0
Pricing on Purpose: Our Journey


      Presenters: Chris Burris, VP of Operations
                  Natalie Noel, VP of S...
Location: Baton Rouge, Louisiana

    Years in Business: Over 10 years

    # of Employees: 9 full-time

    Products: ...
# of User Licenses: 20 (ranges from 5 – 250)

    Project Total: $75,000 (ranges from $300 - $250,000)

    Services:Sof...
Time-Based Billing


    Our Transition to Value Pricing


    Overview of Our Project Methodology


    Overview of Ou...
Benefits:

    ◦ Easy to implement
    ◦ Simple metric to track employee “effectiveness”

    Cons:

        Puts you at...
What were the drivers for our change?

    ◦ Desire to increase profitability
    ◦ Desire to reach full agreement on sco...
Re-engineering   of   sales process


    Re-engineering   of   project methodology

    Re-engineering   of   customer ...
Company-wide commitment


    Purchased Professional’s Guide to Value Pricing

    by Ronald Baker
    Engaged a current...
With new projects, we increased our hourly rates

    to test the market

    What we learned:

    ◦ Customers valued o...
Est. Hours x Hourly Rate


    First attempts at Fixed-Scope, Fixed-Price



    What we learned:

        How to sell ...
Est. Hours x Hourly Rate + How much more do we

    think they’ll pay?
    All projects and subprojects fixed-price at th...
Our final phase

    ◦ Quantify value in the Discovery process
    ◦ Transition all customers to fixed-price support
    ...
Summary of Findings             Implementation
(1) Qualify Prospect         (1) Project Plan &
(2) Summary Of Findings    ...
CRITICAL to value pricing (and successful

    projects!)
    Project Plan Sections:

      Title page (Account, Date, V...
To price effectively… to manage the project

    effectively… to have a high-quality deliverable…
    there must be clear...
Why document assumptions?



    A real-word example:

      Customer will provide all computer hardware and software,
...
Why control scope?



    Scope Control Process:

    ◦ Project details not mentioned within this Project Plan are out
 ...
Only 4 dates really matter:



    Timeline:

    ◦ The Go-Live date will be X days or fewer from the
      approval dat...
Timeline, cont’d:

      Import data source must be complete and provided
       in the format specified by HELP by: X o...
Why define customer’s responsibilities?



    Excerpt from project team assignments:


    ◦ Client-Side Project Leader...
Customer Tasks:

    ◦ Any responsibilities or specific duties assigned to
      the customer at the time of project init...
◦ Example of Scope:
  The defined scope for this project is such that HELP will:
    Install and configure one SalesLogi...
Example of Anti-Scope:

    ◦ Explicit Exclusions:
      Install and configure one SalesLogix Sync Server program on the...
Real-World Example:

    ◦ Module: Monthly Sales Reporting
    ◦ Value Thoughts: Provides interface for adding, editing, ...
Our Process to Developing a Value-Based

    Price
        Needs Analysis Meeting
    ◦
        Summary of Findings
    ◦...
First Encounter with the potential client

    ◦ Important to educate them on methodology
    We have to drive the proces...
What does that mean to your organization?


    What is the impact the solution will have on

    your business?
    Why...
Any ideas of the feasibility of this project?


    Have they determined that they are ready to solve?


    What are th...
First chance to identify in writing the value of

    the solution and have the prospect agree that
    you are on the ri...
Show visual proof of the value

    Get them to ask a lot of questions

    Prospects like to see how they will…

Do not present until the decision maker is

    present.
    ◦ Influencers will slow the process
    Understand if there ...
Building a case and value for the entire

    project
    ◦ Software
    ◦ Future Services
    ◦ Credibility reaches an a...
Present all of areas that we will add value and

    the reasons why
    ◦ We will save them this much time
    ◦ We will...
Price sensitivity

  Timeline

  Likeability of the customer

  Risks

  Expected ROI (Value) of the project for the c...
Customer A

    ◦ Project Total happily approved at 10X original
      budget
    Customer B

    ◦ Expressed “maybe I a...
Customer D – unable to convince them to do

    anything beyond by-the-hour; he thinks it’s
    cheaper by the hour
    S...
Customer satisfaction is higher


