As we emerge from the industrial age into the enlightened technology age, we find ourselves increasingly confused about how to price our products and services. On the one hand, we live in a price-war culture (think about the price-driven car, homewares and clothing industries); on the other hand, we live in a free culture (think Google, Wikipedia, Facebook, eBay, online learning, and music and movie downloads).
When it comes to professional services such as consulting, accounting and law, where we’ve traditionally charged for our time, pricing models are also becoming increasingly disrupted. Nothing is as it used to be.
If you find yourself being beaten down on price and always having to pitch for work, chances are you’re going to have to make some serious changes. And while it’s tempting to look sideways to the competition as a benchmark for your pricing model, it’s most likely going to be a very unhelpful place to start.
It’s likely that you’ll have to go back to purpose to reinvent your service offering from the ground up, along with your pricing models and options.
If you happen to be one of the thousands of independent professionals (solo business operators who sell time for dollars) in Australia, you’ll know how competitive the marketplace is and how often price is the driver of whether clients buy or not. You’ll be very keen to understand how to move from selling time to selling ‘value’ and how to communicate that effectively to potential clients.
So how do you sell your value rather your time? There’s a great little fable called ‘Breaking the Time Barrier’ written by Mike McDerment, co- founder and CEO of FreshBooks. It’s the story of Steve, a web developer who is consistently undercharging for his services based on time versus value. Steve reaches out to Karen, who has built a very healthy business offering a similar service to Steve’s, based on selling value and outcomes versus time. In summary, the fable highlights the importance of being able to probe and ask the right questions of clients and to have deep and meaningful conversations about their true needs, problems and aspirations before having any cost or price discussion.
The deeper you understand your clients and how you can make a difference to their business, the more trust is engendered, the more value you can offer and the more money you can ask for.
Trust is the essential ingredient of being able to charge on value versus hours. So what questions might work for you in engendering trust? What problem am I really solving for the client? What type of value does my service offering create? What unique insights, experience, resources or connections can I offer to clients? What would it cost the client not to solve the problem they have? Is the value of the outcome greater than the cost of what you are fixing for them?
Yet there’s an opportunity to go even deeper than this. Conscious companies dedicated to making a positive impact in the world are increasingly choosing to partner with companies that have a shared purpose and values. If your business relationship remains at a one- dimensional level, with ‘value’ being measured merely in financial or rational terms, then you’ll eventually find yourself competing again. When customers buy the why (your purpose) behind what you do, not just what you offer, true trust is engendered and real value is exchanged, for the long term.
No matter what you’re selling, the best way to ensure that you give and receive the value you deserve for your efforts is to start with a shared purpose. What real value do you create for your customers?
This is an excerpt from Chapter 6, ‘Product (what) – the things you offer that improves lives’ of Conscious Marketing by Carolyn Tate.