| Corporate Poker |
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| Thursday, 01 May 2008 17:13 | |
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A regular client who has been a repeat customer for the past 3 years emailed my staff for a quotation so that she can plan her budget for next year. For the past 3 years, our products have been underpriced but we did it to expand our marketshare. For the past year, what with GST increased by 2% and oil prices setting new records on an almost daily basis, everyone knows that cost of operation has gone up. With our back against the wall, we had to increase our price to ensure our survival. The client has bought a product which we were selling at $6,000 but we gave the client a 10% discount and so the price was at $5,400 instead. This has been a price we sold to her company for the past 3 years. When she had emailed my staff for the quote, we took the opportunity to inform her of the new price of $8,000 but we gave her company a 20% discount and the price will be $6,400. Effectively, the price was increased by 18.5% or the amount of only $1000. Within the next minute, she called and screamed at my staff over the phone telling her our price is ridiculous and was surprised that our other clients have never expressed at the incredulity of our price. She demanded we rework out quote and email her again when done. My staff and I discussed about the quotation strategy. With the grapevine whispering another company venturing into our industry within the next 2 months, any client we lose may go to the competitor, I came out with the following assessment: 1. We can stick to our new price of $6,400. My gut feel is that the client was unlikely to sign-up. 2. My staff suggested raising the price by a small amount $200, so the new price would be $5,600. The client may or may not sign-up at the new price. It was a 50/50 chance. It can swing either way. From experience, people make emotional decision and seldom make business decisions. For $200, do I want to risk the potential of losing $5,400 instead? 3. We continue to offer the old price of $5,400 for the client. There will be no risk and the client would definitely sign-up. This is like poker. Do you bet everything you have and risk winning all or lose all? Do you want to try to raise the bet by a bit and see if the client will fold? Or, you simply let the client call your bluff and fold? Which strategy will you take? 1, 2 or 3? |