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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
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