The 65% Rule: Rethinking Pricing When You Win Too Often

Are you winning too much business?  While a high win rate might seem like cause for celebration, it could actually signal that your pricing is too low.

A CEO of a marketing agency asked me, “Have you ever heard that once your win rate exceeds a certain threshold, it might be time to revisit your pricing strategy?” She mentioned 65% as that critical point, sparking a whole discussion on the topic.

While I’ve discussed this concept in previous videos and posts, it merits revisiting. The premise is fairly straightforward but profoundly impactful: if you’re consistently winning “too many” of your proposed deals, it could be a sign that your prices are too low. While this might sound like a good problem to have, it often means you’re leaving money on the table.

Let’s break down the logic behind this and explore how you can use this principle to make smarter business decisions.

Understanding the Math Behind Pricing Strategy

Is 65% the right number to trigger a pricing change?  I am not a fan of one-size-fits-all rules of thumb.  Rather than live by some rule someone else made up, do the (very simple) math to figure it out for your business.

Imagine your company wins 65% of the deals you propose with an average deal value of $10,000, generating monthly revenues of around $190,000. If you were to increase your prices by ten percent, raising the average deal value to $11,000, this might decrease your win rate slightly. (Consider it might not lower your win rate at all.  I’ve seen that more times than I can count.  See this post or this post for more about this. But for the moment, we’re going to buy the premise that higher prices could result in some hit to win rate.)

Suppose this adjustment leads to a five-point drop in your win rate. Initially, this might seem counterintuitive or risky—why fix something that isn’t broken, right? However, the reduced win rate could be financially beneficial if the higher price per deal compensates for the fewer wins.

As you can see in the table below, with exactly the same number of proposals, you would be able to deliver less work, and you would make $8,000 more per month, or almost $100,000 per year.  (Replace the numbers in this table with your proposal counts, win rates, average deal size, and price increase amount.  Even if your starting win rates are much lower, it’s still an exceptional exercise to undertake.  Make decisions from data not from fear!)

Long-Term Strategic Gains

Often, having fewer projects (professional services) or lower volume (product businesses like manufacturing or distribution) but at higher prices can be a strategic advantage. This approach not only boosts your profitability but also frees up resources. More organizational bandwidth can be applied to produce higher quality, increase efficiency, innovate, or focus on attracting and serving more high-value clients.

Any negative hit to sales volume is often extremely fleeting. The extra capacity created by not engaging with less profitable clients can be redirected towards targeting and servicing clients that align better with the value of your offering. This not only stabilizes your business volume but could lead to growth over time, all at higher profitability.

A Nuanced Approach to Pricing

So, forget sticking rigidly to a win rate rule like “adjust pricing above a 65% win rate.” A better approach is to regularly evaluate the impact of your pricing decisions on your expected business volume. Evaluate your win rates, pricing, and revenue to determine how much business you could theoretically afford to lose with a price increase while still maintaining or even increasing your revenues and profits.

This proactive strategy acts as a safety net, allowing you to make informed, confident decisions about pricing, ensuring your business not only survives but thrives.

Forward this article to someone who needs it.  If it was forwarded to you, subscribe here for more helpful pricing content.