False Profits

Tag: pricing strategy

  • Wrong Map, Wrong Diagnosis: The Danger of Misreading Quote Data

    Wrong Map, Wrong Diagnosis: The Danger of Misreading Quote Data

    Using quote conversion data to diagnose pricing—without proper context—is like trying to navigate New York City with a map of Chicago.

    You’ll still be moving. You’ll still be making decisions.
    But you’ll be solving the wrong problems, chasing the wrong streets, and ending up lost and frustrated that your inputs aren’t producing the outcomes you expected.

    That’s what happens when we treat quote conversion and lost sales data as a clean window into pricing performance. The data might look like a map—but it’s not a map of the territory you’re actually in.

    The Wrong Assumption, Repeated Often

    When clients ask us to pull quote conversion or lost sales data, there’s usually one assumption baked in:

    “This will show us how competitive our pricing is.”

    And yes—price might be part of the story. But it’s rarely the whole story.

    In fact, when we assume price is always the deciding factor, we risk drawing the wrong conclusion and fixing the wrong thing.

    The Reality: Quote Data is Noisy

    Quote conversion data doesn’t live in a vacuum. It’s impacted by a host of non-price factors that don’t show up in the spreadsheet:

    • Availability
    • Proximity to the jobsite
    • Brand preference
    • Relationship strength
    • Sales rep follow-up (or lack thereof)

    If we ignore these, we’re misreading the signals—and usually, that leads to pricing decisions that quietly erode margin.

    Here’s a Better Set of Questions to Ask

    Instead of stopping at “price was too high,” ask:

    • Are we their preferred supplier?
      Or are we a secondary, tertiary, or just a specialty backup?
    • What was our inventory position?
      Did we have what they needed in stock and ready to go?
    • Could we deliver it where they needed it, by when they needed it?
      (Contractors care more about avoiding job delays than saving 2%.)
    • Is the brand we quoted one they know, like, and trust?
      Or did we quote an unknown or lesser brand against a familiar favorite?

    If you’re losing business but didn’t follow up to uncover these insights, then you’re not working with real data—you’re working with assumptions.

    Relationship Beats Price—Most of the Time

    Here’s an uncomfortable truth:

    If the customer wanted to buy from you—and had a strong relationship with your sales rep—they probably would’ve worked through the price.

    That conversation didn’t happen? That silence is data too.

    A strong relationship creates room for dialogue.
    A weak one ends with ghosted quotes.

    So when a quote goes cold, don’t automatically slash the margin.
    Ask: Did they actually want to buy from us in the first place?

    Conversion Data is a Mirror—But It’s Foggy

    Quote and lost sales data can be helpful, but only when interpreted in context.
    If you assume price is the only story, you’ll cut margins when you should be improving service, availability, or brand alignment.

    So before adjusting your pricing strategy based on quote data, make sure you’re using the right map.

    Because if your goal is to navigate a competitive market…

    The only thing worse than having no map—is using the wrong one.

  • Margin Myth #1: Lower Prices = More Sales (and Profit)

    Margin Myth #1: Lower Prices = More Sales (and Profit)

    “For every complex problem, there is an answer that is clear, simple, and wrong.” – H. L. Mencken

    It’s easy to believe that if you lower prices, sales will go up. And to some extent, that’s true. But like most half-truths in business, it’s also dangerously misleading.

    This belief—lower price = more sales—is a perfect example of a simple answer to a complex problem. It’s easy to understand, easy to justify, and often backed by feedback from the field. Unfortunately, it often leads to a quiet but significant destruction of profitability.

    The Appeal of Simplicity

    Sales teams hear it constantly: “Your price is too high.”

    When sales slow down, it’s tempting to see that objection as truth. Over time, that repetition builds cognitive bias:

    • Recency bias: Recent feedback weighs heavier.
    • Confirmation bias: We interpret new information as proof of what we already believe.
    • Availability bias: We rely on the most readily available explanation.

    Eventually, sales teams start believing that price is the reason they’re not closing deals—and that if they just had lower prices, sales would take off.

    The 8.5% Margin Mistake

    I worked with a specialty distributor who learned this lesson the hard way.

    Over a 6-month period, their sales had dipped to around $1.2 million, which represented a 16.1% decline in average monthly sales compared to the previous year. Margins held at about 35%. Feedback from the sales team and customers was consistent: “Your pricing is too high.”

    So, in an attempt to regain momentum, they made a bold move—cutting their general matrix pricing down to 26.5%, an 8.5-point drop in gross margin.

    What happened?

    They saw a modest 4.5% increase in sales. But their gross profit dollars dropped by roughly $15,000 per month.

    They gained a little on top line—but lost big on the bottom line.

    Why This Happens

    The problem isn’t that price doesn’t matter. The problem is believing it’s the only thing that matters.

    In most B2B buying decisions, price is just one part of a much larger equation. Buyers also weigh:

    • Inventory availability
    • Delivery speed and accuracy
    • Ease of doing business
    • Invoicing and returns
    • Relationship and trust
    • Brand familiarity
    • Risk of switching suppliers

    When a distributor offers the lowest price—but isn’t the preferred partner—that quote usually becomes leverage. The buyer brings it back to their existing supplier, who sharpens their pencil just enough to keep the business. The original distributor? They never see the order.

    “If two people want to do business together, price is not going to be a problem. However, if one of the two doesn’t want to do business with the other, price is always going to be a problem.” – Jim Cathcart

    What the Math Actually Says

    Here’s where it gets real: If you’re a 30% margin company and give a 10% discount, you now need to increase your sales quantity by 50% just to earn the same profit.

    That’s a massive lift.

    It’s easy to say sales will go up.
    It’s incredibly hard to increase sales by 50%.

    To make the same $12,000 in gross profit, you now need to sell $150 worth of product at the new price.

    So What’s the Better Approach?

    Rather than broad, reactive discounting, consider this:

    1. Get strategic about who matters
      Focus on key accounts, high-potential customers, and those willing to grow with you.
    2. Understand what drives their behavior
      Every buyer has a handful of products that drive their purchasing habits—high-volume, high-frequency, planned spend. Think “eggs, milk, and diapers.” Be sharp on those.
    3. Avoid the trap of across-the-board cuts
      Not all items need aggressive pricing. Lowering prices on less influential items won’t win you more business—it just erodes margin.
    4. Use price as a scalpel, not a sledgehammer
      Be competitive where it counts. Don’t slash where it doesn’t.

    The Bottom Line

    Yes, lowering price can increase sales. But if you’re not careful, you’ll sell more, work harder—and make less.

    In most cases, especially with across-the-board cuts, price reductions are a shortcut to shrinking profits. The key is not to be the cheapest. The key is to be the smartest.

    Pricing isn’t simple. And treating it like it is? That’s a myth that will cost you.