Old Habits Die Hard

Is price always king?

In our recent pulse survey, Winning Deals and Improving Margins, conducted among professional services providers and their IT clients, the answer was clearly that other things matter more, especially when it comes to deciding whether to retain or replace an incumbent. Yet providers seem to be stuck in old habits of spending most of their time, emphasis and focus on price — putting both new business and their incumbency at risk.

What are the strategic implications of this finding, and how can professional services providers adapt?

To be clear, we found that price matters — especially with new clients, and especially when differences are significant. When responding to an RFP for a new client prospect, don’t imagine that your pricing will be ignored, or that it won’t affect the decision. Of course, it will. But we found that other elements can and do often outweigh pricing differences.

How a prospective provider demonstrates delivery quality, innovative solutions, and nimbleness in addressing changes of direction and scope all weighed into the IT clients’ selection process. Yet, provider negotiators seem stuck in the traditional “price is everything” paradigm, overly focusing on price versus demonstrating “value.”

The same was true for provider incumbents, where price was even less of a factor than with less mature clients. The way an incumbent provider delivered its services and how they developed a trusted relationship with the client had more impact on the renewal decision than price.

In the report, we identified several implications for providers, and ways they can kick the “price is king” habit:

• The first, and most obvious, implication is that professional services leaders must guide their sales teams to avoid focusing exclusively on price — especially for more mature clients, where the emphasis may be predominantly on delivery quality. And for stakeholders within the account for whom price still appears to be king, encourage sales teams to help the client collectively expand their thinking about what’s truly important to them and compete along those elements.
• To break through the “price is always king” barrier in your sales organization, provide targeted coaching and applied training. Changing mindset and behaviors built up over decades requires challenging of assumptions in a well-structured way, and consistent reinforcement of new, learnable skillsets.
• Enhance deal governance. Expecting pursuit teams to focus beyond price is unrealistic (even with business transformation deals) when most traditional sales metrics, incentives, and management approaches revolve around the nominal value of the deal.

Old habits die hard. Sometimes they are so ingrained within a sales team that a dedicated resource is necessary — someone who can objectively assess current mindsets and recommend actionable ways to change them, and have the dedicated time and focus to maintain momentum.

More wins, better margins, and longer relationships will be the reward.

About the Report
“Winning Deals and Improving Margins” — an IT market report based on a cross-industry study of deals greater than $5M annual contract value with 163 executive leaders, directors, and managers at firms with greater than $250M annual revenue (125 Clients and 38 Providers).

To download your complimentary copy of the full survey report, click here.

To learn more about the Vantage Partners Professional Services practice, click here.

To learn more about the Vantage Partners Technology practice, click here.