You’re about to close a deal with an enormous company and the buyer tells you that the $100/widget price must come down if the deal is to go through.
You’ve let your sales funnel dry up and you need this deal to make the quarter. Without hesitation, you drop to $95 (5%) and assume the deal will go through.
Ah, but what does the buyer see? He sees that you just took a seemingly arbitrary 5% off your price – quite an arbitrary amount don’t you think? If you had 5% to give up, you probably have 7%. So the buyer waits two or three days and says that the deal is yours if you just back your price back an extra 2%. Deal done.
Now imagine you cut your price from $100 to $98.35 instead of the round $95, what is this message saying to the buyer? Well, it says that you don’t have much room to move at all, and there isn’t much margin to give up. The buyer comes back demanding an even $98 and you’re still $3 ahead of where you were in the first scenario and everyone’s sales ego remains intact.
Bottom line: don’t telegraph that you have excessive sales margin by moving your price in predictable amounts.