IMPACT Based Pricing Quiz
Which of the following is the IMPACT?
#1
- Make more money
- Stop leaving money on the table
#2
- Increase revenue
- Take my family out for a nice dinner any time I want to
#3
- Restructure my role
- Manage the growth of my business and reduce direct client work.
B is the correct answer in all the pairs.
Why is that?
“Make more money “and “Increase revenue” are slight variations on the idea that the owner is focusing on how to generate more revenue and profit for the firm.
No surprise, that’s what owners do.
But they are not IMPACT statements.
They’re too broad and vague.
There’s nothing to measure the firm’s behavior against.
There’s no way to choose between tactics.
If I raise the price on X and sell a dozen more, I’ve made more money or increased revenue. But is that the right thing to do? Compared to another action? Is it sustainable?
Look at the IMPACT statements:
“I want to stop leaving money the table” focuses the owner on specific actions for each and every client. What kind of discovery calls are needed? How do I design customized offers for Great Fit Clients? What fees are proportional to the significance of the IMPACTs I’ll create for this client? The price or fee comes after the discovery and analysis. When the Owner knows the fee is proportional to the significance of the IMPACTs created, they also know they’ve not left money on the table.
“Increase revenue” is so vague as to be meaningless. It could mean $1 dollar more or $100K more. It could mean high volume at low prices, or high prices at low volume. Or it could mean losing money on every sale because costs are higher than the price.
“I want to take my family out for nice dinners at any time” is so concrete and focused. The Owner still has to specify how much more revenue and how they’ll get there (low or high volume, etc.) but the vision of family dinners is a strong motivator to do all the other work. For example, if this is your vision, you’d realize that you’re more likely to reach it with higher fees and low volume which will give you the time for these dinners.
No IMPACT, No Change
“I want to restructure my role” has haunted me for a couple of years. This is what one Owner told me, and I took it at face value. But after 6 months of advising, she still had not changed her behavior, even though we had discussed many plausible options.
I think the barrier to her changing her behavior was that she didn’t have a vision of what she’d do instead. If she stopped doing direct client work with all clients, what would she do? How could she feel she was making a difference and earning the fees paid by clients?
“Restructuring my role” was not an IMPACT in her mind, therefore she failed to do it.
Create IMPACTs to change your life
I know from my many clients that they, and you, create amazing IMPACTs for your clients. You change their lives. Sometimes the changes are enormous and sometimes they’re small and short lived. That does not matter. If you create IMPACTs, you should be using IMPACT Based Pricing.
IMPACT Based Pricing means prices or fees are proportional to the life changing differences (IMPACTS) you create for clients. The fee is based on the IMPACT and its significance.
IMPACT Based Pricing requires your belief that over time you will get better and better at it. It is an art more than a mechanical formula. You can look at the IMPACTs you’ve created for recent past clients as a starting point. You track the offers you design and modify your thinking for subsequent clients.
If I asked you what IMPACT you’d like to experience this year, what would you say? What would be your version of “I want to stop leaving money on the table” or “I want to have nice family dinners anytime”?
If you’re so inclined, drop me an email to susan@susantrivers.com with your IMPACT statement. I’ll share a thought or two about how you could get there.
