A true story: The date was June 23, 7 days before quarter-end. Terri came to the sales meeting and said she could close another deal, this one for $75k, but she needed a 50% discount to make it happen. Discount granted, and $150k of software was sold for $75k.
A few months later, Michael, our fearless product manager was looking at pricing trends, and he wanted to understand why discounting had become so rampant. Before interviewing this buyer, Michael looked back at the customer record. Strangely, just 6 months before this end of year close-out sale, the buyer had purchased an initial deployment of $40k at full price. Then, just before Terri went to bat for the discount, the buyer had emailed Terri saying that they had some end of quarter budget and wanted to buy all the licenses they needed for the following fiscal year.
Somewhat suspicious of the situation, Michael requested an interview with the buyer. He started out at a high level, not hitting directly at price right away. Michael dug into the reasons for purchase, the business value of the software, and the impact of not purchasing, and the alternatives available if the discount had not been offered. By the end of the call, Michael had demonstrated such an understanding of the business issues that he came right out and asked: "What if we had said 'no' to your request for discount? The response would make the CFO cry:
"We would have eaten the apple one bite at a time. We needed that product, I've already told you that, but we were purchasing more licenses than we needed at the time. We probably would have taken half the licenses and looked for more money the following quarter."
You can't make this stuff up. While the rest of the Product Marketing team was working on a new pricing model, Michael had uncovered a huge hole in the underlying logic. No one had thought to understand the customer value. They had heard that the price was too high, so many times, from so many sales people, that they stopped questioning it.
This story is one of many that I am collecting and presenting on the topic of sales, selling, buying, and value. I have studied 250 B2B purchases in the past 2 years and am summarizing the themes. I will be presenting on this topic at Product Camp Silicon Valley on April 2. If you like this story and want to hear more, please vote for my talk:
Tweet this: New post @onpm – “Your price is (probably) not the problem” http://bit.ly/gvWrdE #prodmktg #marketing #sales #prodmgmt #svpcamp