Pricing  for  Profitability  

by  Michelle  Golden  President,  Golden  Prac5ces  Inc  Senior  Fellow,  VeraSage  Ins5tute  

@michellegolden #PSTECH      #AAMKT          verasage.com  

Today:  2  big  things!  

1. BeMer  scoping  

2. Offering  op5ons  

Price  evolu5on.  

Single,  Fixed  Price  

Fixed  Price  with  Op5ons  

Value-­‐based  Price  

Before  you  consider  proposing.  

Are  you  confident  you  know  what  the  prospect  will  value  most?  •  What  are  their  real  issues  (pains)?  •  Can  we  ar5culate  (truly)  compelling  reasons  to  hire  us?  

Do  we  really  know  enough  about  the  org?  •  Is  this  work  we  even  want?  hMp://bit.ly/bestclients    •  Are  we  aware  of  risks  in  pricing  this  work  &  promising  a  5meline  (true  scope)?  

5  

BeMer  process.  

•  Discover  (value  conversa5on)  •  Debrief  •  Brainstorm,  discuss,  decide  (pricing  council?)  

•  Conversa5on  NOT  presenta5on  •  Prospect  should  know  what’s  in  your  FPA  document  before  you  give  it  to  them  

•  Deliver  quotes  real-­‐5me  •  Doc  must  equip  the  intermediary  to  make  your  case  

Fixed  price  if:  

•  Non-­‐dis5nct  specializa5on  •  Must-­‐have  services  (e.g.,  compliance)  AND  price-­‐sensi5ve  economic  buyer  

•  LiMle  ability  to  create  measurable  or  perceived  value  in  the  course  of  the  work  (unemo5onal)    

•  Disconnect  between  technical  or  user  buyer  &  economic  buyer  

•  CommiMed  to  “No  bill  &  duck”    

Value-­‐based  price  if:  

•  Demonstrated  specialist  (go-­‐to  firm)  •  Technical  or  user  buyer  same  as  economic  buyer,  or  highly  influen5al  with  

•  Can  create  measurable  or  perceived  value  in  the  work  process    

•  Success  fee  or  “5p  clause”  based  on  client’s  percep5on  of  outcome’s  value  

•  Hint:  almost  ANY  service  can  qualify  with  a  skilled  seller  &  an  educated  buyer  

SCOPE MATTERS

Op5ons.  

•  Anchoring  effect  –  buyer  compares  your  prices  to  your  highest  offering  

•  Helps  people  decide  what  they  want  (no,  they  usually  don’t  already  know)  

•  If  you  don’t  offer  a  premium  offering,  how  could  someone  ever  buy  one?  

•  Move  people  UP  the  value  curve  

Inspira5on  

Op5on  ideas.  

Leverageable  Areas  (some  of  many)  

SILVER  (stripped  version)  

GOLD    (today’s  offering)  

PLATINUM  (premium)  

Audit/review   Basic  services   Basic  services   Bundle  complementary  

Tax   Basic  &  might  go  on  extension  by  default  

Basic  plus  “watch”  services  

Bundle  proac5ve  &  complementary  

Consul5ng   Charge  for  assessment;  less  tailored;  simple  phase  

Charge  for  assessment;  custom  prework  

Bundle  assessment,  customiza5on,  follow-­‐up  

Access   2-­‐day  responses   Unlimited  access   First-­‐class  access  

Work  5ming   At  firm’s  availability   Standard  turn-­‐around   On-­‐demand  

Payment  terms   In  advance     Half-­‐down   Aligned  to  client’s  cash  flow  

“Op5onal”  (a  la  carte)   List  poten5al  upgrades,  complementary  services  &  next  steps  

Control  scope  creep.  

•  Clarify  client  due  dates  •  Remind  client  

•  Educate  team  

•  Consequences  (price  shii)  

Image: cefeida (flickr)

10  elements  of  a  project  quote.    

1.  Objec5ves,  needs,  deliverables  2.  Project  structure,  5meline  &  milestones  3.  Constraints,  assump5ons  4.  Define  roles  (customer’s  responsibili5es  too)  5.  Detail  scope  &  func5onal  requirements  6.  Include  “Addi5onal  Items”  for  common  add-­‐ons  7.  Establish  parameters  for  change  request  8.  Future  projects  list  (i.e.  what  is  NOT  included)  9.  Terms  &  guarantee  10.  Approval  

Preparing.  

Prac5ce  areas,  for  each  key  service:  •  What  does  the  average  engagement  include?  

•  What  can  we  strip?  

•  What  can  we  add?  

Qs  to  ask  the  customer.  

Issues  that  can  be  measured:  •  How  do  you  measure  it?  

•  What  is  it  now?  

•  What  would  you  like  it  to  be?  

•  What’s  the  value  of  the  difference  immediately?  

•  What’s  the  value  over  5me?  

Unmeasurable?  qualify  on  a  scale  (e.g.,  1-­‐10)  

Tangible  value.  

Intangible  value.  

•  Specialist  exper5se/knowledge  •  Unique  social  capital  •  Brand/reputa5on  •  Unique  result:  crea5vity  &  innova5on  •  Reducing  risk  •  Excellent  service  experience  •  Makes  customer  “look  good”    •  Rela5onship  brings  benefit  or  feels  good  What  else?  

Remember.  

•  Price  beMer:  prac5ce  makes  perfect  •  Present  op5ons  

•  Use  phases  (WHK)  •  Preprice  easy-­‐to-­‐an5cipate  items  

•  Project  management  begins  with  scope    •  Head  off  scope  creep  at  the  pass  

•  Set  then  manage  expecta5ons  with  clients  •  Communicate  scope  to  team  

michelle@goldenprac5ces.com  verasage.com  goldenprac5cesinc.com  goldenprac5ces.com  (blog)  @michellegolden  (twiMer)  

More  Info:  slideshare.net/goldenm  

SEE: www.journalofaccountancy.com/Issues/2009/Jun/20091530.htm