The Underpricing Problem
A full pipeline can hide a price that has never been tested.
Mark Josephson describes a pricing decision that his team thought would cost them business. They had proposed a starting price of $1,000 a month. Within three months, he says, deals were closing at $1,500 and $2,000.
The useful detail is the gap between what the team expected and what customers accepted. Completed sales gave them evidence that an internal discussion could not.
That happens easily when sales are healthy. A price that wins business gives the team little reason to question it. The company can keep growing while carrying a decision made when it had fewer customers, a less capable product, and less confidence in what it delivered.
Find out what the price includes
Before changing the number, look at what customers actually buy. The same quoted fee can cover very different amounts of work once discounts, onboarding, support, and custom requests are included.
Ernesto Mandowsky describes this problem in services. If every engagement has its own scope and price, the team has to negotiate both each time. A better-defined offer makes it easier to explain the fee and to see when a request falls outside it.
This is also why average selling price can be misleading. An increase looks encouraging until the company discovers that it comes with more delivery hours, slower payment, or customers who need unusually close attention. Compare similar customers and include the work required to serve them.
For senior advisory work, the offer also needs to explain what the advice will change. Name the decisions the buyer needs to make and show why your experience is relevant. Calling the work strategic does not establish its value.
Test a specific assumption
Josephson's account is a reason to test pricing. It does not establish that every company should charge more. A weak offer can stay weak at a higher price, and an apparently easy sale may owe more to a particular buyer or salesperson than to the fee.
| What you observe | What to examine |
|---|---|
| Frequent discounts | Which buyers receive them, what is conceded, and whether those deals retain or expand. |
| Healthy sales, weak margins | Delivery effort, scope changes, support, and the mix of customers buying. |
| Resistance to a higher price | Whether comparable buyers understand the result, have the budget, and see a credible alternative. |
Choose a defined group of comparable opportunities for a test. Agree in advance what you will examine: realized price, win rate, reasons for losing, sales cycle, and the cost of delivery. Record changes in scope or terms so that a higher fee does not conceal a larger concession elsewhere.
If existing customers are involved, understand the commitments already made to them and give the team a clear way to handle exceptions. A pricing decision becomes a customer relationship decision as soon as someone has to explain it.
Give introductory pricing an end date
An early price can be a sensible way to learn. The problem is letting it become permanent without a review.
Set a point at which the team will look at customer results and buying behavior again. The decision may be to raise the price, narrow the scope, change the target customer, or leave the offer alone. What matters is being able to explain the choice with evidence from the business.
Josephson's team expected resistance and found room above its proposed starting price. The question for another company is which of its own assumptions has gone untested for just as long.