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It’s a joy to post to this blog because I never have to look for material. Really, never. By just living every day I see many examples of good, and unfortunately bad, sales skills. Sadly I have to report about my observation of some poor sales skills. Here’s what happened. I was attempting to get some help with my home computer through a home computer service company. Okay, I’m somewhat technical but not enough to resolve the problem I was having. Engaging a computer service company is really service in its purest form; I am buying their know-how and brainpower. There are no products here.

I talked to a salesperson that was intelligent and seemed knowledgeable. As I talked to her I was gaining confidence that this was going to be the company I would contract with to fix my computer woes at home. Everything was going great until we started talking about price. We saved the pricing discussion until everything else had been covered. She quoted a price per hour that was at least 1/3 of what I was expecting. My first reaction was to be thrilled with the cost savings I was going to realize. After about three nanoseconds however, I realized that a legitimate company with qualified personnel could not, and would not, price at this level. I chose to move on to another company.

What is the dynamic here?

1. Service is not a commodity. You’re not selling corn, steel or shower heads when you sell service. Knowledge, information and intelligence can be sold for a premium. Service absolutely defies commoditization. Think about it, no two service companies provide exactly the same service; therefore pure price comparisons are impossible.

2. Any economist will tell you that customers appreciate discounts and will move their business to companies that provide the best prices, up to a point. When service prices are overly discounted buyers begin to think that the service being sold is inferior. This was my experience with the computer repair company.

3. Service businesses need to do the opposite of what commodity businesses do in pricing research. Whereas commodity businesses perform market research to insure their pricing is competitive (i.e., not much higher than the competition), service businesses should do research to ensure that their prices are high enough. Do you expect Harvard University to have the lowest tuition rates? As a student you would be confused if they did and would wonder if Harvard was all it was cracked up to be. Your customers and prospects feel the same way about your business.

Have you ever considered why people brag about how much they pay their lawyer per hour? Why do you think people brag about how much their doctor charges? They feel this indicates the quality of the service they are getting and how important they must be to get this level of service.

Service providers, think twice before you dive to the bottom of your pricing bag. Will you lose some business because of pricing if you don’t sometimes massively discount? Yes, but you will more than make up for this lost business (and probably not very desirable business either) with the additional revenue you accumulate through high value pricing.

Tags: pricing

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