Do these statements sound familiar?
- “We charge a little less than the law firms that do this kind of work.”
- “We look at what other videographers charge and price just a bit less.”
- “We’ve adopted a ‘price-to-win’ mindset that helps us offer top value for a little less than the competition.”
You’re in plentiful company if your firm has adopted these pricing practices. More than 80% of knowledge based services firms put their competition’s pricing in the top two considerations when setting their own pricing.
What’s the Problem?
The first problem is that you’re ignoring your clients’ point of view.
The second problem is that your firm is giving the power of pricing over to external forces.
- Your firm has its own mission and values.
- It has its own strategy (“We deliver X value to Y buyers for Z profit.”)
- It has chosen its target buyers and invested in marketing to them.
- It has accumulated specific expertise and developed services based on that.
- It has articulated the value it delivers to its buyers.
Why then would it go ahead and prioritize what other firms are charging over all these internal strengths?
How to Solve the Problem
- The first step to solving the problem of allowing competitors to affect your prices is to STOP!
Huh? The CEO or Owner has to explicitly say that the firm will not consider competitors’ pricing for their own fees or pricing.
Lead the conversation with this question: “What is the value we deliver to our best clients?” because that question gets to the heart of the matter.
“Value we deliver” refers to how your services change the lives of its clients. For example, a tax return, accurately prepared and filed on time, has life changing value. The client is complying with IRS regulations and therefore can turn their attention back to this year’s work. Best clients are the ones who are happy to pay commensurate with this value.
The CEO or Owner should ask all associates or colleagues of the firm to say what they think is the value delivered. People in different roles will have different perspectives on the value delivered and all voices should be considered.
- Once all possibilities are on the table, the firm can narrow them to the top 3-5.
Use these 3-5 instances of life changing value delivered as the foundation for every conversation with clients and prospective clients.
Hundreds of CEOs and Owners have worked with us to learn to speak “VALUE BASED PRICING.”
Build the Perfect Offers for Clients
We teach them how to elicit what the clients feel would be life changing value to them.
Then, the firm uses these client expressions to develop the offers that will deliver this value for a fee commensurate with the value delivered.
We recommend building three options, with each one delivering some level of lifechanging value. The first offers to deliver the highest level of life changing value, and the next two options deliver value on a smaller scale. Each option is priced for the value delivered.
Adopt a Process for Value Based Pricing
We take each firm through our four-step process which determines their right fee-to-value ratio. This is not an ‘agnostic’ formula. It is personalized for your firm and relies on recent past work of similar type.
You can read the 4-step process here. The key factor, you will see, is that the only consideration is the client’s desired life changing value.
How Can You Try Value Based Pricing?
It’s easy to START! Schedule a complimentary STARTER call with me and we’ll map out a couple of initial steps your firm can take to begin adopting value based pricing.
Can’t wait? Text START to 703-801-0345 to schedule your STARTER call as soon as possible.
