What Is The Right Price?

I recently bought a new car. I wanted an estate (or a wagon if you’re in the US) as I needed something I could transport Walter in for our adventures.

I could have spent £10k on a used Skoda Superb estate or I could have spent £100k on a new Audi RS4 estate.

So how did I know the right price to pay? I needed to go somewhere between useless and useless.

  1. Spend too little and the buyer gets “useless”. They’ve spent money but they get a product that doesn’t work.  This is going cheap on a software project and ending up with a tool that doesn’t do what it’s supposed to.
  2. Spend just enough and the software will work but it won’t be fun or intuitive.
  3. In the Goldilocks Zone the software will fulfill its original promise. It won’t be particularly fancy, but you’ll be able to leverage it to drive revenue, save costs or eliminate complexity. This is what we want to be selling to the buyer.
  4. Spend too much and you’ll get additional features or luxuries that don’t make a difference to the output.
  5. Go even further and you’re back to “useless”. This is when you must reduce functionality to justify the price. Like owning a watch covered in diamonds. You’ll never wear the stupid diamond watch because you’re scared of getting robbed and so it’s less useful than a cheaper one that you will wear every day made from stainless steel.

The goal of B2B selling is to drive revenue, reduce costs or eliminate complexity. As soon as you communicate more than that, the buyer see’s you as overpriced. If you don’t communicate one of these three things, they see you as cheap.

If you position yourself in the Goldilocks zone, it doesn’t matter what your competitors pricing is.

  • If the competitor is cheaper than you, then communicate to the buyer that what they’re getting isn’t going to work.
  • If the competition is more expensive, communicate to the buyer that they’re spending on things that don’t make a difference.

This forces the competition to try and justify their pricing against your pricing. This makes you look strong.

The more sensible your pricing looks, the more likely a risk averse, scared of change buyer (which makes up 99.9% of the marketplace) will buy from you. Sensible wins.

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