    Profitability


    Project totals are higher


    Service agreements

Confidence of Employees

    ◦ They have to value themselves
    Getting all of our clients on board with the

    prici...
Chris Burriss – chris@helpcrm.com
Natalie Noel – natalie@helpcrm.com
        www.helpcrm.com
          (800) 346-0415
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Pricing On Purpose Our Journey Public Version

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Time-based billing puts the vendor and customer at odds with one another, resulting in the misconception that effort (time) equals value (results). Nothing could be farther from the true and damaging to a business relationship. It has been our goal to find and implement a better way to price our services. This is our journey to Pricing on Purpose.

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Transcript of "Pricing On Purpose Our Journey Public Version"

  1. 1. Pricing on Purpose: Our Journey Presenters: Chris Burris, VP of Operations Natalie Noel, VP of Sales & Marketing
  2. 2. Location: Baton Rouge, Louisiana  Years in Business: Over 10 years  # of Employees: 9 full-time  Products: CRM, primarily SalesLogix and SageCRM  Industry Sectors: Government, Manufacturing, Big-ticket Resellers,  and Franchises Services: Consulting, Technical (Installations, Software  Development, Integrations w/ Other Apps, etc.), and Training
  3. 3. # of User Licenses: 20 (ranges from 5 – 250)  Project Total: $75,000 (ranges from $300 - $250,000)  Services:Software: 2:1 Ratio (ranges from 1:1 to 4:1)  Customer Revenues: $1,000,000 – $2,000,000,000 per Year  Timeline: 120 days (ranges from 45 days to 1 Year)  Revenue Streams: 75% New vs. 25% Existing  Pricing Method: ALL Value Priced, except LA Government 
  4. 4. Time-Based Billing  Our Transition to Value Pricing  Overview of Our Project Methodology  Overview of Our Pricing Methodology  Examples of Success & Failure  Benefits & Struggles  Q&A 
  5. 5. Benefits:  ◦ Easy to implement ◦ Simple metric to track employee “effectiveness” Cons:  Puts you at odds w/ the customer ◦ Customer unable to budget fully ◦ Variability in risk ◦ Limits your firm’s earning power ◦ Actually limits employee “effectiveness” ◦
  6. 6. What were the drivers for our change?  ◦ Desire to increase profitability ◦ Desire to reach full agreement on scope and price prior to initiating a project ◦ Desire to have a “friendly” mechanism for serving the customers that truly value our services and disengaging with the rest ◦ Desire to have a better method for rewarding our employees
  7. 7. Re-engineering of sales process  Re-engineering of project methodology  Re-engineering of customer support processes  Re-engineering of billing practices  Re-engineering of employee minds 
  8. 8. Company-wide commitment  Purchased Professional’s Guide to Value Pricing  by Ronald Baker Engaged a current member of the VeraSage  Institute as our consultant Received assistance from Ed Kless  PMP Certification  We didn’t dive immediately into Value Pricing; we  transitioned…
  9. 9. With new projects, we increased our hourly rates  to test the market What we learned:  ◦ Customers valued our services more than we realized and were willing to pay more – experimented up to twice our normal hourly rate ◦ When you charge more, customers respect what you have to say; in other words, the more we charge the more our customers value our expertise
  10. 10. Est. Hours x Hourly Rate  First attempts at Fixed-Scope, Fixed-Price  What we learned:  How to sell these types of projects ◦ How to manage these types of projects ◦ Customers actually preferred fixed-scope, fixed-price! ◦ Identifying full scope upfront makes the project much ◦ more successful (and less stressful)
  11. 11. Est. Hours x Hourly Rate + How much more do we  think they’ll pay? All projects and subprojects fixed-price at this  point with some support still being billed hourly What we learned:  ◦ Price does NOT equal effort – numerous approved (and disapproved) proposals proved that the perception of value is different from hours required to complete a service
  12. 12. Our final phase  ◦ Quantify value in the Discovery process ◦ Transition all customers to fixed-price support ◦ Price with these questions in mind:  What is the value to the customer?  What is this project worth to the customer?  What other factors affect the price? What we learned:  ◦ The idea of fixed-price support is to be addressed, preferably, during the first sales interactions ◦ Value must be quantified in the Discovery process
