Low Pricing Can Kill Your Business!

It was one of those days you don’t ever forget.  Like JFK’s assassination, the Space Shuttle Challenger explosion, and O.J.’s acquittal.  I remember exactly where I was the day I lost a sale because my fee was too low!Pricing strategy

It was February 12, 1990 which happened to be my Dad’s birthday.  I was at Corning Medical in Medfield, Massachusetts meeting with three people in their international marketing department.  They were all “leaning in” as I showed them samples of my work publicizing products in Western Europe and were asking relevant questions about our approach and the specific services we provide.   Clearly interested and impressed, they then asked, “How much does this cost?”  This, of course, was the ideal scenario: the quality of our work persuaded them to ask me for the sale.  I didn’t have to ask them.

When I told them my fee, they were silenced.  My answer turned the tide.  Because of their experience with international marketing, they couldn’t believe I could achieve the results I showed them for my very reasonable fee.  Frankly, I didn’t fully realize it at the time, but the issue became my credibility: they couldn’t imagine how I could achieve results for them for the fee quoted, regardless of the evidence presented.  They were suspicious of my Porsche performance at Ford prices!

It took a few months to matriculate, but by May of 1990 I decided to “reposition” my business and increase all of our fees dramatically.  The Corning people were right: our fee for publicizing products in Western Europe was too low!  They taught me a lesson that would make me a lot of money for years to come.  In June of that year, I changed our company name from Sales Development Associates to Venmark International, developed a rich new logo, and proceeded to generate more business then we could handle during the next several weeks that summer.  The new “brand” more accurately reflected our “position” as a high-value service provider.

So as not to offend my longstanding clients, I gave them each a substantial discount from the new fees.  Another lesson surfaced: everybody wants to be treated special and get a good deal.   And if they perceive their deal to be better than the deal others get; that’s even better!   Thanks to Corning Medical, I successfully repositioned my company with a 30% across the board increase in fees and was able to increase fees to existing clients by 10% and none of them balked.  This was further confirmation the repositioning was the right thing to do.

The bottom line was: the quality of our work and the results we achieved for clients easily justified the additional fees.  Our sales message and new fees were totally congruous and Venmark International has become recognized by clients as well as many media outlets as one of the best product publicity firms in the country; not the cheapest.   So, review your lost sales; especially the ones that didn’t feel right to you.   Make sure that your pricing isn’t too low compared to the benefits provided by your product or service.   And, remember, low pricing can kill your business!

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Biography & background for this story: 

Steven M. Stroum grew up in a working class family in Auburndale, a village of Newton, MA. His father was in the display business and mother a school teacher.  After a brief stint at Northeastern University in 1966, he enlisted in the U.S. Air Force and served in Thailand during the Viet Nam War. In March 1968 he received a medical discharge, became a Disabled Veteran, and in September he returned to Northeastern where he received a BS in Business Administration with honors in 1973.

After a brief tenure working at the Boston Brokerage Office of Paul Revere Insurance Company, where Steve was the first co-op student from Northeastern University, or anywhere, to ever hold a field sales position, he and his wife decided to move to San Francisco.  Their adventure to the west coast lasted two years.  After coming home for the bi-centennial in 1976 and returning to San Francisco to be informed by his partner that his office was gone, he resigned and bought a book entitled, “Where do I go from here in my life.”  Being highly disciplined, he completed the written exercises over several weeks and produced a “specific, immediate work objective.”  Hand written on a large sheet of paper, it included topics such as your ultimate life goal, what needs doing, philosophy of life, and ideal job specifications. Third on the list of what needs doing was “Growth of the Small Businessman and Enhancement of Free Enterprise and Competition. That has been Steve Stroum’s life’s Work.

The Venmark Corporation

In November, 1976, Steve started Venmark from a spare room at his home in Newton, MA and in a few short months moved to nearby Wellesley. By the end of his first year in business The Venmark Corporation had 10 employees and dozens of clients. In recognition of Venmark’s contribution to the success and growth of numerous small companies, Steve was selected to serve on the Commonwealth of Massachusetts Small Business Task Force and was later appointed as one of 18 Small Business Advisors to the Governor of Massachusetts.  He has a passion for helping small- and medium-sized companies take full advantage of their publicity opportunities to equalize the playing field and compete with large corporations.

Venmark’s contribution to the small business community was recognized further when Steve was selected by the International Rotary Foundation to tour South Korea for six weeks as an Ambassador.  A frequent speaker early in his career, he has addressed the Boston Chapter of the American Marketing Association, The Inventors Association of New England at MIT, IEEE, and many other business and civic groups.  He was also appointed to The Norbert Weiner Forum at Tufts University to study the impact of technology on society and served as publicity advisor on the SBANE (Smaller Business Association of New England) Board of Directors.

Steve Stroum, a seasoned product publicist, marketer, and entrepreneur has been featured in INC Magazine, Sales and Marketing Management Magazine, Marketing Magazine, OMNI Magazine, USA Today, Businessweek Exchange, The Christian Science Monitor, Boston Globe, Boston Herald, Middlesex News, San Francisco Chronicle, and numerous other media outlets.  He has been guest lecturer at Babson College, Boston College, and Northeastern University, has appeared on numerous radio and television programs.

About Steve Stroum

Steven M. Stroum is the founder and president of Venmark International, a firm that specializes in getting widespread publicity for clients in-print and online. Over the years, he has been recognized by leading editors as "the best in the business."