Ventures in NYC. Besides Fred’s daily insights on startups and entrepreneurship, one of the blog’s principal attractions is the vibrant discussion in the Comments section.
One such thread in which I found myself invested recently had to do with how a sales rep’s behaviors can scuttle a sale. We were discussing (tech) sales reps’ tendency to exclude Purchasing from the discussion because Purchasing’s mandate is to shave points off the purchase price during contract negotiations. This caused us to branch into the broader category of “price” as an issue in sales.
Here’s some of what I opined. It’s equally relevant to professional service sales.
IMO, it’s akin to the narrowness of view that results in "price" being the determining factor. If price becomes the decision factor, your solution is either 1) a commodity, i.e., so mature or undifferentiated as to command no pricing power at all, in which case you have a Marketing problem, e.g., a lack of Product/Market Fit, not a Sales problem; or 2) the seller is ignorantly permitting such a narrow examination of the effects and impact of the underlying business problem that drives demand that there are no other forms of Value under consideration to offset Price.
In 2), Purchasing is not causing your Sales problem; you already have a Sales problem, and a serious one. Purchasing’s reward system merely exacerbates it. If sellers’ compensation systems were modified to include cost-of-sales (COS) and cost-to-buy (CTB) as factors, you’d see behavior change quickly in favor of more collaborative decision-making and less grinding on the buyers.
CTB is often ignored by sellers but it’s important because, as it increases, it has a corrosive effect on the business relationship, which degrades and may eliminate any chance of client loyalty or partnership; under such conditions, you’re always vulnerable to clients being seduced in the future by competitors’ price inducements.
Your sellers' behaviors manufacture the virtual certainty of lower prices and a higher COS/CTB in the future. Any incremental increase in the sales price achieved by wearing down the buyers with old-school sales behaviors would surely be offset by a COS/CTB factor that’s a multiple of that margin.
(I’ll apologize for any jargon; this was posted in a forum full of salespeople.)
The important point for lawyers and others selling professional services is to make sure that you explore all of the various costs of inaction or indecision: Strategic, Operational, Economic and Emotional. Only then will price be kept in its proper perspective.