  13. 13. Summary of Findings Implementation (1) Qualify Prospect (1) Project Plan & (2) Summary Of Findings Proposal Approval (3) Demo Product (2) Implement & Control (4) Discovery Proposal Scope Discovery Process Customer Ownership (1) Identify Problems (1) Level I & II Training (2) Identify Value (2) Admin Training (3) Design Solution (3) Gold-Level Support (4) Compose Project Plan (4) User Adoption Maintenance (1) Support Agreements (Gold, Silver, Bronze, or Per Incident) (2) Subprojects
  14. 14. CRITICAL to value pricing (and successful  projects!) Project Plan Sections:  Title page (Account, Date, Version #, and Project Name) ◦ Document Revision History ◦ Project Logistics ◦ Scope for all phases (Installation, Customizations, Data ◦ Migration, Integrations, and Training) ◦ Approval page
  15. 15. To price effectively… to manage the project  effectively… to have a high-quality deliverable… there must be clear communication! Document your method of management for  Resources, Scope, and Time – the “Iron Triangle.”
  16. 16. Why document assumptions?  A real-word example:   Customer will provide all computer hardware and software, which meets or exceeds the product manufacturers’ recommended system requirements as stated in the Technical Specification document.  Installations will be coordinated such that multiple installations are completed within a scheduled time period, and the HELP Project Team will have ample time for installations and testing.
  17. 17. Why control scope?  Scope Control Process:  ◦ Project details not mentioned within this Project Plan are out of scope. ◦ … HELP will evaluate the feasibility of the change, the impact on the project, and the additional investment needed. ◦ …HELP may choose to approve certain changes to project scope, at the discretion of HELP, without further price commitments from the customer and/or a formal change request procedure.
  18. 18. Only 4 dates really matter:  Timeline:  ◦ The Go-Live date will be X days or fewer from the approval date of this Project Plan. ...customer will be responsible for meeting the following deadlines:  Technical requirements for ALL servers and workstations must be met by: X or more days before Go-Live.
  19. 19. Timeline, cont’d:   Import data source must be complete and provided in the format specified by HELP by: X or more days before Go-Live.  Customer’s decision makers must be available for Customizations review by: X or more days before Go-Live.  If customer does not meet the identified deadlines, the project Go-Live date will be impacted. The degree of impact will be assessed at the time the issue occurs.
  20. 20. Why define customer’s responsibilities?  Excerpt from project team assignments:  ◦ Client-Side Project Leader  Is accountable to executive leadership for successful completion of the project.  Assures knowledgeable and empowered resources are made available in a timely manner.  Can make decisions about policies relating to project organization, project scope, or allocation of project funding.
  21. 21. Customer Tasks:  ◦ Any responsibilities or specific duties assigned to the customer at the time of project initiation.
  22. 22. ◦ Example of Scope:  The defined scope for this project is such that HELP will:  Install and configure one SalesLogix database on the Database Server PC.  Install and configure one SalesLogix Application Server program on the Application Server PC.  Install SalesLogix Administrator program on the Application Server and up to three other identified computers.  Install SalesLogix Architect program on the Application Server and up to three other identified computers, if pertinent licenses have been purchased.  Install and configure one SalesLogix LAN Client program on one identified computer per each Named User license specified as Network Clients.
  23. 23. Example of Anti-Scope:  ◦ Explicit Exclusions:  Install and configure one SalesLogix Sync Server program on the Sync Server PC. – Remote SalesLogix clients with synchronization will not be used within this implementation.  Install and configure one SalesLogix Remote Client program (to include SQL Express) on one identified Laptop computer per each Named User license specified as Remote Clients. – Remote SalesLogix clients with synchronization will not be used within this implementation.
