What do your numbers mean?
A consulting firm lists different measures of their work. For example:
- 10% increase in favorable customer reviews
- 21% increase in profitability
- 37% reduction in employee absenteeism
The intent is to prove their value to their clients.
But there are 3 problems with this proof:
- There’s no context. One client may be thrilled with a 21% increase in profitability, and another may shrug and say, “not nearly enough.” Other decision makers may look at a 37% decrease in absenteeism and think there’s no way a company could have survived with that level of employee absenteeism, so it’s not relevant. Also, there’s no connection to time. Did it take 1 year or 5 years to increase profitability? And there is no connection to the industry. Are customer reviews hard or easy to get and how often do people give 1 or 2 star ratings in that industry?
- The reader has no idea what effort was required to achieve these results. What resources such as employee time, financial outlays, and organizational disruption were required to achieve these numbers?
- Most importantly, there is no “So what?” The “So what?” is the story of what happened to the company once these results were achieved.
- Did the number of new customers increase because reviews were better? Were there fewer returns, or more retention?
- How did increased profitability impact the company going forward? Did additional profit reduce debt, enable expansion, or increase employee wages?
- What changed when more employees came to work every day? Better customer service, more innovation, a more collaborative and trusting culture?
Firms like yours that accumulate knowledge and expertise and apply them to create impacts for your clients must go beyond the “what” to the “So What?” if you are to increase your fees.
The “what” is usually a number and that number will be interpreted differently by every person who sees it.
There is no universal standard for value.
You cannot tie your fees to value and expect to increase fees,
“So What?” is the ticket to higher fees
I had trusted pricing based on value for about 8 years (after ditching hourly billing) when I was confronted with this exact problem:
Two CEOs interpreting specific numbers vastly differently than I did.
One owner told me “it’s not worth it” when I offered to help his company increase revenue by 30% in one year without increasing expenses.
The other owner said “I don’t see the value” even though a basic ROI calculation resulted in a 300% ROI.
Around the same time, I saw and heard people defining value as getting a deal, or something for nothing.
The word ‘value’ was being devalued in real time. If I stuck with pricing based on value, I was facing tough times.
IMPACT Based Pricing
That was when I created the practice of IMPACT Based Pricing (IBP).
Instead of relying on the “what” to justify fees, I would go the next step and describe the “So What?” Fees would be proportional to the impact, and the more significant the impact, the higher the fee.
THE crucial element of IBP is having the client or customer tell the firm, in their own words, what impacts they need, want, and desire. The firm doesn’t make these up and doesn’t decide that all clients want the same things. (I.e., no productizing.)
Each client gets customized options, with fees proportional to the significance of the IMPACTs created. The client chooses which option makes the most sense to them at the time of the purchase.
The client understands without a doubt that they are paying for the “So What?”
The better your firm is at creating IMPACTs in response to what the client needs, wants, and desires, the higher your fees will be.
If you’re ready to start pricing for the “So What?” schedule a meeting with me here.
