What do you do when your client tells you that your proposal is twice the price of your nearest competitor? My client just called me and told me that my quote was 2X more expensive than the highest bid received from other companies. What do I do next?
First, don’t panic.
At least your client is talking to you. They could have just as easily thrown your proposal in the trash and never contacted you.
This could just be a ploy by your client to get you to lower your price or it could be a legitimate question about why your price is so high. Either way, your next move is to contact the client as soon as possible.
Your client is theoretically trying to make the best decision possible for their business and that is how you should approach this problem as well. Be a resource to truly help them figure out the best course of action.
If your price is 2X your nearest competitor, either:
A. You misunderstood the requirements.
B. Everyone misunderstood the requirements except you.
C. You are offering something of additional value that your competitors are not offering.
D. You are priced too high for your market.
If you have a great relationship with your client, I would ask to meet with them and help them compare the competitors proposal to your own to make sure it is a fair comparison.
I would do the following:
1. Review the specific issues that the client said was important to have addressed in the proposal. If you can get the client to rank the issues in order of importance, that would be even better. (See point #8.)
Doing this exercise should tell you if you and your client are in agreement on what all of their issues are that should be addressed in the proposal and help you identify if the problem with your client is A, B or C above.
2. If you have a unique service or offering that would be of value to your client that your competitor is not capable of matching, you can try to get that service included on the “important issues to address” list, though you should have done this the first time around. I would just say make sure you keep your clients best interests in mind when making this decision.
3. Once you are certain you and your client are in agreement on what issues need to be addressed in the proposal, ask to review the quotes.
4. Compare your quote and the competitors quote to the ranked list of issues and point out the specific spots where the proposals differ from each other or the list.
5. If you have addressed issues in your proposal not on the list or that the client does not want it is up to you to offer to remove the item or convince the client that they need it and to pay the additional cost associated with it.
6. If your proposal has addressed everything on the list, but your competitors proposal has not, ask the client if the item the competitor left off is important. If it is important, the competitor needs to add it, if it is not truly important, take that item off your proposal and adjust the price accordingly.
7. If your competitor has offered a very low price to get the business that you do not think they can honor, explain your concern to the customer and offer a fixed price or a guarantee to meet the price you quoted to eliminate the advantage such a tactic might give your competitor.
8. If the client did rank their issues in order of importance and price seems to be their ultimate concern, you might offer to remove the lowest ranking issues from the proposal and reduce your price accordingly.
9. OPTION: Offer up a discount/rebate or refund if you are wrong. You could offer to charge a lower rate if your actual costs are lower than what you are predicting in your proposal.