  24. 24. Real-World Example:  ◦ Module: Monthly Sales Reporting ◦ Value Thoughts: Provides interface for adding, editing, and deleting monthly entry; established foundation for further automation; user currently spends at least 10 hours / week maintaining this data in XLS; information is critical to maintain good relationship with vendor; gives financial data for all customers which would allow profiling by region, market, avg. transaction size, etc. ◦ User(s) Affected: Betty ◦ Labor Savings: $12,000 ($60,000 salary; 20% time savings) ◦ Increased Revenue: $50,000 ◦ Total Value: $50,000 + $12,000 = $62,000 ◦ Maximum Price: $15,500 (1/4 of total value) ◦ Minimum Price: $5,150 (1/12 of total value) ◦ Proposed Price: $7,750 ◦ Payout – Months: ($7,750 / $62,000) * 12 = ~ 1.5 Months ◦ Est. Hours: 36 ◦ Per-hour Investment: $7,750 / 36 = $215/hr
  25. 25. Our Process to Developing a Value-Based  Price Needs Analysis Meeting ◦ Summary of Findings ◦ Demo of Solution ◦ Presenting of Initial Valued-Based proposal ◦ Discovery ◦ Presenting of the Value-Based project proposal ◦
  26. 26. First Encounter with the potential client  ◦ Important to educate them on methodology We have to drive the process of finding value  for each prospect ◦ There mindset is more about “how much will this cost me” Ask lots and lots of questions  ◦ Why, how, what, how much, etc.
  27. 27. What does that mean to your organization?  What is the impact the solution will have on  your business? Why are we having this conversation?  What happened before you called me?  What is driving you to do this? 
  28. 28. Any ideas of the feasibility of this project?  Have they determined that they are ready to solve?  What are the main problems you want to solve?  Is this the complete list?  Is there anything else? Based on what other  customers have needed What is the timeline for the project? 
  29. 29. First chance to identify in writing the value of  the solution and have the prospect agree that you are on the right track Identify all of the initial areas they will receive  value
  30. 30. Show visual proof of the value  Get them to ask a lot of questions  Prospects like to see how they will… 
  31. 31. Do not present until the decision maker is  present. ◦ Influencers will slow the process Understand if there is a significant amount of  value for the customer to move forward Clearly outline the Value points and their  quantitative amount If you have clearly identified as much value as  possible they will say yes
  32. 32. Building a case and value for the entire  project ◦ Software ◦ Future Services ◦ Credibility reaches an all time high After EVERY Discovery, we have NEVER  received a price rejection  Discovery is critical because:  We’re expensive… this gives customers an opportunity for us to prove our experience without them needing to invest as much  Defining value (i.e. helping them realize their potential)
  33. 33. Present all of areas that we will add value and  the reasons why ◦ We will save them this much time ◦ We will eliminate this process ◦ Improve this process Payment  ◦ One number and allow them to pay it off over 2-3 months as we work on the project
  34. 34. Price sensitivity  Timeline  Likeability of the customer  Risks  Expected ROI (Value) of the project for the client  Uniqueness of the project  How busy we are  Does this project have any strategic  significance?  Can another company do this project?
  35. 35. Customer A  ◦ Project Total happily approved at 10X original budget Customer B  ◦ Expressed “maybe I am under valuing myself in my own business” after be persuaded to the idea that value does not equal effort Customer C  ◦ Wrestled w/ issues on their own for 2 months ◦ We scope & priced beforehand for $1,000; fixed within few minutes via email ◦ Customer was very happy despite effort involved
  36. 36. Customer D – unable to convince them to do  anything beyond by-the-hour; he thinks it’s cheaper by the hour State Contracts-Currently still by the hour  Under Valued Ourselves 
  37. 37. Customer satisfaction is higher  Profitability  Project totals are higher  Service agreements 
  38. 38. Confidence of Employees  ◦ They have to value themselves Getting all of our clients on board with the  pricing model change Affected time to close  Affected total price of project  Affected time to go through the process  and create proposal Harder to sell first discovery piece  Customer satisfaction 
  39. 39. Chris Burriss – chris@helpcrm.com Natalie Noel – natalie@helpcrm.com www.helpcrm.com (800) 346-0415
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