WRAP Decision Model

How can you make a good decision?

Suppose your software company is trying to win government clients. A sales representative, Tom, argues that prices must fall to close deals. Here is how WRAP can help you examine that proposal.

• Widen Your Options. It’s important not to be framed by Tom’s complaints into a narrow decision about “whether or not” to reduce price. Price isn’t the only variable that explains why customers buy. What other options do you have? If none comes immediately to mind, do your “laddering.” First look internally at your bright spots. You’ve already closed a few accounts; what can you learn from those successes? Then you can ladder up and see what other software firms are doing in the government market. What seems to work for them? Laddering further up, you might study any product that is sold both to corporations and to government agencies. What are the differences in how the products are configured and sold? Maybe you’d learn, for instance, that government customers expect more hands-on service than do your savvy tech clients. In short, you shouldn’t fixate on pricing before you have more data. You need more options and more information.

• Reality-Test Your Assumptions. First, ooch: run a small trial. Give Tom the leeway to offer substantial discounts to one or two customers. See what happens. Why guess when you can know? Simultaneously, try considering the opposite: If the theory is that price is the problem, go looking for evidence that price is not the problem. For example, you could ask your other sales rep to charge a higher price—but one that includes an extensive service package. A few experiments with higher and lower pricing should tell you a lot. As you run these experiments, gather more information by zooming out and zooming in. To zoom out, you might look for third parties—market research companies, for instance—who could tell you whether software companies typically discount for government clients, and if so, how much. (That would be a flavor of “base rate.”) Also, you could zoom in by joining your sales reps for a few customer visits. Meeting your clients personally and hearing their feedback would give you some much-needed texture on the situation.

• Attain Distance Before Deciding. You aren’t ready to make a decision here. You need better information and more options first. That said, if Tom turns out to be right, you may have competing core priorities on your hands: Should you slash prices (cutting profits) for the sake of building a base of government clients? Is the core priority market share or profit margin? It’s worth sounding out your leaders for their perspective.

• Prepare to Be Wrong. Without knowing your decision, it’s hard to prepare for the aftermath. But you can almost always set a tripwire. For instance, you could set a limit on the experiments you’re trying with your salespeople. You might work with Tom on an appropriate tripwire—i.e., if he hasn’t closed a deal in two months, given the freedom to discount the price as he requested, then you’ll both agree to try a different approach.