Dive Deep Into Win-Loss Analysis on September 14-16

Pricing Strategy: What Does “Too Expensive” Really Mean?

Cameron Turnbow

Price is a perennial topic in win-loss interviews conducted by Clozd. Many buyers say that a client’s solution was just too expensive, so they opted for a less expensive product instead. In these situations, Clozd consultants dig deeper to understand what “too expensive” actually means. We have pinpointed five deeper customer concerns which may be masked by the generic statement, “it’s just too expensive.”

First, No Clear and Justifiable Value Prop

Often “too expensive” means that the customer is unable to justify the value of the product. Expensive is a relative term in any business decision. It comes down to the buyer’s ability to justify an ROI or make a business case to the larger organization.

After performing thousands of win-loss interviews, we have found there is frequently a disconnect between the sales messaging and what the customer is hearing, especially in terms of a product’s value proposition. In every evaluation, customers place value on solving their current problem or need. That value is compared to the offered price point.

Effective sales messaging shows how a product meets those needs and delivers value. Customers are then empowered to go back to their leaders and clearly articulate why a product is a must-have.

Second, the License Model Doesn’t Fit Their Business

A company’s licensing model is regularly another roadblock during pricing conversations. Customers may disguise this as “too expensive,” but in reality, the pricing model is just not conducive to the way they operate or their expected growth.

Example: a SaaS company changed its pricing structure from a concurrent licensing model to a per-seat model. Previously, licenses were determined based on the number of users that were able to simultaneously access their product. This helped ensure that each license was used at 100% capacity. After changing to a per-seat model, each license required a named user. Customers became frustrated because they had to purchase individual licenses for users that rarely used the product.

Through win-loss interviews, this client learned that the license model was a point of frustration for customers. Buyers actually preferred a tiered licensing model because it provided more options to fit each user type. The actual license fee was not the issue, but rather the licensing model.

Third, the Pricing Model Doesn’t Scale Well

Sometimes a company’s pricing model just doesn’t fit with a customer’s expected growth. 

Example: an interviewed customer was totally fine with the vendor’s current price. However, at the rate the customer’s company was growing, the vendor’s pricing model quickly became cost-prohibitive. Without reassurance or clarity on how the price would change over time, the buyer simply concluded that the product was “too expensive.” What they were really saying was, “there is a risk that it will become too expensive in the future.” 

The way a pricing model is explained and presented signals to the buyer how much risk they are taking on by signing up. Companies that design and communicate a relevant pricing model for their market win more deals and grow with their clients. Conversely, we see that companies who fumble on this principle struggle to retain or gain new customers. 

Fourth, the Package Doesn’t Match Their Needs

People do not like buying things that they won’t use. Sometimes companies, in an effort to make their product more compelling, add in a lot of features. But some buyers don’t need or care about those features. In fact, buyers may feel like you are selling them more than what they need. This leaves the impression that they are spending more than what they should. Packaging your product and/or service correctly will ensure you avoid this potential pitfall.

Side note: always offer a bare-bones option.

Fifth, the Price Point Doesn’t Line Up with Competitors

One of the key insights derived from win-loss interviews is a better understanding of competitor pricing. This awareness is key when sending over an initial quote to a customer. If the initial quote is not competitive, customers will often eliminate that vendor without trying to negotiate the price. While at times customers will freely volunteer the price of competing vendors, sales reps must be prepared to deliver a price that is in line with the competition. If companies are not able to do this, customers will see them as generally “too expensive.”

By understanding what “too expensive” really means, sales reps can make adjustments to their messaging and turn price into a tool to convince each customer of their product’s value. Price can be a strength, not a deterrent, when a product clearly adds value and solves a customer’s problem. When the pricing model fits business operations, projected growth, and market expectations, a company’s price can drive commitment and secure long-term customers. Let us help you perfect your pricing model and learn what “too expensive” really means.

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