If you’re not familiar with test and learn, you’re in good company. Most Owners of professional services firms aren’t acquainted with this smart concept that reduces the risk of implementing new ideas.
Trivers Consulting Group has been implementing a version of it with clients for years, although only recently did we become familiar with the formal concept. We were working with a medical services client to transition to Value Based Pricing when the CEO commented that the 5 Steps phased approach reminded him of test and learn.
Simply put, test and learn is a systematic approach to putting new products and services out in the market, capturing the metrics of how they perform, and making improvements before testing again. It can also help a company test a new market for its existing offerings, gather metrics, improve, and test again.
Tools for Test and Learn
We have 4 tools that clients love to use to grow both revenue and profit. One size does not fit all people, companies, and circumstances.
Profit Optimization Roadmap:
The POR is a year-long map to profit growth broken into chunks that emphasize metrics and analysis. The sequence of activities keeps everyone’s eye on the prize and includes periodic analysis of the execution up to that point. If progress hasn’t met the goal, we stop and figure out what is going on.
- Was it a failure of implementation and execution?
- Was it a failure of pre-launch research?
- Has the market suddenly changed?
- Have costs increased?
- Is there price resistance we didn’t anticipate?
- Should we keep going or let it go?
In no case will a test go on longer than 90 days without measuring and learning and deciding to stop or go.
Leverage Assets to Drive Results – LADRSM:
This tool helps a firm navigate an internal investigation and analysis of the 7 elements required for revenue and profit growth. The concept, which you can see in the graphic, is that without each element, total results will fall short.
This functions as a test and learn by illuminating how a firm’s strategy does or does not support the brand, offerings, prospects, marketing, sales, and leverage. Once Strategy is fortified, we repeat the analysis for each of the other elements. We are constantly testing the company’s assumptions, operations, marketing, and sales, and their impact on the financial condition of the firm.
Growth and Opportunity: The GO CURVE
Our popular GO CURVE tests how the firm’s entire array of offerings work to propel the firm to its revenue and profit goals. By testing the array, we learn where their choices about products and services may hinder desired growth. For example, too many low-margin offerings that appeal to testers holds a company back, even if the total revenue numbers are high. Another test is how the firm’s array of offerings work with their best customers’ journey from small value to higher value to highest value. These tests help the company learn what new products and services to add and what old ones should be retired.
Crack the Pricing Code: Implement Value Based Pricing and Generate Fortunes
The foundation of the transition from time-based pricing to Value Based Pricing is testing and learning. In Step 2 PREPARE, the firm studies its recent history and tests Value Based Pricing against hourly pricing. Once an initial comfort level with Value Based Pricing is developed, the firm will establish systems, train to talk with clients, and sustain and grow over time.
On nearly every page, I write that the firm is phasing in Value Based Pricing. Start with a few of the firm’s best clients; talk it over; show them how it benefits them. Invite your product/service developers to focus on outcomes, not inputs, and connect the outcomes to the fee.
Test and learn is critical to successful implementation of Value Based Pricing. You will test your offerings and your fee-to-value ratio. You will learn from feedback from clients. The next iteration will be better. After a few tests and learns, you will have confidence in Value Based Pricing and then you can implement it across the board.
How Will YOU Apply Test and Learn?
The first application should be fairly simple and short term. Think of it as Testing and Learning your approach to test and learn! As you get better, you can make the tests harder; increase the risks and the stakes; and enjoy more impactful results.
Think test and learn has possibilities for your firm, but not ready to try it on your own? Give me a call or text TEST to 703-801-0345 and we’ll see if we can help.
You will never know how powerful it is until you try!