My Denver omelet was tastier than normal and I wondered what happened in the kitchen that made it more flavorful. Its value went up and the menu’s price tag no longer mattered. I took another mouth-watering bite and looked across the table at the CEO of a small marketing firm that I was coaching.
I suddenly saw a connection, as she struggled to accept the value of her newest service offerings. The streamlined approach simplified her workload, which compelled her to reduce prices that were already under valued. She was basing the asking price on her ability to streamline her work efforts rather than on the service’s value to the customer.
Many small firm executives struggle with the perception that unless it involves a melee of sorts, the service or product must be priced lower to justify its value. Truth be told, in today’s market the client’s outcome determines the services value.
Executives can learn to position their services based on the value of the recipient’s outcome by following the below 4 Steps.
1. Value Your Clients Success
Last year I coached a small business owner whose declining revenue numbers suggested his doors would close within 6-12 months. I was asked to increase the store’s sales in whatever manner might work. While my strategy was foreign to the team, I was fully supported and given an expense account to implement my action plans.
Within 6-8 months the measureable results had increased the revenue percentage by double digits and brought in about 130 new customers. Each customer spent an average of $1,000 per visit—a 100% increase over the national average order size benchmark. The elated owner said, “You’re worth ten times what I’m paying you!” I suddenly realized that my value was in the end result, not in how much I struggle or sweat.
By placing a focused value on the outcome, clients are willing to pay for those results. Most will not care how much it costs, if it’s a small percentage of the revenue it generates. Everyone likes a project to pay for itself and then some. The happy client is always the one who gets the results they asked for, not the one who saved money and is forced to close down.
2. Value Your Ingenuity of Development
One business I coached never front loaded any lessons learned or ramp up time when starting a new project. The owner felt that his customers shouldn’t have to pay for his education, especially if it is required on their project.
I asked him what his greatest value was that drew his customers. He pointed out that they come to him because of his expertise. It didn’t take long for him to realize that his learning curve on the current project would soon be a part of his expertise and of great value to his customer.
I suggested his ingenuity, education and development time, which are his greatest assets, should be included within his pricing. After fidgeting a bit, he agreed to charge 50% of the learning costs since the customer would gain from his new knowledge.
Companies are willing to hire someone who can figure things out quickly to get them up to speed in new market areas. Whenever someone comes along with similar, but not exact experience, they are snapped up for the sake of speed to market. The cost is never the issue; the only concern is productivity and timeliness of release. So all ingenuity during the development stage is of great value whether learned on the job or outside of it.
End of part 1 of 3. Part 2 covers steps 3 & 4 with part 3 providing sample pricing.